A method of deferring compensation for executives is the use of a rabbi trust. The instrument was named - rabbit trust - because it was first used to provide deferred compensation for a rabbi. Generally, the Internal Revenue Service (IRS) requires that the funds in a rabbi trust must be subject to the claims of the employer's creditors.
This information is current as of December, 2007, but is subject to change if tax laws or IRS regulations change. Current tax laws should be consulted at the time of the preparation of such a trust.
Description: Arkansas Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — a Rabbi Trust Keywords: Arkansas Nonqualified Deferred Compensation Trust, Executive Employees, Rabbi Trust, Nonqualified Deferred Compensation, Benefit Trust The Arkansas Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees, also known as a Rabbi Trust, is a unique type of trust established by employers to provide additional compensation and benefits to their executive employees. This trust is a nonqualified deferred compensation plan that helps employers attract and retain top talent by offering additional financial incentives beyond regular salary and benefits. The Arkansas Nonqualified Deferred Compensation Trust operates as a separate legal entity, set up by the employer specifically for the benefit of executive employees. It acts as an unfunded, unsecured promise by the employer to pay certain compensation amounts to the executive employees at a later date, usually after retirement or another predetermined event. The assets of the trust are separate from the employer's general assets and are managed by a trustee, typically a financial institution or other professional entity. The trustee is responsible for investing and safeguarding the funds within the trust, ensuring that they are available to fulfill the employer's promised compensation obligations. One notable characteristic of the Arkansas Nonqualified Deferred Compensation Trust is the use of a Rabbi Trust. A Rabbi Trust is a specific type of trust that provides some degree of protection to the executive employees against the employer's potential insolvency or other adverse financial circumstances. By placing the trust assets in a separate entity, the funds are shielded from the employer's creditors and remain available for the benefit of the executive employees. This protection can provide peace of mind for executives who may have concerns about the employer's long-term financial stability. The Arkansas Nonqualified Deferred Compensation Trust may have variations or subcategories depending on the specific plan design and employer preferences. For example, some trusts may offer different investment options to participants, allowing them to have a say in how their deferred compensation is invested. Others may include a vesting schedule, where the executive employees gradually earn ownership of the promised benefits over time, encouraging retention and loyalty. Overall, the Arkansas Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — a RabbThusus— - is a sophisticated financial arrangement that employers utilize to attract, retain, and provide additional financial security to their executive employees. By offering deferred compensation and protecting it through a Rabbi Trust, employers can effectively incentivize top talent and enhance their executive compensation packages.
