Who this is for
- US citizens and green card holders living abroad with a workplace, personal or mandatory pension there
- US residents who kept a pension or provident fund from a job in another country
Not covered here
- How withdrawals, lump sums and pension payments are taxed
- Canadian RRSPs, RRIFs and other registered plans
- Whether a particular country's scheme meets Rev. Proc. 2020-17 or a treaty definition
Which US forms can a foreign pension trigger?
A pension or retirement scheme outside the US can need up to four US filings: the FBAR, Form 8938, Forms 3520 and 3520-A, and Form 8621. The FBAR and Form 8938 apply to most plans with a value once you pass their thresholds. Forms 3520 and 3520-A and Form 8621 depend on how the plan is built and whether an exception or a treaty covers it. Separately, contributions and growth can be taxed on your US return each year unless a treaty defers them; see the tax section below.
| Filing | When a foreign pension can trigger it | What removes it |
|---|---|---|
| FBAR (FinCEN Form 114) | Your foreign accounts, counted together, top $10,000 at any time in the year | No exception for foreign plans; the retirement exceptions cover only accounts held inside an IRA or a US plan (Publication 5569) |
| Form 8938 | Your foreign assets pass your Form 8938 threshold | Nothing pension-specific; a timely Form 3520 (with a timely Form 3520-A if you own the plan) can replace the line on Form 8938 (instructions) |
| Forms 3520 and 3520-A | The plan is a foreign trust and you are treated as its owner or you deal with it | Employer-plan exceptions, Rev. Proc. 2014-55 (Canada), Rev. Proc. 2020-17, or the proposed section 6048 regulations (IRS) |
| Form 8621 | The plan holds foreign mutual funds or similar pooled funds | A treaty that taxes the plan's income only when paid out (26 CFR 1.1298-1(c)(4)) |
Start by naming your plan. Who pays in decides most of the answers:
| Kind of plan | Who pays in | Questions it raises |
|---|---|---|
| Employer plan | Your employer, often you too | Employer contributions under section 402(b); Form 3520 exceptions for employer plans; a treaty employment rule |
| Personal pension you fund yourself | You | If the plan is a foreign trust, possibly a grantor trust you own: then Forms 3520 and 3520-A unless an exception fits, and yearly tax on growth unless a treaty defers it |
| Mandatory national scheme with your own account | Employer and you, by law | Treated by the same tests: who pays in and whether the plan is a trust |
| State pension or social security | Payroll taxes | Not on Form 8938; see the state pension section below |
What makes a case not simple: two countries' rules apply to the same money, the answer turns on the exact treaty paragraph, missed years compound penalties, and a self-funded plan can be a foreign trust. Gather: the plan rules or member booklet, every yearly statement, a contribution history split between you and your employer, and the plan's list of funds.
Does my foreign pension go on the FBAR?
Usually yes, if you have a financial interest in it and your foreign accounts together pass $10,000. The IRS lists foreign retirement accounts, such as Mexican AFORE accounts and Canadian RRSPs, as reportable (Publication 5569). The FBAR retirement exceptions cover foreign accounts held inside an IRA or a US plan under section 401(a), 403(a) or 403(b); they do not cover foreign plans (FinCEN instructions).
You have a financial interest when the account is in your name, or when it is held by a trust you own under the grantor trust rules, or by a trust in which you have more than 50% of the present beneficial interest (FinCEN instructions). For other kinds of account, see which accounts count on the FBAR.
What value goes on the FBAR when the pension has no balance?
Report a reasonable approximation of the highest value in the year; yearly statements may be used if they fairly reflect that maximum (FinCEN instructions). Convert at the Treasury rate for the last day of the year and round up to the next dollar. If the value cannot be determined, check box 15a, "amount unknown".
FinCEN gives no guidance specific to pension types. A defined benefit plan, which promises a pension rather than holding an account balance for you, has no published FBAR valuation method. That gap, and whether such a plan is a "financial account" at all, is unsettled. FBAR thresholds and deadlines are in foreign account reporting.
Does my foreign pension go on Form 8938, and what value do I use if I don't know it?
Yes, a foreign pension plan is a specified foreign financial asset; report your interest in the plan in Part VI, not the funds it holds (Form 8938 instructions). The form is due only when your foreign assets pass your threshold, which is higher if you live abroad and for joint filers; the amounts and the living-abroad test are in foreign account reporting.
The value is the fair market value of your interest on the last day of the year. If you do not know it and cannot find it from readily accessible information, use the value of what the plan paid you during the year; with no payments, use zero (instructions). If you timely file Form 3520 for the plan (and, if you are treated as its owner, Form 3520-A or a substitute is timely filed too), you can list those forms in Part IV instead, but its value still counts toward your threshold. Not filing can cost $10,000.
