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.
* 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.