Liverpool co-owners Tom Hicks and George Gillett sounded out Jurgen Klinsmann about becoming the club's next manager, according to a report.
Hicks claims the talks would not have resulted in the immediate dismissal of the man who led the team to Champions League glory but that Klinsmann was 'an insurance policy'.
Klinsmann is no longer an option, however, as he has agreed to take charge of Bayern Munich.
He told the Liverpool Echo: 'After George and I had our long and productive meeting with Rafa following the Manchester United match, we put all of our issues behind us and received Rafa's commitment that he wanted to stay with Liverpool.
'We never reached agreement on an option with Jurgen, and we are both pleased for him that he has a great opportunity to return to Germany and coach a great club team.
'Rafa has both of our support, and our communication has greatly improved.
'We attempted to negotiate an option as an insurance policy to have him [Klinsmann] become manager if Rafael left for Real Madrid or other clubs that were rumoured in the press - or in case our communication spiralled out of control for some reason.'
The article also claims that had Liverpool tumbled out of the Champions League, the owners would have tried to replace Benitez.
However, Benitez steered the team through with a crucial victory against Marseille in France.
Klinsmann's name has been linked with Liverpool since November.
It is believed to be the root cause of Benitez's testy media conference then when he had been told to concentrate on running his team by the owners.
Despite the backing of the owners, winning the FA Cup may be the minimum requirement for Benitez to stay in his job come the summer.
Liverpool face Coca-Cola League One Luton in a replay at Anfield tomorrow - and Benitez knows defeat is not an option.
Yet another depressing draw at Middlesbrough on Saturday - they have won just three of their last 10 - has seen the Spaniard come in for more criticism.
He said: 'From our point of view, we want to win the FA Cup again. It is a fantastic competition, and we will put out our strongest team and hope to progress to the next round.
'We still want to win the title, but also we want to win the FA Cup as well.
'I know it will be a different Luton side. They have lost players now, so we know it will be more difficult for them - but they will still try their hardest to win.'
Benitez could well give a debut to new centre-back Martin Skrtel, but he is unlikely to take the slightest risk with the rest of his team.
The prospect of Swansea or Havant and Waterlooville at home in the next round presents a golden opportunity to reach the fifth round without any further scares.
He said: 'I am positive about our chances against Luton. We will be at Anfield, and I know we are in a much better position than some other Premier League clubs who have already been knocked out!
'They have problems, I understand. But we are still talking about the FA Cup, and it can be a very difficult competition for any big club against any sort of lower-division opposition.'