Is my foreign pension a foreign trust that needs Forms 3520 and 3520-A?
It can be. The IRS says self-funded plans and some employer plans may be grantor trusts (trusts taxed to the person who put money in): if the plan is a foreign trust and you contribute to it, you are treated as its owner even without control over investments (IRS). An owner files Form 3520 and makes sure the plan files Form 3520-A, or attaches a substitute Form 3520-A. Form 3520 is due on the 15th day of the 4th month after your tax year ends (the 6th month for some people living and working abroad; an extension of your return extends it). Form 3520-A is due by the 15th day of the 3rd month after the trust's year ends, but a substitute attached to a timely Form 3520 counts as timely (IRS; Form 3520 instructions).
The penalties are steep: generally the greater of $10,000 or 35% of unreported transfers or distributions, and the greater of $10,000 or 5% of the plan assets you are treated as owning for a missing Form 3520-A that you do not replace with a substitute. More penalties follow if the failure continues (IRS).
Which exceptions remove Form 3520?
Four kinds of exception can apply (Form 3520 instructions). The employer-plan exception turns on who paid in; the others turn on the plan's design or country. None of them removes the FBAR or Form 8938.
| Exception | What it covers |
|---|---|
| Employer plans | Transfers to a funded deferred compensation arrangement under section 402(b), a foreign trust described in section 404(a)(4), or a qualified foreign plan under section 404A |
| Rev. Proc. 2014-55 | Canadian RRSPs, RRIFs and other Canadian plans it lists; see Canadian registered accounts on a US return |
| Rev. Proc. 2020-17 | Tax-favored foreign retirement trusts that meet every condition below, held by an eligible individual |
| Proposed section 6048 regulations | Tax-favored foreign trusts run to provide retirement, medical, disability or educational benefits; you may rely on them for tax years ending after May 8, 2024, only if you and related persons apply them in full and consistently |
The employer-plan exception covers transfers to the plan. The IRS sources above do not say how to split a plan that both you and your employer pay into; your own contributions may still make you the owner of that part.
Does my plan meet Rev. Proc. 2020-17?
Only if it meets every condition, under the law of the country where it was set up (Rev. Proc. 2020-17):
| Condition | What the law of the plan's country must provide |
|---|---|
| Purpose | Operated only or almost only to provide retirement benefits |
| Tax-favored | Contributions get a tax benefit, or the plan's income is tax-deferred or taxed at a reduced rate |
| Local reporting | Yearly information reporting on the plan is available to the local tax authority |
| Earned income only | Contributions only from income for personal services |
| Contribution limit | Limited to a percentage of earned income, or to $50,000 or less a year, or to $1,000,000 or less over a lifetime |
| Withdrawals | Tied to retirement age, disability or death, or penalized before then |
| Employer plans | Open to a wide range of employees and gives them significant, nondiscriminatory benefits |
You must also be an eligible individual: a current or former US citizen or resident who is compliant, or comes into compliance (on amended returns if needed), with US income tax returns for open years and, where the law requires, reporting the plan's contributions, earnings and distributions as income. Each condition is a question of the plan's local law; a plan that fails one is outside the exception.
Are the funds inside my pension PFICs that need Form 8621?
They can be. A foreign mutual fund or similar pooled fund is usually a passive foreign investment company (PFIC). You need no Form 8621 for PFICs held through a plan that a US income tax treaty treats as a pension fund, if that treaty taxes the plan's income to you only when it is paid out (26 CFR 1.1298-1(c)(4)).
For a plan no treaty covers, no regulation or IRS page addresses foreign pensions directly. Whether you are treated as owning the funds depends on how the plan is classified, such as a grantor trust you own or an employer trust under section 402(b). This is unsettled; get the plan's fund list before deciding. Filing rules, exceptions and missed years are in Form 8621 filing and missed years.
Are pension contributions and growth taxed on my US return while I'm still working?
