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Rabbi trust and change in control services

Rabbi trust and change in control services

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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The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice, or tax advice. You should consult with appropriate counsel, financial professionals and other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements. The information shown is not intended to provide any suggestion that you engage in or refrain from taking a particular course of action.

OCIO solutions and LDI solutions are provided by Investment Solutions, an advisory team within Principal Asset ManagementSM. Principal Asset Management leads global asset management at Principal®.

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.

When Principal Custody Solutions is providing investment management services, Principal Custody Solutions serves as the investment manager or discretionary trustee but leverages the investment expertise of Principal Asset Management. Customers may also contract directly with Principal Asset Management for investment management services. In those instances, Principal Custody Solutions serves solely in a custodial or trustee capacity. Please refer to your underlying service agreements for details.

Principal Global Investors, LLC is registered with the U.S. Commodity Futures Trading Commission (CFTC) as a commodity trading advisor (CTA), a commodity pool operator (CPO) and is a member of the National Futures Association (NFA). Principal Global Investors advises qualified eligible persons (QEPs) under CFTC Regulation 4.7. Principal Asset Management is a trade name of Principal Global Investors, LLC.

Insurance products and plan administrative services provided through Principal Life Insurance Company®.

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

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

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