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The provisions and conditions in the 1992 Revenue Procedures set some boundaries for what the IRS would issue a written determination on. But those conditions do not necessarily set the outer limit for what can be done while getting the desired tax treatment. I’ve seen from big law firms rabbi-trust documents that set up an officer of the employer as the trustee. But it’s unwise unless the employer or executive has your or another tax practitioner’s advice. Many States’ laws restrict which persons can be in the business of serving as a fiduciary, often limiting it (mostly) to a licensed bank or trust company. But few of these laws preclude a human from serving as a trustee not as a business and without compensation. I think you’re right to worry about whether a human’s powers as a trustee might give her practical control that defeats an intended deferral. Which issues are raised, and how strong or weak they are, turns on the particular facts and circumstances.

I think you have to know more before you can say there is a problem. What if it is a way for small plans to gain access to the cheapest class of funds within that fund family and the total fees are still lower than what a small plan can get on its own for example? Almost all mutual funds have shares that have much lower fees if you can invest say $5M. Any given small employer's plan can't do it but could this structure allow it to happen? I don't think you can say there is no value in the structure. It very well could be a problem. I have seen plenty of layers of fees that existed to enrich people but you not seeing the value doesn't prove there is not value in the structure of the fund.

Griswold, I think a big part of the answer is the wording of the statutory provisions, not just the fact that a retirement plan has a trust and is a taxable entity, unless it meets exemption requirements. The curse of qualified plans is that 401(a) says a plan is qualified "if" and then starts listing pages and pages of requirements that have expanded over the years, but never specifies the time period during which the various conditions must be satisfied. In the absence of Congressional guidance regarding the timing of all those "ifs," the IRS has interpreted as meaning "if [at all times and forever]." From whence, the necessity for EPCRS and its predecessors. 125(a), by contrast, just tells you that a participant doesn't have to include nontaxable benefits in his/her income on account of constructive receipt, if the requirements of 125 are met. That is by definition a time-limited requirement, since the only tax "person" with skin in the game is the employee, who has a 3-year statute of limitations.

[I re-worded because I didn;t like it before!] I worked on a DC Plan with a "big law firm" and their position is consistent with EBECatty. In other words, if you are deferring payment/taxation for a "short-term" that is ok. If it were taxable immediately even if paid a short time later, there would be no value (or really meaning) to the rule.