Fidelity IRA distribution to UK-periodic No-no!

Thanks dunroving.
Is this a Roth account? Will check the WBEN-8 thread.

Thanks dunroving.
Is this a Roth account? Will check the WBEN-8 thread.

No, it is a 403b or something similar (I can never remember!).

This is reply to an earlier posting by Darting ( Aug 2016).. see below
"So I'm considering a four-year distribution period: during this time I won't have any other income in either the US or the UK, and this will avoid having to distribute sums over $100k, for which Fidelity require a medallion signature verification, (something that seems to be nearly impossible to achieve in the UK, or cost nearly as much as flying to the US and filling in the form in a Fidelity office!)"

During a recent visit to Fidelity International in London, I found that they support some activities for Fidelity ( FMR). I believe they can do Medallion Signature Verification. Check it out.

This is reply to an earlier posting by Darting ( Aug 2016).. see below
"So I'm considering a four-year distribution period: during this time I won't have any other income in either the US or the UK, and this will avoid having to distribute sums over $100k, for which Fidelity require a medallion signature verification, (something that seems to be nearly impossible to achieve in the UK, or cost nearly as much as flying to the US and filling in the form in a Fidelity office!)"

During a recent visit to Fidelity International in London, I found that they support some activities for Fidelity ( FMR). I believe they can do Medallion Signature Verification. Check it out.

I doubt it, but I don't need this any more, as I withdrew my entire IRA in one lump sum during a brief vacation visit to the US, and just a few weeks ago got a small but welcome tax refund on this distribution.

I am now free of the IRS forever!

Wow, this thread is scary as I think I'm heading for the same problems.

To explain:

• UK citizens who are currently living in the US on green cards and have been here 16 years
• Planning to return to the UK next year for good
• I will be 50 this year
• I have a 401k with Fidelity
• No longer employed by the company I came here with
• Company pension that is also administered by Fidelity

My original plan was to start the pension at 55 and then take regulars distributions from the 401k once I reached the age where there would be no penalties. I had read about the high likelihood that Fidelity would withhold tax regardless of the instructions given and I would have to claim back. I'm now however even more concerned that from what I've read here that I won't even be able to do regular distributions.

Any suggestions or advice? and please let me know if any additional details would help.

Wow, this thread is scary as I think I'm heading for the same problems.

To explain:

• UK citizens who are currently living in the US on green cards and have been here 16 years
• Planning to return to the UK next year for good
• I will be 50 this year
• I have a 401k with Fidelity
• No longer employed by the company I came here with
• Company pension that is also administered by Fidelity

My original plan was to start the pension at 55 and then take regulars distributions from the 401k once I reached the age where there would be no penalties. I had read about the high likelihood that Fidelity would withhold tax regardless of the instructions given and I would have to claim back. I'm now however even more concerned that from what I've read here that I won't even be able to do regular distributions.

Any suggestions or advice? and please let me know if any additional details would help.

Your largest problem is likely to be IRC Section 877A.

Your largest problem is likely to be IRC Section 877A.

Any advice or guides? I looked at 877A and as clear as mud to me.

Given that both my wife and I are in the same boat would the test limits be applicable for each of us?

Try to do the paperwork BEFORE you leave the US. I would suggest you visit Vanguard and Schwab regarding the regular distributions after you leave the US. Also try to meet with Fidelity and confirm their position with respect to distributions for non US persons living abroad.
Explore the option of converting some of your holdings to Roth. That will reduce tax liability long term.
If you get distributions before age 59 1/2, then there are penalties ( in addition to tax)
You lived in US for 16 years. You are a Long Term Resident (LTR) if you have lived in the US ( with Green card) for 8 out of the last 15 years). The 8 years need not be contiguous!.
If you are LTR, then make sure that you satisfy 8854 requirement...5 years of complete filing. No compromise there. Also make sure you have filed forms 8838(?)..not sure about the number. It is to do with Foreign Bank accounts etc.. again 5 years are required.
Did you and your wife file jointly or individually? For expatriation each of you and your wife have to complete 8854. You can split the assets. However, I think the section regarding tax liability ( for the past 5 years) is not split.
See if you can leave the US in early January in the year you decide to expatriate. That reduces the hassle of having to file for part of the year where you spent 30 days or more in the US. 30 days or more make you Resident for tax purpose for that year ( or part of).
We left the US in April (2015). So I had to work with a tax person in Boston to make sure that everything is covered properly. She was easy to work with. Cost us $3000! But we have peace of mind.
If I can think of anything else, I will add later.

