That usually makes employees unhappy, particularly if the plan payments won't be made until after termination of employment. From an employee's perspective, if there is anything worse than being an unsecured creditor of your employer, its being an unsecured creditor of your former employer. The trust document specifically recites that the trust assets remain subject to the claims of the employer's general creditors. Thus, a rabbi trust would not protect employees in the event of employer bankruptcy, but it generally would protect employees against the possibility that the employer will change its mind about paying plan benefits. The peace of mind that comes from seeing a specific pool of assets for plan payments, combined with the knowledge that getting any additional security would likely result in current taxation, usually satisfies the employee's concerns.
Some plans allow investments in employer stock.
First, employers generally would not have any exposure for extracontractual remedies, such as punitive damages or damages for emotional distress. The liability would be limited to benefits described in the plan. Second, employers can require claimants to exhaust a plan's internal administrative appeals process before seeking a judicial remedy. That standard of review is a significant obstacle for claimants to overcome. Such arrangements, although common, must be carefully crafted to comply with a number of legal requirements.