Home  
  
 
  

Securing Nonqualified Deferral Plan Benefits

Nonqualified plans typically provide the majority of an executive's retirement income. However desirable these plans may be, there is still a risk factor - the very nature of these plans require that the promise of payment be an unsecured obligation. This risk factor is a major consideration for most executives.

There are basically two scenarios which might cause a sponsor not to pay the benefits: a change of heart, and the inability to pay due to financial considerations, such as bankruptcy.

To help alleviate executives' concerns, the plan sponsor may establish a trust as a vehicle to accumulate assets to support the payment of benefit obligations under the plan. The trust receives contributions, makes investments, and makes distributions according to the terms of the plan.

One form of trust, a Rabbi Trust, protects plan participants from being denied payment due to a change in management or a hostile takeover. Another form of trust, a Secular Trust, will further secure the benefits for the participant, but could result in some undesirable tax consequences.

     

     

    Back to Top

     
     
     
     

    Copyright 1999 - 2017. Deferral.com.   All rights reserved.

    Privacy Statement | Terms & Conditions