Try to do the paperwork BEFORE you leave the US.

Sounds like good advice and hopefully I've started the ball rolling soon enough.

I would suggest you visit Vanguard and Schwab regarding the regular distributions after you leave the US. Also try to meet with Fidelity and confirm their position with respect to distributions for non US persons living abroad.

Will do, my concern is Fidelity seem to say one thing and then do another

You lived in US for 16 years. You are a Long Term Resident (LTR) if you have lived in the US ( with Green card) for 8 out of the last 15 years). The 8 years need not be contiguous!.

That is simple it has been contiguous and at least the last 10 years on green cards

If you are LTR, then make sure that you satisfy 8854 requirement...5 years of complete filing. No compromise there. Also make sure you have filed forms 8838(?)..not sure about the number. It is to do with Foreign Bank accounts etc.. again 5 years are required.

Definitely always completed tax returns while here and have completed the FBAR? form.

Did you and your wife file jointly or individually? For expatriation each of you and your wife have to complete 8854. You can split the assets. However, I think the section regarding tax liability ( for the past 5 years) is not split.

We have filed jointly.

See if you can leave the US in early January in the year you decide to expatriate. That reduces the hassle of having to file for part of the year where you spent 30 days or more in the US. 30 days or more make you Resident for tax purpose for that year ( or part of).
We left the US in April (2015).

It is likely that we would leave in June due to schools etc. Our daughter (now 13) was born in the US and has dual citizenship.

So I had to work with a tax person in Boston to make sure that everything is covered properly. She was easy to work with. Cost us $3000! But we have peace of mind.
If I can think of anything else, I will add later.

Thank you so much for your reply it is very much appreciated.

Just a reminder : Form 8938 is "in addition" to FBAR.

Wow, this thread is scary as I think I'm heading for the same problems.

To explain:

• UK citizens who are currently living in the US on green cards and have been here 16 years
• Planning to return to the UK next year for good
• I will be 50 this year
• I have a 401k with Fidelity
• No longer employed by the company I came here with
• Company pension that is also administered by Fidelity

My original plan was to start the pension at 55 and then take regulars distributions from the 401k once I reached the age where there would be no penalties. I had read about the high likelihood that Fidelity would withhold tax regardless of the instructions given and I would have to claim back. I'm now however even more concerned that from what I've read here that I won't even be able to do regular distributions.

Any suggestions or advice? and please let me know if any additional details would help.

Firstly you have a huge advantage in that you are finding out the problems now, while you are still in the US and can deal with them.

I would agree that the first thing to do is contact Fidelity. However their refusal to even consider periodic distributions of an IRA to a foreign address is actually printed on the IRA distribution form that you can download from the Fidelity site itself, and I myself have been told this will be universally applied, on three separate occasions. How they treat company pension schemes as regards periodic distributions I do not know, however they will not apply tax treaties either.

Moreover keeping an IRA with Fidelity means you cannot purchase mutual funds, making it more difficult to manage your IRA holdings as years go by. This may get worse, as a letter from Fidelity warned me that greater restrictions may in future be applied to IRA holders overseas up to and including being restricted to no transactions at all other than selling existing holdings.

Moreover beware that the average customer service representative at, for example Fidelity branches, will have no idea and no experience of dealing with foreign distributions, and will likely not know anything about it. On my visit to the US the combined efforts of the local representative and the international wire "specialist" that he was talking to on the phone resulted in the complete messing up of the wire to my UK bank owing to them changing all the information I filled in (completely correctly) on the form, and not understanding what a correspondent bank was.

 This is par for the course for the US, where many financial institutions seem to be unfamiliar with the common mechanisms and procedures of international banking, so beware, even of what you are told by Fidelity themselves.

My advice is change your IRA NOW from Fidelity to another provider that will allow rebalancing your holdings, will do periodic distributions, understands and correctly applies tax treaties and can perform international wires correctly!

If you have been in the US for 16 years your IRA is likely to be an amount that it would incur a prohibitive tax bill to convert to a tax free ROTH, as you have to pay all the tax-deferred from your IRA contributions on the entire amount you convert. However this too (and the likely UK tax treatment of a ROTH distribution ) is worth investigating now.


I would also advise you to free yourself of the IRS and the obligation to complete tax returns for life by abandoning your green card at a US Embassy using form I-407, and filling in a form 8854-Initial and annual expatriation tax statement.

Unless you are worth more than $2million (this includes the amount in your IRA), or have paid more than about $150,000 income tax each year for the last 5 years you will not be subject to expatriation tax.

