Parent/Sub issue

[card]

I have a large corporate client with a number of smaller wholly owned subs. The subs participate in the parents NQDCP. The plan provides that each sub is liable for the payments to its own employees. But the parent generally makes payments and then seeks reimbursement from the subs.

The parent would like to establish a rabbi trust. Clear the most significant part of the total liability will relate to the parent's employees. The contributions to the rabbi trust will come from the parent.

Does there need to be separate accounting for the sub liabilities? What happens if there is no separate accounting, and a sub goes bankrupt? I'm assuming this should have no real impact so long as the sub has not contributed dollars directly to the rabbi trust.

Thanks for any guidance-

card

[Guest hank]

You may want to take a look at IRS Notice 2000-56 (issued last fall) that touches on some of the issues raised when a parent makes contributions to a rabbi trust for employees of a sub (employer stock contributions, if I recall). That Notice addressed some open questions that arose as a result of final regs under IRC Section 1032.