How REITs Can Hedge an Employee Benefit

Informally funding a DCP without Triggering Distribution Requirements
In order for Real Estate Investment Trusts (“REITS”) to maintain their designated tax treatment status, they must meet the annual REIT testing requirements. REITS are required to distribute at least 90% of taxable income in the form of dividend payments to their shareholders. Income realized through the growth of mutual funds – even to pay an employee benefit – must be included in the taxable income calculation, causing significant shortfalls when plan balances rise.