backup withholding and rabbi trusts

[Guest jcarlos]

Under what circumstances would a company have to apply for a number for a Nonqualified plan? and

Under what, if any, circumstances would there be backup withholding for a rabbi trust?

[QDROphile]

A nonqualified plan that is not a "top hat" plan is subject to the ERISA trust requirements and TIN rules would apply. A rabbi trust would not satisfy the ERISA trust requirements.

[Guest jcarlos]

Could you give me an example that is a non-qualified plan that is not a top hat plan (and is, therefore, subject to the withholding rules)?

[QDROphile]

Staying within the private employer arena, you don't find many nonqualified plans that don't purport to be top hat plans because the ERISA trust requirement eliminates most of the tax benefits of deferral and securities law compliance can be a significant issue. An example of a nonqualified plan that is not a top hat plan is one that fails to comply with section 401(a) -- therefore not qualifed -- and participation is not limited to a selct group of management employees -- therefore not a top hat plan. ERISA requires the plan to have a "secular" trust. Contributions to the trust are treated as ordinary income to the participants.

I am aware of some top hat plans that have secular trusts. I am not privy to the reasons for the arrangements.

[Guest Harry O]

I would think a pure section 415 excess plan would be an example of a nonqualified plan that does not necessarily have to be a top hat plan.