tailz

I might be moving to the US later this year on an L1 visa and the US employer has stated in their offer that they will continue to pay into my UK pension as per my current employer (same company).

Anyone have any ideas if there would be any tax implications either in the US or the UK if this was done?

Thanks

Tony

Michael

In the 1970's, the federal government passed laws that companies that wanted to provide normal pensions had to follow specific regulations (funding, distributions, etc.) and then the pensions would be guaranteed by the government. The companies would need to register their pension plan with the government or quite offering such pensions (a lot of pensions previously weren't providing the defined benefits at retirement or went bankrupt).

The government also approved 401k, 403b, and other plans that were owned and investment controlled by the employee.

Any of the above plans are tax free to the employer and employee to specific contribution levels where the employer can write contributions off as an expense and the employee doesn't pay taxes on contributions and taxes are differed until withdrawal.

Since it is unlikely that your UK pension plan has been registered with the federal government, there is a possibility that contributions could cause US tax implications for either the company or your since any contributions may possibly be treated as income.

captainsensible

I work with some Brits that moved here on L1 visas and continued paying into their UK pension schemes (their own contributions, plus the company).

Causes more headaches for the company, but they have not had issues with taxation - unless they were drawing on the pension (when it is then declared as a foreign income).

Michael

But did they get to deduct their contributions from their income before taxes as is done with US pension plans? A US employee's year end w-2 does not even show those contributions as income. For example, if a US employee contributes 4% of his/her income to a 401k plan, the w-2 will indicate income is 4% less than what was actually paid to the employee.

MsElui

we did this on an L1a. We had to declare the foreign pension funding on the tax return but i dont remember it being a huge issue.

tailz

Thanks for the replies, so it seems that although there is a bit more reporting, it won't be too much of a hassle. I will discuss further with my employer when I am out there in April just to be sure they check all relevant tax implications and get something in writing.

captainsensible

Yes they did.

jjmb

My husband's company did the same thing when we moved here for the first few years and it was never an issue. The only thing that seemed eye popping at the time was the adjustments on his W2, where it seems like he was earning a whole lot of money he wasn't. Way too complicated for me to understand but with all the various codes on the W2 to make adjustments, we still paid the same rate of tax as his normal salary.

Just glad we had company accountants for the first couple of years with all the other allowances we had on the L1 visa. Must admit was a bit panicky the first year we did our own taxes and now they have all the FATCA requirements, I just send all the documents to the CPA.