Separate EIN for Rabbi Trust

[HCE]

We recently moved from one trustee to another.  The old trustee did not require us to get a separate EIN for the rabbi trust, the new trustee does require this.  They say they need a separate EIN to file a 1041 for the Trust.

Is this a concern?  Could a separate EIN jeopardize the unfunded status of the nonqualified plan/rabbi trust?  Is there any risk of not having a separate EIN?  Can we (is it reasonable to) push back here?

[Luke Bailey]

An answer would require a review of your trust and related documents, but rabbi trusts are grantor trusts and so not taxpayers/not required to have an EIN. If the rabbi trust participants are entitled to gain on assets (i.e., gain goes into the measurement of their benefit), I suppose that having an EIN for the trust might be beneficial from a housekeeping standpoint by keeping investment return reports (1099-INTs, -DIVs, etc.) separate, but it would not be necessary and the employer grantor of the trust would need to understand that everything reported as income of the trust under its EIN is from a tax perspective the income of the employer, so needs to go on its 1120-whatever. Again, I have not reviewed your documents or arrangement, but if you really have what the IRS letter rulings and folks in the biz refer to as a "rabbi trust," it will not be filing a 1041.

[gc@chimentowebb.com]

There won't be a problem. This is pretty common for institutions to file a barebones 1041 which contains only the trust’s name, address, and tax identification number. They will attach a separate grantor tax information letter to the return. This is easier for them than filing 1099s when there are multiple sources of income.

[Luke Bailey]

HCE, gc@chimentowebb.com is correct. Although a grantor trust is generally not required to have an EIN, if for purposes of keeping investment income separate for internal accounting purposes the trustee gets an EIN for the trust and has the issuers of the trust's investments report using the trust EIN instead of the grantor's, a minimal 1041, as gc@chimentowebb.com describes, is required. Here's a link to an article that explains that and alternatives. https://www.thetaxadviser.com/issues/2013/sep/clinic-story-03.html