Overfunded SERP

[Guest Iwonder]

If a SERP is found to be significantly overfunded, far in excess of what is required to satisfy obligations, can an excess amount be returned to the sponsor company?

If so, what are the tax consequences.

Thank you.

[XTitan]

Assuming you're talking about assets in an irrevocable Rabbi trust, does the trust agreement have a reversion of excess assets provision or a recovery of benefits paid from corporate cash provision? If not, there is generally no way to get the assets out of the trust until all payments are made, though the trust document would be the best source for this info.

[mbozek]

If a SERP is found to be significantly overfunded, far in excess of what is required to satisfy obligations, can an excess amount be returned to the sponsor company?

If so, what are the tax consequences.

Thank you.

How is the SERP funded? If the SERP is unfunded and the payments are to be made by the employer from its general assets then it doesnt matter if it is over funded b/c the excess will be retained by the employer unless the plan provides otherwise. If the funds are held in a restricted account such as a rabbi trust then you need to check the terms of the plan to see if the excess will be returned to the employer. If the funds are in the employer's general account there are no tax consequences other than the employer will deduct the payments as compensation paid to the employee.