FBAR and Final salary pension scheme

Here's what I've found thus far:

From the FBAR instructions (page 6):
Exceptions
Participants in and Beneficiaries of Tax-Qualified Retirement Plans.
A participant in or beneficiary of a retirement plan described in Internal
Revenue Code section 401(a), 403(a), or 403(b) is not required to report
a foreign financial account held by or on behalf of the retirement plan.

From 26 USC (*) 401(a)
(a) Requirements for qualification
A trust created or organized in the United States and forming part of a stock bonus, pension, or profit-sharing plan of an employer for the exclusive benefit of his employees or their beneficiaries shall constitute a qualified trust under this section—
(emphasis added)

From the first words, an element of doubt. As they say 'I've got no dog in this fight'. It's just extra typing on the FBAR form. I'll have already reported the pension (and additional information about it) on 8938.

http://www.law.cornell.edu/uscode/text/26/401

From 26 USC (*) 401(a)
(a) Requirements for qualification
A trust created or organized in the United States and forming part of a stock bonus, pension, or profit-sharing plan of an employer for the exclusive benefit of his employees or their beneficiaries shall constitute a qualified trust under this section—
(emphasis added)

True, but from the Treaty Notes

"In the case of the United Kingdom, the term “pension scheme” includes the following: employment-related arrangements (other than a social security scheme) approved as retirement benefit schemes for the purposes of Chapter I of Part XIV of the Income and Corporation Taxes Act 1988, and personal pension schemes approved under Chapter IV of Part XIV of that Act."

So if you get tax treaty exemption of a UK pension fund on your US taxes an argument could be made that you don't need to file FBAR. If you don't use the treaty then FBAR definitely applies.

Compelling viewing!

http://www.irsvideos.gov/ReportingForeignFinancialAccountsOnTheFBAR/

Also a more general argument against FBAR reporting for employer pensions is that they don't count as "accounts". The employer doesn't own them or have signature authority over them. There is a promise from the employer to pay an amount in the future.

http://www.aca.ch/joomla/index.php?option=com_content&task=view&id=231&Itemid=90

Also a more general argument against FBAR reporting for employer pensions is that they don't count as "accounts". The employer doesn't own them or have signature authority over them. There is a promise from the employer to pay an amount in the future.

http://www.aca.ch/joomla/index.php?option=com_content&task=view&id=231&Itemid=90

Not to be picky, but the ACA article was written in June, 2009. The FBAR instructions in force then were 10-2008. They are very different to the latest instructions. The latest instructions are the problem, I believe. As I said before, 'I've no dog...............'

Not to be picky, but the ACA article was written in June, 2009. The FBAR instructions in force then were 10-2008. They are very different to the latest instructions. The latest instructions are the problem, I believe. As I said before, 'I've no dog...............'

The thing is in this tax stuff you have to be picky. So what's in the new FBAR instructions that now causes final salary pension schemes to be reportable? I'd argue that final salary pension plans aren't actually even accounts as defined in FBAR.

The FBAR is a Treasury form so you have to use the Treasury rules, not the tax code. The tax treaty is irrelevant. It is nothing to do with Treasury rules at all. Period.

Both the Treasury and the IRS agree that most foreign pensions are foreign trusts.  A beneficiary of a foreign trust reports the interest on a FBAR (I have not got the instructions in front of me as I type this, so do shoot me down if I am remembering wrong!)

Can you "cash out" a final salary pension scheme before retirement, pay a penalty, then be subject to tax on that income? With personal pensions you can in limited circumstances. In otherwards can you dispose of the assets with your signature?

At the end of the day, reportable or not, it's just a simple field entry on the FBAR. Valuing the account is the tricky part... Give me the nice, well laid out FBAR to the ugly, messy 8938 any day

The FBAR is a Treasury form so you have to use the Treasury rules, not the tax code. The tax treaty is irrelevant. It is nothing to do with Treasury rules at all. Period.