Often yes, unless a treaty says otherwise. Only a trust created or organized in the United States can be a qualified plan under section 401(a), so the US exclusions for 401(k)-type plans do not reach a foreign plan (26 U.S.C. 401). One exception: a foreign trust that would qualify in every other respect is treated as exempt for section 402, so employer contributions are taxed when paid out, not when they vest (26 U.S.C. 402(d)); whether a plan meets every other condition turns on its terms. The table covers every other foreign plan.
| Money in the plan | General US rule without a treaty |
|---|---|
| Your own contributions | Paid from pay that stays taxable; no US deduction or exclusion |
| Your employer's contributions | Taxed to you under section 402(b) once your right to them vests, meaning you keep them even if you leave (26 U.S.C. 402; 26 U.S.C. 83) |
| Growth on your own contributions | If the plan is a grantor trust you own, its income is taxed to you each year (26 U.S.C. 671) |
| Growth on employer contributions | Under section 402(b), generally taxed when paid out, and a beneficiary is not treated as owner of such a trust (26 U.S.C. 402(b)(3)); how that fits a plan you also pay into is unsettled |
Section 402(b) covers employees' trusts; a plan set up another way, such as an insurance contract, needs its own review. If the plan fails the US participation or coverage tests (sections 401(a)(26) and 410(b)), a highly compensated employee (a higher-paid employee under a US test) is instead taxed on the vested accrued benefit, other than their investment in the contract, as of the end of the trust's year (26 U.S.C. 402(b)(4)); how these tests apply to a foreign plan is unsettled. Whether the foreign earned income exclusion covers the pay you contribute is in FEIE or foreign tax credit.
When does a tax treaty defer or exclude foreign pension contributions and growth?
Only when a treaty paragraph covers your exact case, and the answer often differs for employees and the self-employed. Treaties such as the US–UK treaty contain a "saving clause" that lets the US tax its citizens and residents, green card holders included, as if the treaty did not exist, except for the paragraphs the clause lists. Read the treaty, its protocols and the paragraph's conditions (IRS).
The US–United Kingdom treaty shows how narrow this is (treaty):
| Paragraph | Who it covers | What it gives |
|---|---|---|
| Article 18(1) | A resident of one country in a scheme set up in the other (for example, you live in the US and the plan is British), citizens included | Income the plan earns is taxed to you only when, and to the extent, it is paid out, not yearly |
| Article 18(5) | A US citizen living in the UK, employed with pay borne by a UK employer, in a UK scheme | Contributions and benefits accrued tied to that job kept out of US income, only to the extent they get UK tax relief and capped at what a corresponding US plan would allow; the US must have agreed the scheme corresponds to a US plan |
| Article 18(2) | Someone working in one country while in a scheme of the other | Relief there for contributions and benefits accrued while working, capped at what that country gives its own residents; only if contributions began before the work there and that country agreed the scheme corresponds to one of its own (Article 18(3)); the US does not give it to its own citizens or green card holders (Article 1(5)(b)) |
Article 18(5) covers employment only. Contributions a US citizen in the UK made while self-employed are outside it, so a self-funded personal pension there needs its own review. Where a treaty position reduces US tax, a disclosure on Form 8833 may be needed; how payments are taxed, and the Form 8833 waivers, are in foreign income on a US return.
Is a foreign state pension or social security scheme treated differently?
Yes, for Form 8938. A right to foreign social security or similar government social insurance is not reportable on Form 8938, but an interest in a foreign pension plan is not treated as social security and stays reportable (Form 8938 instructions). The FBAR rules do not mention state pensions. A right to a state pension is not one of the account types they list, but the list is not complete, so a state scheme that keeps an account in your name needs review (FinCEN instructions).
How a state pension is taxed when paid is in foreign income on a US return. Whether you pay into US or foreign social security while working abroad is in self-employment tax abroad and totalization.
I never reported my foreign pension: what do I fix first?
The route decides which late forms are filed, so it is settled before any late form is prepared:
- Check your income tax returns. Rev. Proc. 2020-17 helps only eligible individuals: people who are, or come into, compliance with their US income tax returns for open years, reporting the plan's contributions, earnings and distributions as income where the law requires it, on an amended return if needed.
- Pick the route. Living abroad, see the Streamlined Foreign Offshore Procedures. Living in the US, see catching up on missed foreign reporting.
- Classify each plan (FBAR, Form 8938, Forms 3520 and 3520-A, Form 8621) from its terms, then check that the result holds for each year.
- If a plan meets Rev. Proc. 2020-17 and you are an eligible individual, it needs no Form 3520 or 3520-A for any open year, so no late ones are owed for it; the FBAR and Form 8938 still are. If the IRS already assessed a Form 3520 penalty on it, you can ask for abatement or a refund on Form 843, within the refund time limits. Rev. Proc. 2020-17 says to write "Relief pursuant to Revenue Procedure 2020-17" on line 7 with how you and the plan meet each condition; on the current form, line 7 is a reason check box and the explanation goes on line 8 (Rev. Proc. 2020-17; Form 843).
Missed years, a lump sum or a transfer between plans are the cases where professional judgment matters most.
