Foreign Pension fund IRS reporting

[Exflyboy]

Hey Guys,

I  just found out with some shock that if you hold foreign pension (even if it has not started paying out yet) that you are required to report this to the IRS on form 8938 and possibly another one called FBAR.

This is nasty because potentially there is a $10,000 per year penalty going back to 2011 if you fail to submit the 8938 form (not sure about the other one).

The get out are

1) If you did not know from readily available information (I guess that means published account statements) what the total value of you pension was then the value of the pension is ZERO.
2) If your total interest in foreign accounts falls below the reporting threashold ($100k married filing jointly for 8939 and $10k for FBAR) then you don't have to file the appropriate forms.

In my case, none of my pension statements ever gave me a total account value.. only a future per year payout value.. which is not an account value.

This lets me off the hook from my reading.

You may want to check yours.

I just had a company ask what a buyout value of my pension would be.. and they told me 2 days ago it was $400k.. this of course means I now "Know" what the value of my pension is and so I will have to report on one or both forms next year.

Phew!

[jlajr]

I am a US citizen permanently living outside the US, and I can only pass along what I've been told and how my accountant has treated my long-term savings plans, including a defined-contribution pension fund.

• Non-US financial accounts do not need to be reported on Form 8938 until their total value exceeds USD 50,000 on the last day of the tax year, or USD 75,000 on any day of the tax year, if filing as an individual (http://www.irs.gov/Businesses/Comparison-of-Form-8938-and-FBAR-Requirements).
• I don't know how, but my accountant has not reported any gains/interest/dividends in my long-term savings plans. On the other hand, it is entirely possible that my deposits and my employer's contributions to these plans are being counted as active income (salary, wages, and tips).
• For at least a few years now, since the aggregate value of all of my non-US financial accounts has been over USD 10,000, I have been filing FBARs for my financial accounts, and reporting these long-term savings plans.

HTH.

[Exflyboy]

Fortunately foreign pension plans are not reported on the FBAR form, just the 8939 form.

If the value of your pension plan is not known from readily available information then the value is whatever distribution you received that year. If you received no distribution the value is ZERO.

Just check your pension statements to make sure they do not say "the total value of your pension is $xxxxx".. Otherwise you could get hit with a $10k per year penalty for not filing the form(s).

[jlajr]

Fortunately foreign pension plans are not reported on the FBAR form, just the 8939 form...

That is different from my understanding of the FBAR requirements. For example, for Israeli pensions funds, from http://www.pstein.com/faq/fbar/:

"3. Does my Israeli pension need to be reported on the FBAR filing?

"A. It depends on the type of pension account. If you have the ability to take out the money in the pension account presently, then the current redeemable value of the pension must be reported on the FBAR under Part II “Information on Financial Accounts Owned Separately”). On Line 16 where it asks for type of account, you should check the box that says “Other” and enter the word “pension” for the description.

"B. On the other hand, if when you retire you will just be entitled to receive a percentage of your monthly salary from the pension company or your former employer it does not have to be reported on the FBAR form."

I think, even though I don't actually have the ability to take the money out of my pension account, it does have a redeemable value and I would be able to take money out under certain circumstances (long-term unemployment after being fired?).

[SnackDog]

Good reminder.  I'm pretty sure I can't access mine until I retire in country (will not happen) or withdraw it two years after leaving.  There is not guarantee I can access it at all, so not currently reporting.   Will be interesting to see if I eventually can access it and withdraw the lump sum.  Not sure how taxes will work in country or US.  An no clue what amount will be, anywhere from 6 to 7 figures so a bit of a wildcard in the financial plan.  Would be good to hear from anyone who has repatriated a lump sum to the States.

[DNJ]

The 8938 thresholds are higher if you are living outside the U.S. http://www.irs.gov/pub/irs-pdf/i8938.pdf

The redeemable value question is interesting, re the FBAR filing. After reading this I must do a bit more research.  There is a temporary ability in Ireland right now to remove up to 30% of your own contributions (expires March next year).

D

[Exflyboy]

Fortunately foreign pension plans are not reported on the FBAR form, just the 8939 form...

That is different from my understanding of the FBAR requirements. For example, for Israeli pensions funds, from http://www.pstein.com/faq/fbar/:

"3. Does my Israeli pension need to be reported on the FBAR filing?

"A. It depends on the type of pension account. If you have the ability to take out the money in the pension account presently, then the current redeemable value of the pension must be reported on the FBAR under Part II “Information on Financial Accounts Owned Separately”). On Line 16 where it asks for type of account, you should check the box that says “Other” and enter the word “pension” for the description.

"B. On the other hand, if when you retire you will just be entitled to receive a percentage of your monthly salary from the pension company or your former employer it does not have to be reported on the FBAR form."

I think, even though I don't actually have the ability to take the money out of my pension account, it does have a redeemable value and I would be able to take money out under certain circumstances (long-term unemployment after being fired?).

Yes that sounds about right.. its about whether you have own (or have signatory authority over the account) vs if it is a employer owned and administered account on your behalf.. a bit like a trust fund.

To quote another interpretation from a group of CPA's looking at this from setting up a QROPs perspective...

FBAR

"An individual would NOT have to report a plan that was an employer-administered plan or a traditional defined benefit plan since the individual neither owns the account nor has signatory authority over it."

Form 8938..

" a foreign pension plan must be reported provided reporting threasholds have been met"

Fortunately, the 8938 instructions provide a get out clause in that "if you didn't know or cannot find by readily accessible information, the value of the plan, then its value is $zero". You don't file an 8938 if the total value is below your threashold.. which of course $zero is.

That's why its important to read your statements to see if the Total value of your plan is stated or not.. mine isn't.. I only found out after I got a buy out offer two days ago.. so of course now I KNOW.. I have to submit an 8938 for this year.

[jlajr]

The 8938 thresholds are higher if you are living outside the U.S. http://www.irs.gov/pub/irs-pdf/i8938.pdf

Great. Thank you.