Foreign Trustee?

[Guest padmin]

Can a qualified plan trustee be a foreign corporate entity or non-resident foreign national?. The client has non-US owners and the domestic officers would prefer not to be plan trustees.

[Guest mjb]

There is no prohibiton against non citizens acting as trustees of a Q plan under the IRC as long as the trust is a domestic trust sited in the US. However, there are other federal laws that restrict non us citizens from having control over US domestic funds. You need to discuss this issue with counsel.

[Peter Gulia]

Beyond ERISA's requirement to keep the indicia of ownership of all plan assets in the jurisdiction of the district courts of the United States, a trust that isn't a United States person trust could tax-disqualify a plan that otherwise would qualify under IRC 401(a).

Even if all other conditions for a U.S.-person trust are met, a trust won't qualify unless "one or more United States persons have the authority to control all substantial decisions of the trust."

Consider the difference between directed and decision-making trustees. Also, a non-U.S. person's power to remove a trustee or add another trustee can, depending on the surrounding facts, mean that the U.S. persons lack "the authority to control all substantial decisions of the trust."

While it isn't necessarily unlawful (if the ERISA requirement is met) for a retirement plan to have a foreign trust, few employers and participants desire a trust that isn't tax-qualified.