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.
Massachusetts Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — a Rabbi Trust is a specific type of financial arrangement that allows employers to provide additional compensation and benefits to their top executives. This trust is primarily designed to defer the payment of income taxes on the executive's deferred compensation until a later date, usually retirement. A Massachusetts Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — a Rabbi Trust is created in accordance with the regulations and laws of the state of Massachusetts. It is established for the benefit of a specific group of executive employees, generally those in high-ranking positions within the organization. Keywords: Massachusetts, nonqualified, deferred compensation trust, executive employees, Rabbi Trust, compensation, benefits, income taxes, retirement. There can be different variations or types of Massachusetts Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — a Rabbi Trust depending on the specific needs and preferences of the employer. Some common variations include: 1. Supplemental Executive Retirement Plans (SERPs): These trusts are designed to supplement traditional retirement plans for executives. They provide additional retirement benefits beyond what is available under qualified retirement plans such as 401(k) or pension plans. 2. Executive Bonus Plans: These plans allow employers to grant bonuses to their executives while deferring a portion of those bonuses into a deferred compensation trust. This trust acts as a vehicle to defer income taxes on the bonus amounts until a later date. 3. Phantom Stock Plans: In this type of trust, executives are granted "phantom" stock units that track the performance of the company's actual stock. These units are not actual shares but represent an equivalent value. The trust holds the stock units on behalf of the executive until a specified triggering event (e.g., retirement). 4. Stock Option Plans: These trusts involve granting executives stock options, which give them the right to purchase the company's stock at a predetermined price (exercise price) within a specified period. The trust holds the stock options on behalf of the executive until they exercise the options. It is important for both employers and executives to carefully assess their specific compensation needs and consult with legal and financial professionals to tailor the trust's provisions to their unique requirements within the framework of Massachusetts laws and regulations.
