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Nonqualified plan assets as collateral for loan?


dv13

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Other than through a rabbi trust, is there any way a company can be prohibited from using their nonqualified plan assets as collateral for loans?

I'm not aware of any. Does non-assignment play into this?

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I'd read the plan documents first just to make sure no "plan assets" were accidentally created, but assuming that is not the case I can't think of any reason why the employer couldn't do anything it wishes with those funds.

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If an employer actually sets aside funds to cover the nonqualified deferred compensation obligation that accrues, those funds belong to the employer and the employer can do whatever it wishes with the funds, subject to any contractual (including trust agreement) terms about disposition of the funds. If you mean "can be prohibited" against its will, no. If means other than an appropriate grantor trust are employed to protect or secure the set-aside assets for the benefit of the particpant, the benefit may become taxable.

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