Cascada Ltd. makes its pension contributions to a long-term employee benefit fund. The fund is legally separate from Cascada Ltd. The assets held by the fund can be used only to pay employee benefits and the assets are available to Cascada Ltd.'s creditors only in the event of a bankruptcy. In 20X3, the fund returns $50,000 to Cascada Ltd. as reimbursement for employee benefits that Cascada Ltd. paid. Are the assets held in the fund considered plan assets?
A. No. The assets are available to Cascada Ltd.'s creditors in the event of bankruptcy, therefore they do not exist solely to pay or fund employee benefits.
B. No. Some of the assets were returned to Cascada Ltd., so they can't be plan assets.
C. Yes. Even in the event of a bankruptcy, assets can be considered plan assets if they are returned to Cascada Ltd., as long as the return is for reimbursement of employee benefits paid by Cascada Ltd.
D. Yes. Cascada Ltd. and the fund only use the assets to pay for current employee benefits and Cascada Ltd. does not expect to go bankrupt.
C. Yes. Even in the event of a bankruptcy, assets can be considered plan assets if they are returned to Cascada Ltd., as long as the return is for reimbursement of employee benefits paid by Cascada Ltd. The fact that the fund is legally separate, and its assets are used solely to pay employee benefits, indicates that they are plan assets. The return of $50,000 to Cascada Ltd. in 20X3 for reimbursement of benefits already paid by the company does not change the nature of the fund's assets as plan assets.
