Employer Retention of COLI Under a Rabbi Trust

[Guest Edward McElroy]

An employer maintains a NQDC plan. The employer has also establisged a rabbi trust. Currently insurance contracts are held by a trust company and employer pats trust company a custodial fee. Employer is interested in either (i) taking physical control of life insurance policies or (ii) permitting its law firm to take physical control of insurance policies. Is this ok? Any thoughts? Tanks. Ed

[Guest bswift]

I'm not exactly sure of your question, but is it that the rabbi trustee is holding insurance contracts to pay benefits under the plan and for some reason the employer wants to take the policies out of the trust? If so, and if the trust document provides that the employer has the right in its nonfiduciary capacity to replace assets in the trust with other assets acceptable to the rabbi trustee (which it should), then the employer should be able to do whatever it wants with the policies so long as their value is replaced. Of course, taking the policies out may screw up the insurance funding arrangement of the benefits payable under the plan, but what the hey.