RABBI TRUST

A form of employee benefit in which an employer establishes a trust to provide nonqualified deferred compensation to certain key employees. The trust usually contains restrictions on revocation and is subject to claims of general creditors of the employer. Employer contributions are not taxable as income to the employee at the time of contribution. Any income earned prior to distribution to the employee is taxed to the employer. The name "rabbi" originated because the first plan of this type reviewed by the IRS concerned a trust established for a rabbi.