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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16576
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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What are my options if I want to roll a Rabbi Trust into another

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What are my options if I want to roll a Rabbi Trust into another tax deferred vehicle?
Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

I would love to assist you today with your question. However, I am going to give you an honest answer that is both accurate, yet may not be what you want to hear. Please rate this answer in light of the circumstance; that is, I have no personal control over the tax code, and that I have a duty to answer your question both honestly and accurately.

You cannot roll your Rabbi trust into another tax deferred vehicle. A Rabbi Trust is a non-qualified deferred compensation plan, and money in a Rabbi Trust is not eligible to be rolled over into qualified retirement plans such as other 403(b) plans or IRAs. IRS regulations have made distributions from the RPB Rabbi Trust more complicated over the past few years, as Congress enacted laws that limit the flexibility of when Rabbi Trust balances can be distributed. The laws were a reaction to abuses in Rabbi Trust plans resulting from the Enron, WorldCom and other financial scandals. The laws have had the unintended consequence of affecting participants in all pension plans with Rabbi Trust provisions no matter what the situation.

Both types of Rabbi Trust plans, the pre- and post-2005 versions, are not eligible for rollover into qualified pension plans including traditional IRAs.

While the Rabbi Trust funds are invested by the RPB and held in trust by the RPB, the actual account (contributions and earnings) is technically an asset of the congregation (or company) that contributed the funds. Congregations (and companies), however, do not have access to the money. The only time that Rabbi Trust funds could be accessed is if the congregation or company becomes legally insolvent. Under those circumstances, assets in the Rabbi Trust would be available to the claims of creditors of the congregation that contributed the funds.

Rules for distributions from Rabbi Trusts can be found, HERE

I know this probably isn't what you wanted to hear. However, as I stated before I have a duty to give you an honest and accurate answer.

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Customer: replied 4 years ago.
Thank you
If I want to move my money from t RT to another entity without paying tax now, is there something available ?

Thank you for your reply. Unfortunately, you are not the owner of the funds in the Rabbi Trust. By definition, either the congregation or the company that set up the trust is the owner, until distributions are made upon retirement.

Therefore, you cannot roll over the trust, and you also cannot move the funds, as you are not the technical owner. For instance, if the company that set the trust up filed for bankruptcy, the funds in the trust would be available for the company's creditors.

Unfortunately, there's nothing you could do to transfer the funds tax free. If the company gives you the funds you will have to recognize them as taxable.

If this helped, then rate my service as "excellent" so that I can be compensated for assisting you today. Otherwise, click "reply" or "continue conversation" for continued dialog with me.

VERY IMPORTANT - IF you are having DIFFICULTY RATING, please let me know IMMEDIATELY. If you don't rate my response, I don't get paid even though your deposit is retained by the site. Thanks for your cooperation in this matter.

Jim,

Thanks for contacting us with your question. I hope our insight was informative, although I realize that it may not be the news you wanted to hear.

Please take a moment to rate my response as "excellent" so that I can be compensated for assisting you today. If you are having difficulties with the rating process, let me know immediately
Customer: replied 4 years ago.
Hello, I tried to rate you service as excellent but it will not take my response...