The IRS could care less where it goes. They tax you now or they tax you later. It’s just set up differently. In this case it’s for all purposes a “ employer discretionary contribution” plan. Nothing special just another form of retirement account. It actually helps reduce the companies and the employees immediate tax burden, but like I said before the IRS doesn’t care as they will wait it out.

Only reason it’s gets placed into the account is because the senior guys are in higher tax brackets and want to defer for as long as possible.