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.
The Hillsborough Florida Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — a Rabbi Trust is a specific type of trust established by companies in Hillsborough, Florida to provide nonqualified deferred compensation benefits to executive employees. This trust is known as a Rabbi Trust because it receives its name from an Internal Revenue Service (IRS) ruling known as the Rabbi Trust Letter Ruling. A Hillsborough Florida Nonqualified Deferred Compensation Trust operates as a tax-deferred vehicle used by companies to set aside funds for executive employees, allowing them to defer a portion of their compensation for future use. The trust is designed to offer additional benefits beyond what is typically available through employee-sponsored retirement plans. There are several types of Hillsborough Florida Nonqualified Deferred Compensation Trusts: 1. Defined Contribution Trust: This type of trust allows executive employees to contribute a specific percentage or amount of their income into the trust, which is then invested according to the employee's chosen investment options. The eventual payout to the employee is determined by the performance of the trust's investments. 2. Defined Benefit Trust: In this type of trust, the employer guarantees a specific retirement benefit to the executive employee based on a predetermined formula. The contributions to the trust are made by the employer, and the payout is typically based on factors like the employee's years of service and salary history. 3. Supplemental Executive Retirement Plan (SERP): A SERP is a type of nonqualified deferred compensation plan that can be used in conjunction with a Hillsborough Florida Nonqualified Deferred Compensation Trust. It provides additional retirement benefits to highly compensated executive employees that go beyond what is available through traditional retirement plans. 4. Split Dollar Life Insurance Trust: This type of trust combines life insurance with deferred compensation benefits. The employer and employee jointly fund a life insurance policy, with the employee's portion of the premium going into the trust, where it grows tax-deferred. Upon retirement, the employee can access the funds in the trust, potentially tax-free. 5. Elective Deferred Compensation Trust: This trust provides executive employees with the option to defer a portion of their compensation, which is then invested within the trust. The employee can choose from a range of investment options and control the timing of distributions, typically after retirement. Overall, the Hillsborough Florida Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — a Rabbi Trust is a valuable tool for employers to attract, retain, and reward executive talent by offering additional retirement benefits beyond traditional company-sponsored plans. It allows employees to defer compensation and potentially enjoy tax advantages while planning for their future financial security.
