Author Topic: 401k Contributions as UK Employee Possible?  (Read 1789 times)

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Offline Guildford

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Re: 401k Contributions as UK Employee Possible?
« Reply #15 on: March 26, 2014, 03:44:51 PM »
Hi, taking a step forward this conversation. We could agree that employee and the employer matching contributions into a UK pension could be 'general limitation' income thus subject to FTC (carryforward and current) from employment in the UK; however, the accretion (likely passive?) on the pension would be unrealized: could the HTKO potentially come into play given the fact that, when it will be taxed in the UK, it will suffer an ordinary rate?

I cannot see the PFIC rules to apply to a pension, but I am not sure. 

Overall, how comfortable can we be that the US tax basis of a UK pension, electing out of the treaty protection, will be the employee and employer matching contributions?  Apologies if I am asking something that has been discussed before.


Offline ES

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Re: 401k Contributions as UK Employee Possible?
« Reply #16 on: March 20, 2017, 05:14:51 PM »
Remember that you'll also have growth within the pension, all of which will be taxable, so ensure you include that in the same bucket as the deductible contributions. Your pension operates similarly to a traditional IRA containing nondeductible contributions, which is not the same thing as a Roth IRA.

The IRS provides guidance for figuring the taxable amount of traditional IRA distributions and figuring the taxable amount of 401k distributions. In both cases they use a pro rata method.

How does the IRS calculate the pro rata IRA withdrawal analysis when considering the non-deductible percentage of an account in the event of fx swings?  As in, a situation where a foreign pension (covered by the treaty) has 20% investment gains in GBP but the account is at a 20% loss given the USD conversion.