Just a reminder : Form 8938 is "in addition" to FBAR.

Yes, that had me worried at first as unlike the FBAR I had no specific recollection of the 8938. The good news was that the limits for 8938 are higher on the 8938 and it is part of a 1040 submission. On checking my records it had been submitted for the year it was needed.

Thanks again, the information and replies on this site are so useful and hopefully, answers to my questions will be useful to others

Firstly you have a huge advantage in that you are finding out the problems now, while you are still in the US and can deal with them.

Yes, I'm so glad I found your post.

I would agree that the first thing to do is contact Fidelity. However their refusal to even consider periodic distributions of an IRA to a foreign address is actually printed on the IRA distribution form that you can download from the Fidelity site itself, and I myself have been told this will be universally applied, on three separate occasions. How they treat company pension schemes as regards periodic distributions I do not know, however they will not apply tax treaties either.

No choice on the Penson but at least I can act on the other things.

Moreover keeping an IRA with Fidelity means you cannot purchase mutual funds, making it more difficult to manage your IRA holdings as years go by. This may get worse, as a letter from Fidelity warned me that greater restrictions may in future be applied to IRA holders overseas up to and including being restricted to no transactions at all other than selling existing holdings.

Yes, this is a real concern

Moreover beware that the average customer service representative at, for example Fidelity branches, will have no idea and no experience of dealing with foreign distributions, and will likely not know anything about it. On my visit to the US the combined efforts of the local representative and the international wire "specialist" that he was talking to on the phone resulted in the complete messing up of the wire to my UK bank owing to them changing all the information I filled in (completely correctly) on the form, and not understanding what a correspondent bank was.

I've already had first-hand experience with this on other issues when I left my employer.

This is par for the course for the US, where many financial institutions seem to be unfamiliar with the common mechanisms and procedures of international banking, so beware, even of what you are told by Fidelity themselves.

Agreed.

My advice is change your IRA NOW from Fidelity to another provider that will allow rebalancing your holdings, will do periodic distributions, understands and correctly applies tax treaties and can perform international wires correctly!

Any recommendations? It appears that Fidelity seems to be one of the worst in this regard. I've seen Vanguard mentioned, but wonder how different they really are.

If you have been in the US for 16 years your IRA is likely to be an amount that it would incur a prohibitive tax bill to convert to a tax free ROTH, as you have to pay all the tax-deferred from your IRA contributions on the entire amount you convert. However this too (and the likely UK tax treatment of a ROTH distribution ) is worth investigating now.

I'm certainly going to consider this. One additional consideration is the potential impact on the 8854 status. When I left my employer last year there were heavy tax implications (auto vesting of shares etc) which have made my average income tax look far higher that it would typically be.

I would also advise you to free yourself of the IRS and the obligation to complete tax returns for life by abandoning your green card at a US Embassy using form I-407, and filling in a form 8854-Initial and annual expatriation tax statement.

That is the plan. Have you kept a US bank account?

Unless you are worth more than $2million (this includes the amount in your IRA), or have paid more than about $150,000 income tax each year for the last 5 years you will not be subject to expatriation tax.

I believe it is $161K for 2016 and going to $162K for 2017. I understand those limits are not halved or doubled for a couple filing jointly. However, I think I'm right in saying that the net worth is per person. I believe we are under either way but if it is per person then we are absolutely safe.

The net worth is per person.
Regarding alternatives to Fidelity, I wrote to both Vanguard and  Schwab ( in US) to see what the rules are with respect to Automatic Withdrawals from Roth distribution. Got a call from Schwab's London office. They would allow automatic withdrawals of distribution to non- US persons residing abroad. Have not pursued it yet.

Any recommendations? It appears that Fidelity seems to be one of the worst in this regard. I've seen Vanguard mentioned, but wonder how different they really are.

Unfortunately I only found out all the restrictions, limitations and sheer difficulties of having a Fidelity IRA as a non-resident alien five years after I left the US for good, so I have no way of knowing what other companies might be better.

Also, there is simply no telling what kind of changes in policy other companies might introduce over the 20 to 30 years you might be expecting to draw distributions from your IRA. For this reason my instinct would be to try to get as much money as you can out over as short a time as possible, simply to get it back to the UK and be completely in control of it.

That is the plan. Have you kept a US bank account

I still have a US bank account, but again you cannot rely on that facility being open to you indefinitely as a non-resident. Who knows what policy changes may occur over the next 20 years!