Having recognized a need for security, the question to be asked is what level of protection is desired (from whom or what event)? Generally, benefits may be protected from the following events:
Change in Financial Condition
Change of Heart
Change in Control
Bankruptcy
A Rabbi Trust is the most commonly solution used to set assets aside to informally finance nonqualified plan liabilities. A Rabbi Trust:
Established by an employer to provide a source of funds which may be used to satisfy the employer’s obligation to executives under a nonqualified benefit plan
Typically set up as an irrevocable trust and is usually considered a grantor trust
Provides protection against: Change of Heart and Change of Control