Amending Irrevocable Rabbi Trust to revert excess to sponsor

[jessgaines]

I have a client with an NQDC plan funded by an irrevocable Rabbi Trust. The sponsor did not draft the trust to include reversion of excess funds back to sponsor. Can they amend the plan to add the clause?

[My 2 cents]

It is my recollection that a qualified ERISA plan could adopt such an amendment but five years would have to have elapsed after the amendment before the plan termination for the excess to be payable to the sponsor. As I recall, potential allocations of excess assets are not considered protected as part of the accrued benefit. The excess assets, by definition, are those assets remaining after the entirety of the accrued benefits have been paid out.

I don't really know how a non-qualified plan would have to treat excess assets, but I would be surprised if the rules concerning reversions to the sponsor are more stringent than those applicable to qualified plans. Perhaps there would not be a five year waiting period before the revised provision could be followed.

As must always be asked, what does the plan currently say? Does it say that any assets left over after paying all benefits must be allocated entirely among the participants?

[jessgaines]

The trust document says nothing about assets left over after payment of benefits to Participants. The reason for the excess/overage is due to an error regarding a participant who was not eligible to participate, but contributions were made none the less. So, the plan is not terminating, it just needs to be amended to include the reversion clause in order for this participant to be paid out by the sponsor, not the trust. Confusing, right?