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Securing SERP Benefits


Guest David M

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Guest David M

We are seeking some creative ways of securing an executive's SERP benefit without coming afoul of constructive receipt.

We have thought of a rabbi trust, a secular trust, or a bond (although there is little to no appetite in the bond marketplace for small, single-person transactions).

How else might we secure this benefit in order to give the executive greater comfort in its security? Some form of life insurance?

I would be grateful for some ideas. Thank you.

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Guest EAKarno

There are a few very effective means of securing SERP benefits from bankruptcy utilizing a modified form of split-dollar life insurance arrangements. The tax effectiveness of these arrangements is derived directly from the interim guidance offered by Treasury and the Service in Notice 2002-8. The idea will not work for any arrangement put in place after the Treasury finalizes its proposed split-dollar regs (likely this summer). Although these transactions generally look nothing like a loan, there is also a risk that they could get lumped in with traditional split-dollar arrangements and thus, perhaps, be barred as a "personal loan" under Section 402 of the Sarbanes-Oxley Act if extended to "executive officers" of public companies.

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