Rabbi Trusts Benefits Features and Key Considerations

Michael W. Hlavin, CFP®, Matrix Financial Solutions, A Broadridge Company
Nancy D. Gray, CRSP, Matrix Financial Solutions, A Broadridge Company

May 28, 2020

With M&A activity once again heating up during these unprecedented times, employers at companies that may be targets of an acquisition, as well as acquiring firms are seeking solutions relating to executive benefit and compensation programs during these transactions. An “employer’s promise to pay” deferred compensation or other non-qualified benefits to a highly compensated employee may be a contract right that avoids the complexities of ERISA. However, when it's time to pay, if the funds aren't there or the employer changes its mind (perhaps due to a change in ownership), the employee may be reduced to expensive litigation and an uncollectible judgment. Engaging a corporate trustee to establish a rabbi trust can provide some security against such a turn of events while offering other benefits to facilitate the administration of non-qualified plans. Let’s discuss how this works!

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