FBAR and USS pension value

Hi all,

I have a USS pension (left the scheme some years ago and I am still in the accrual phase) and have been advised to report on the FBAR. I am uncertain as to what is required here for a value. At the moment it seems like 0 because I am unaware of a condition where I would be allowed to withdraw any of it and I'm not at the contractual pensionable age so no distribution. From various sources I am led to believe that a value can indeed be computed and should be reported.

I have not been able to uncover the magic formula for computing current values but have come across a calculator on the USS site https://www.ussbenefitmodeller.co.uk/deferred/pension_increase which yields "your current deferred benefits" for both pension/annum and tax-free cash lump sum. Am I correct to assume that the sum of the calculations for "current" pension/annum and lump sum is what needs to be reported on the FBAR?

You can use the modeller if you have either:
    1)the statement you received on leaving USS or;
    2) a quotation you may have received from USS since leaving the scheme.

I did have my USS leaving letter to hand, but for those that do not have either 1) or 2) from above, how would you compute the value/s?

I was told by the IRS that USS was not reportable on FBAR. Are you reporting because you've left the scheme?

I'd select option 15a (maximum value unknown). Unlike regular bank accounts, it can be hard to find the maximum dollar amount of pensions. Also, if you state an amount, it should be accurate.

I'd select option 15a (maximum value unknown). Unlike regular bank accounts, it can be hard to find the maximum dollar amount of pensions. Also, if you state an amount, it should be accurate.

The same problem would also affect a brokerage account. The values of the underlying assets can change by the microsecond. The 52-week high price for a single stock can be easily found online, but with multiple shareholdings in an account, the only way to get the 52-week high for them as a combination would be to get the tick-by-tick price data for each stock for the whole year, put it into an enormous spreadsheet and calculate the sum of the prices at each tick. This would be difficult even if you could get the data, which as a retail investor you probably can't! So again a case for using the "maximum value unknown" option as Barcrest has suggested.

I'd select option 15a (maximum value unknown). Unlike regular bank accounts, it can be hard to find the maximum dollar amount of pensions. Also, if you state an amount, it should be accurate.

I would not declare a defined benefit pension plan on FBAR.

If I did declare it I would also use option 15a

Until clear guidance from Dept of Treasury/IRS, I'm going to disclose. Just erring on the side of caution, and there's no penalty for that!  

15a is going to get a tick!

Nun, in one of your posts you copied in an official response in which it was said you "generally" don't have to report an employer-sponsored defined benefit plan. What's the caveat there? I've searched but nothing much came up except something about risk of forfeiture. Not sure what's meant by this. Where's the risk?  Whilst not invested, you could lose employer contributions if you leave early. However, once invested where's the risk? The scheme not being able to make good on its commitment?  Is USS insured to any level?  I could be completely off the mark with this...too much googling and inference on my part. You can't really predict that kind of risk can you so it must mean something else.

As an aside...‘Actuaries’ magic pencil’ hides UK university pension deficit
http://www.ft.com/cms/s/0/14e5b2e6-3ccd-11e3-a8c4-00144feab7de.html#axzz2wzEKrbw8

My decision though has nothing to do with the aforementioned rambling...

oops, link doesn't work...

Google USS actuary and it's currently the 4th link down.

headspin, in March 2012 I e-mailed FBARquestions at irs dot gov and asked specifically about USS. I was told categorically that it does NOT need to be reported on FBAR.

My personal feeling is it is not reportable. However, I have been advised by an Enrolled Agent to report. I am preparing my own FBAR but I have engaged an EA for another purpose so I assume they have a good reason for this instruction as it certainly isn't for the money. I do not know the reason why and I did not wish to dilute my expensive consultation trying to get to the bottom of it.  I'm not saying they are correct, however it can't hurt me to report it. The purpose of this thread was to establish how to compute the currrent value for the account.  Please refer to the other threads on the forum for some great discussion from Nun, barcrest, politicfool, theOAP and others as relates to FBAR and pension reporting.

Particularly interesting is Nun's e-mail to IRS and their response which he kindly shared on another thread. Here it is:

Here is my question to Fbarquestions@irs.com and the answer, make of it what you will

"I have a question about whether FBAR filing is required by a US citizen who is the beneficiary of two types of UK final salary pension plans; the UK University Superannuation Scheme (USS) pension plan and a UK employer sponsored final salary pension plan.

The USS plan (http://www.uss.co.uk)  is a final salary pension plan and is organized in the UK as a trust. There's no ability to direct investments by the beneficiaries. The university and the beneficiary put in a percentage of salary and then at retirement age (usually after 55) the pension is calculated according to years of service and final salary.

