An "underfunded" DB plan is terminated and lump sums are paid and a Single Premium Annuity is purchased to provide the immediate and deferred benefits for those who didn't elect lump sums.

The Sponsor deposits $5 Mil. to cover the additional money needed to cover all the payments (lump sums & contract). This contribution was deducted.

It's now 2 years later and the annuity contract is just getting settled and low and behold the Sponsor actually gets a refund, ($50K).

Is this considered a reversion? Are there any corp. tax implications?

I've never been in this situation, but it sounds like a reversion to me.

Issue is that reversions are subject to 50% excise tax and ordinary income tax, but this doesn't seem fair (not that fair and IRS rules necessarily have anything to do with each other) since the client made a large "extra" contribution in the year of termination (which may or may not have been deductible in that year, depending on size of plan and relationship of Current Liability to actual payout).

I know very little about corporate taxes, but it would be worth talking to the CPA and seeing if the contribution in the year of termination and the refund could somehow be netted out to avoid the excise tax kicking in.