Executive benefits with a level of protection in the case of a change of heart or merger agreement

Rabbi trusts are designed to provide a level of protection for employee benefits in the case of future changes in management. Our proprietary rabbi trust can also be structured to provide discretionary trustee responsibilities to oversee trust provisions. Structuring a rabbi trust to include discretionary trustee responsibilities can prevent changes, alterations, or even reductions to executive benefits. But how does this work? By incorporating certain benefit protection language into the rabbi trust, the trustee is positioned to become a discretionary trustee if the company experiences a change of heart or a change in control. Consider these 6 tips when setting up a rabbi trust change in control provision to protect employee benefits.

Our rabbi trust and change in control services can include:

Traditional trust & custody services:

  • Custody and safekeeping of assets
  • Trade settlements
  • Proxy voting
  • Development of the trust agreement
  • Investment performance reporting
  • Benefit payments

Discretionary trustee responsibilities upon and following a change in control or change of heart:

  • Company-defined funding requirements, i.e., annual true up
  • Discretionary trustee governance and oversight
  • Investment management and discretion to acquire, hold, and dispose of trust assets
  • Benefit determination by the trustee in the event of a dispute between the employee and new management
  • Potential litigation to enforce the terms of the trust

As an industry leader in rabbi trusts, we understand the sensitive nature of these agreements and are prepared to help provide input on the structure of rabbi trust provisions to help meet the goals of the organization.

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Custody and trust services are provided by Principal Bank®, Member FDIC, and/or Principal Trust Company®. These services are provided under the trade name Principal® Custody Solutions. Principal Trust Company is a trade name of Delaware Charter Guarantee & Trust Company.

Principal Bank, and Principal Trust Company are members of the Principal Financial Group®, Des Moines, Iowa 50392.

Principal®, Principal Financial Group®, and Principal and the logomark design are registered trademarks of Principal Financial Services, Inc., a Principal Financial Group company, in the United States and are trademarks and services marks of Principal Financial Services, Inc., in various countries around the world.

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Investment and insurance products are:

  • Not insured by the FDIC or any Federal Government Agency
  • Not a Deposit or Other Obligation of, or Guaranteed by, Principal Bank or Any Bank Affiliate
  • Subject to Investment Risks, Including Possible Loss of the Principal Amount Invested