The employer sponsored plan (http://www.pensionsadvisoryservice.org.uk/workplace-pension-schemes/final-salary-schemes) is also a final salary pension plan and is organized in the UK as a trust. There's no ability to direct investments by the beneficiaries. The employer and the beneficiary put in a percentage of salary and then at retirement age the pension is calculated according to years of service and final salary."

Here is the IRS answer

"Dear Sir:

Defined benefit retirement accounts held by employers or governments do not generally need to be reported by the individual. These are generally NOT held in the individual's name.  However, foreign defined contribution retirement accounts held by the individual (similar to IRA) should be reported.   These accounts are generally held in the individual's name, so meet the #1 Financial Interest definition in the instructions to the form.

It sounds like you a have a defined contribution account.  Even though you cannot access it prior to age 50, it is still being held in your name or for your benefit.  As such, it meets the definition of a financial interest as stated in the instructions to the FBAR form.  You would file if the threshold and other requirements for filing are met."

The "generally" bit is explained by the sentence that followed. Sorry for my earlier rambling about risk of forfeiture, I can't explain my lack of understanding. Generally not held in employee's name so not reportable.  I've had a look at my service statement and my leaving letter...they both have my name as a member. There is nothing called an account number, though my NI is used as "our ref". I'm inclined to think the money is pooled with a note of individual/employer contributions. It says Member details, not account holder details. Suggests it's a group thing, as opposed to individual. It might be reasonable to conclude the USS is the holder. If so, then IMHO, you shouldn't have to report it as it won't meet the financial interest definition. Note: I have no background in finance or law.

If I did not have a statement, I would ask the employer or the scheme trustee for one and use that value. I recently did this and received one promptly. I do not believe it is reportable, though. The assets are absolutely held in the name of the scheme and not in the individual's name. They simply assign a share of the total portfolio to each beneficiary. There would be negative consequences to the participants if they each had their own account as opposed to the money being pooled and invested as one portfolio.

A tax professional will recommend FBAR because there is no down side to it. But I think it's fairly obvious now that a defined benefit pension plan does not need to be included on FBAR.

The question of how to value a defined benefit (or final salary) pension if useful in the context of how you would declare it for US tax filing though. It has been stated that you declare the value of the Vested Accrued Benefit........so if you must put the pension on FBAR that would seem to be the appropriate valuation.

The definition from the FBAR site clearly defines what a financial interest is for reporting and a defined benefits pension clearly is excluded by their definition.

http://www.fincen.gov/forms/files/FBAR%2520Line%2520Item%2520Filing%2520Instructions.pdf

financial Interest.
A United States person has a financial interest in a foreign financial account for which:
1. the United States person is the owner of record or holder of legal title, regardless of whether the account is maintained for the benefit of the United States person or for the benefit of another person; or
2. the owner of record or holder of legal title is one of the following:
a. An agent, nominee, attorney, or a person acting in some other capacity on behalf
of the United States person with respect to the account;
b. A corporation in which the United States person owns directly or indirectly: (i)
more than 50 percent of the total value of shares of stock or (ii) more than 50
percent of the voting power of all shares of stock;
c. A partnership in which the United States person owns directly or indirectly: (i)
an interest in more than 50 percent of the partnership's profits (e.g., distributive share of partnership income taking into account any special allocation agreement) or (ii) an interest in more than 50 percent of the partnership capital;
d. A trust of which the United States person: (i) is the trust grantor and (ii) has an ownership interest in the trust for United States federal tax purposes. See 26 U.S.C. sections 671-679 to determine if a grantor has an ownership interest in a trust;
e. A trust in which the United States person has a greater than 50 percent present beneficial interest in the assets or income of the trust for the calendar year; or
f. Any other entity in which the United States person owns directly or indirectly more than 50 percent of the voting power, total value of equity interest or assets, or interest in profits.

So USS Ltd or USS are the owner/s of record and I am merely a beneficiary. As such, I have no "financial interest" in it so it does not go on my FBAR.

So USS Ltd or USS are the owner/s of record and I am merely a beneficiary. As such, I have no "financial interest" in it so it does not go on my FBAR.

Yes I'd agree with that. But that's not the tricky bit. Now you have to decide how you are going to deal with the USS pension on your US taxes.

Spare a thought for form 8938, (Statement of Specified Foreign Financial Assets). If you're obliged to file, the valuation amount is based on the distribution for the tax year in question.