She has advises public and private employer clients regarding issues related to design, preparation, communication, administration and operation of qualified plans and the related funding vehicles, including pension and profit sharing plans, 401(k) plans,
rabbi trusts and cafeteria plans.
Taxation of
rabbi trusts: A
rabbi trust is an unfunded plan that provides some security for the employee because the employer does not have access to the trust assets.
This excludes approximately $35M to $36M of stock-based compensation expense and any potential expenses related to benefit programs funded through
rabbi trusts. Capital expenditures are expected to be approximately $350M.
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Rabbi trusts maintain their position as the top choice for a security vehicle, employed by 79.1% of all respondents.
(33)Companies are permitted to establish LS domestic-based grantor trusts known as "
Rabbi Trusts," which can be funded and invested to match the accruing employee liabilities in a non-qualified deferred compensation plan.
Secular trusts are not as popular as
rabbi trusts, in part because of questions surrounding their taxation.
See also, the discussion of
Rabbi Trusts on page 510.
Revenue Procedures 92-64 and 92-65, 1992-2 CB 422 and 428, contain the IRS' ruling position for
rabbi trusts. The IRS will generally rule on a nonqualified deferred compensation arrangement using a
rabbi trust only if the IRS' model
rabbi trust (reproduced at the end of this chapter) is used.
One partial answer to the desire for more security is the "
rabbi trust."
Rabbi trusts enhance employee security with minimal threat to the income tax advantages of the nonqualified deferred compensation plan.
Among the latter, sources cite, for example, equity split-dollar plans, off-shore
Rabbi trusts and cutting-edge techniques that call for an IRS opinion letter.
The entries in this guide answer 500-plus questions about the different types of nonqualified deferred compensation plans available to executives, and the rules governing
rabbi trusts, life insurance, stock plans, Section 457 plans, withholding taxes, funding, and mutual fund options.
The scope of the term employer should also extend to the "employer's" VEBA, charitable foundation, pension or profit-sharing plans (as well as other deferred compensation trusts, such as
rabbi trusts, established by the employer), and include advising a foreign parent corporation on any U.S.
