401(k) Plan with Non-Citizen Trustee

[Lame Duck]

I have a new client that is the subsidiary on an Israeli company. All of the employees of the subsidiary are sales people. There are no officers. The company wishes to establish a plan for the U.S. employees. Can the Israeli president of the parent act as the trustee of the U.S. plan? I know the law requires the indicia of ownership of the trust assets to be held in the U.S. but I haven't been able to find any requirement that the trustee be here. Any help or guidance is greatly appreciated.

[masteff]

It appears he can be a trustee but not the sole trustee and shouldn't be able to veto the US trustee.

Prior threads on the topic:

http://benefitslink.com/boards/index.php?/topic/41182-who-can-be-a-trustee/

http://benefitslink.com/boards/index.php?/topic/35410-foreign-trustee/

http://benefitslink.com/boards/index.php?/topic/4489-domesticforeign-trust/

A couple of links to info referred to in those threads:

http://www.unclefed.com/ForTaxProfs/irs-drop/1998/n-98-25.pdf

http://www.ecfr.gov/cgi-bin/text-idx?SID=715fc31d00b647e27143645b2470f48a&node=26:18.0.1.1.2.20.69.8&rgn=div8 (especially see "(d) Control Test")

[Lame Duck]

Thanks. I spoke with the DOL EBSA and they said there was no prohibition against his serving as trustee but that there were concerns over his ability to manage the tust and to be available to participants or regulatory agencies. If that oculd be worked out, he could serve as trustee.

[Peter Gulia]

Lame Duck, don't rely on the Labor department alone. Even if what you heard might be a correct interpretation of ERISA's Title I, the Labor department lacks authority on the issues of whether a trust is a U.S. or non-U.S. trust, and whether a non-U.S. trust might tax-disqualify its plan. Get your lawyer's advice. And ask your lawyer whether an Internal Revenue Service ruling or determination might help.