Both the Treasury and the IRS agree that most foreign pensions are foreign trusts.  A beneficiary of a foreign trust reports the interest on a FBAR (I have not got the instructions in front of me as I type this, so do shoot me down if I am remembering wrong!)

So could we end up in a situation where the IRS accepts the pension plan as a qualified plan for tax purposes, but the Treasury takes another view and classes it as a foreign trust.

I have 28 years of UK National Insurance payments and so will qualify for a defined benefit pension from the UK Government when I am 67. Where in the FBAR does it say that is not reportable? or is it?

I'd argue that a UK final salary pension is not owned by the individual but by a trust and would not have to be reported by a US beneficiary unless they had a greater than 50% financial interest.

If the UK employer pension plan is a defined contribution plan where the employee has an investment account that shows the balance of their and the employer's contributions that they can direct, then that would be FBAR reportable.

It doesn't have a value I can report.  I can't cash it out and get any money.  

The reason I started all this is because I don't have enough to qualify to file the FBAR this year, but will next year when I finally add my name to my husband's account.  

So there we are, or aren't as the case may be. 

Such debate! 

Both the Treasury and the IRS agree that most foreign pensions are foreign trusts.

Moving right along to the elephant in the room: If a UK defined benefit pension is viewed by the IRS as a trust, is any member of a UK scheme required to file Form 3520? Since this is IRS, not Treasury, does the Treaty definition 'corresponding pension schemes' remove this obligation? This is a serious question, with serious consequences.

Form 8938 presses this issue home in Part II, line 7B or line 8b. Does a defined benefit pension fall under line 7, or line 8?

Pension plans are reportable in part II section 8, (it's not stock).

Moving right along to the elephant in the room: If a UK defined benefit pension is viewed by the IRS as a trust, is any member of a UK scheme required to file Form 3520? Since this is IRS, not Treasury, does the Treaty definition corresponding pension schemes' remove this obligation? This is a serious question, with serious consequences.

Form 8938 presses this issue home in Part II, line 7B or line 8b. Does a defined benefit pension fall under line 7, or line 8?

Good question. What UK plans are actually covered under the Treaty? and does that matter a fig when it comes to FBAR. Some say not, that FBAR is a Treasury form, but there seems to be a lot of direction and content coming out of the IRS about this so it's very confusing.

Even if you do think that your employer sponsored plan is covered by the Treaty (so is not classed as a foreign trust by IRS) it might not actually be because it isn't covered by

http://www.legislation.gov.uk/ukpga/1988/1/section/590/enacted

You've got to look at all the characteristics of your employer sponsored fund to see if it qualifies. For example I've read that UK's University Superannuation Scheme pensions (which are employer sponsored pensions) are classed by the IRS as non-qualifying and come under IRC 402(b) and are foreign trusts. I think this is because they don't fall under Chapter I of Part XIV of the Income and Corporation Taxes Act 1988, one reason being that you can take distributions from the pension before age 55.

So US citizen, UK university workers in USS should be filing 3520s and paying tax on university contributions, but does it come under FBAR? If the pension is a foreign trust and the US citizen has no signature authority and is one of thousands of participants do they have to file FBAR?

http://gswlaw.com/irsblog/2009/09/10/fbar-filings-trusts/

I would agree that USS pensions are subject to full disclosure. Putting the income aspect to one side, 3520, 3520-A, (8938 part 4 - if threshold pertinent). I would want to report on the FBAR too. If it's a reportable account for FBAR purposes is one for debate... No penalty for reporting something you don't need to. My view is: if in doubt... Report...

But how can you put the value on the FBAR if you don't know it?

But how can you put the value on the FBAR if you don't know it?

The instructions call for an approximation. I have no idea at all what the maximum value of my pension plan is for the year. The information is not available from the provider either, so it's something beyond my control. I give a good faith estimation, it's thousands of dollars out, who knows. At the end of the day I've reported the account and the value to the best of my ability. Others may have their own method...