From Yahoo Finance: 2025-03-23 16:43:00

A rabbi trust is an irrevocable trust employers use for deferred compensation. It allows funds to be set aside for key employees but can be accessed by creditors if the employer goes bankrupt. Rabbi trusts offer tax deferral benefits and structured payment plans, but lack ERISA protection.

Rabbi trusts originated from a 1980 IRS ruling involving a synagogue’s trust for a rabbi’s deferred compensation. They are commonly used for executive compensation and non-qualified retirement plans. Assets in rabbi trusts are subject to employer creditors, unlike traditional retirement accounts.

Rabbi trusts offer tax deferral benefits and help retain key employees with structured payment plans. However, they lack ERISA protection and may be used to satisfy creditor claims in case of employer bankruptcy. They are commonly used for executive compensation, severance packages, and non-qualified retirement plans.

Rabbi trusts provide tax deferral benefits, flexible payment structures, and help retain key employees. However, they lack ERISA protection and may be used to satisfy creditor claims in case of employer bankruptcy. They are commonly used for executive compensation, severance packages, and non-qualified retirement plans.

Read more: What They Are, Pros and Cons