Page 2 - Reporting Foreign Retirement Plans on Required Information Returns

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a foreign estate that exceeds $100,000. ing thresholds are met), and a foreign retire- any retirement distributions from the pen-
Form 3520 must also be filed by a U.S. ment plan is reportable on Form 8938 sion would then trigger a Form 3520 filing
person to report the creation of a foreign regardless of whether the plan is associated obligation, since distributions from a foreign
trust, ownership of a foreign trust, transfers with a segregated foreign retirement account trust to a U.S. person also trigger the filing
of money or property to a foreign trust, or or is simply a foreign pension. A foreign requirement. An employer-created foreign
distributions from a foreign trust. equivalent of Social Security, however, is retirement account may also result in a U.S.
In addition, there are different monetary exempt from reporting on Form 8938. person needing to file Form 3520, since the
penalties that may apply if an individual There is also the issue of which mone- account may be viewed as a foreign trust
fails to timely submit a required informa- tary values must be reported on Form 8938 for the benefit of the employee. If the
tion reporting form related to foreign assets. with respect to a foreign retirement plan. employee is a U.S. person, then his periodic
The penalty for failure to file an FBAR is If the plan is in the form of a foreign retire- contributions from his wages to the foreign
$10,000 for each nonwillful violation, and ment account, the taxpayer should receive retirement account (i.e., the foreign trust)
the greater of $100,000 or 50% of the periodic statements identifying the value of may trigger an obligation to file Form 3520,
account value for each willful violation. the retirement account and can use the val- since Form 3520 must be filed when a U.S.
The penalty for failure to file a required ues on those statements when reporting the person transfers money or property to a for-
Form 8938 is $10,000 for each 30-day peri- maximum value on Form 8938. With eign trust. It appears, however, that an
od during which the Form 8938 is not filed, respect to a foreign pension, the general employer’s periodic contributions to an
with a maximum continuing failure-to-file rule is that the individual must report on employer-created foreign retirement plan
penalty of $50,000. There is also a 40% Form 8938 the fair market value of her will not trigger a Form 3520 reporting
underpayment penalty for any tax deficien- beneficial interest in the pension plan as of requirement, since the instructions to Form
cies relating to foreign assets that were not the last day of the tax year. If, however, 3520 expressly provide that the form does
properly reported on Form 8938. The the individual does not know (or have rea- not have to be filed to report “transfers to
penalty for failing to report an interest in son to know based on readily accessible foreign trusts described in [Internal Revenue
a foreign trust on Form 3520 is the greater information) the fair market value, then she Code] sections 402(b), 404(a)(4), or 404A,”
of $10,000 or 35% of the gross value of must instead report on Form 8938 the fair all of which relate to employer contributions
any property transferred to the foreign trust market value of the cash and other property to retirement plans.
or any distributions from the trust. distributed during the tax year as a bene- Complicating matters is the fact that there
ficiary of the pension. If she received no may be special rules that apply to certain
Reporting Different Types of Plans distributions during the tax year, and does foreign retirement plans. For example,
Reporting a foreign retirement plan will not know or have reason to know the fair Canadian Registered Retirement Savings
differ depending upon the type of plan and market value of the beneficial interest— Plans (RRSP) do not have to be reported
form. A foreign retirement plan is only which will often be the case with an on Form 3520, as the instructions to that
reportable on an FBAR if it is associated employer-created pension plan when the form expressly provide that “Form 3520
with a segregated foreign retirement participant is not yet receiving retirement does not have to be filed” to report transfers
account, since it is the foreign account— benefits—then she must still report the pen- to, ownership of, and distributions from
not the plan itself—that triggers the obliga- sion on Form 8938, but should report the such plans. Until tax year 2014, however,
tion to file the FBAR. Assuming that the maximum value of the asset as zero. RRSPs did have to be reported on Form
aggregate $10,000 reporting threshold has A foreign retirement plan may also trig- 8891, U.S. Information Return for
been met, an individual with a foreign retire- ger an obligation to file a Form 3520, which Beneficiaries of Certain Canadian
ment account will need to report the highest is used, among other things, to report trans- Registered Retirement Plans. Thus, although
balance in the retirement account at any actions related to a foreign trust. A self-cre- RRSPs are exempt from being reported on
point during the tax year. Neither a foreign ated foreign personal pension plan may be Form 3520, that does not mean that they
employer-created pension (which involves viewed as a foreign grantor trust, and thus are exempt from being reported elsewhere.
only a right to receive payments on retire- reportable on Form 3520, since a U.S. per- For example, there is no exemption from
ment) nor a foreign equivalent of Social son must file Form 3520 to report owner- reporting RRSPs as an asset on Form 8938;
Security would qualify for reporting on an ship of a foreign trust. An employer-created rather, the 2014 instructions to Form 8938
FBAR, however, as there is no foreign foreign pension may also trigger an obliga- expressly provide that RRSPs must be
account to report in those situations. tion for a U.S. resident alien who is of retire- reported. In addition, there is no exemption
In contrast, Form 8938 requires the ment age to file Form 3520. The foreign from reporting RRSPs on the FBAR form;
reporting of all manner of foreign assets pension may be viewed as a foreign trust in fact, an IRS FBAR Reference Guide
(assuming the appropriate monetary report- with the resident alien as its beneficiary, and available on the IRS’s website expressly

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