Example
These scenarios are illustrative, with round numbers in the currency named in each heading.
US citizen in Australia (Australian dollars)
He has A$150,000 in a superannuation fund, and his employer pays in about A$15,000 a year. He checks, in order:
- FBAR: the fund passes the threshold on its own, if it is an account he has a financial interest in. Form 8938: compare the fund plus his other foreign assets with the living-abroad threshold.
- Forms 3520 and 3520-A: if the fund is a foreign trust he is treated as partly owning, does it meet every Rev. Proc. 2020-17 condition? If not, the forms come into play for that part.
- Treaty: does the US–Australia treaty defer US tax on the fund's income? If not, the funds inside raise the Form 8621 question.
- Employer contributions: how each year's A$15,000 is taxed under section 402(b), unless section 402(d) applies, and whether a treaty paragraph changes that.
US–UK dual citizen in London (pounds)
She has £60,000 in a workplace pension through her UK employer and £40,000 in a personal pension she funded while self-employed. Both are checked for the FBAR as accounts she has a financial interest in. Article 18(1) does not help, because she lives in the UK, where both plans are set up. Article 18(5) can keep the workplace contributions and benefits accrued out of US income, to the extent they get UK tax relief, up to what a corresponding US plan would allow, and only if the US has agreed the scheme corresponds to a US plan. It covers employment only, so the personal pension needs separate review: whether it is a foreign trust, whether its growth is taxed each year, and whether Forms 3520 and 3520-A are needed.
Green card holder in the US (US dollars)
He has a $30,000 bank account abroad and a provident fund from a former employer in Asia that sends no statements and shows no value he can find. Form 8938: with no known value and no payout, the fund counts at zero, and $30,000 alone is under his threshold. FBAR: the bank account alone passes the threshold, so he files, and lists the fund too if it is an account he has a financial interest in, checking "amount unknown" only if its value truly cannot be determined.
Different for you?
- You are taking money out, or plan a lump sum or annuity: see foreign income on a US return, and get cross-border tax help before a lump sum or a transfer between plans.
- Your plan is a Canadian RRSP, RRIF or other registered plan: see Canadian registered accounts on a US return.
- You only need FBAR and Form 8938 basics: see foreign account reporting or get FBAR filing help.
- You moved to the US this year with a pension: see first year as a US tax resident.
- You missed years while living abroad: see the Streamlined Foreign Offshore Procedures and get cross-border tax help.
- You missed years while living in the US: see catching up on missed foreign reporting.
- A treaty may cover your plan, or you are self-employed with a personal pension: the answer turns on the exact treaty paragraph; get cross-border tax help.
Figures on this page
| Figure | Value | Source |
|---|---|---|
| FBAR filing threshold Total maximum value of all foreign financial accounts at any time in the calendar year; an FBAR is required when the total is more than this | $10,000 | FinCEN: Report Foreign Bank and Financial Accounts Checked |
| FBAR trust-beneficiary financial-interest threshold Financial interest arises from a present beneficial interest in more than this share of trust assets or receipt of more than this share of current trust income; the specific reporting exception in 31 CFR 1010.350(g)(5) may apply. | 50% | eCFR: 31 CFR 1010.350 Checked |
| Form 8938 failure-to-file penalty For not filing a complete and correct Form 8938 on time; the same amount applies for each 30-day period of continued failure starting 90 days after an IRS notice | $10,000 | IRS: Instructions for Form 8938 Checked |
| Form 3520 / 3520-A initial penalty minimum Initial section 6677 penalty is the greater of this amount or a percentage of the amount involved; more applies if noncompliance continues after IRS notice | $10,000 | IRS: Instructions for Form 3520 (Penalties) Checked |
| Form 3520 penalty rate for an unreported transfer to a foreign trust Of the gross value of property transferred to a foreign trust that a US transferor fails to report in Part I; applies if greater than the minimum penalty. The same rate applies to unreported distributions received (Part III) | 35% | IRS: Instructions for Form 3520 (Penalties) Checked |
| Penalty rate for a foreign grantor trust's missing Form 3520-A Of the gross value of the portion of trust assets treated as owned by the US person; applies if greater than the minimum penalty | 5% | IRS: Instructions for Form 3520 (Penalties) Checked |
| Rev. Proc. 2020-17 annual contribution limit for a tax-favored foreign retirement trust One of three alternative contribution-limit tests (percentage of earned income, this annual limit or less, or the lifetime limit or less), set by the law of the trust's country; converted at the Treasury Bureau of the Fiscal Service rate on the last day of the tax year | $50,000 | IRS: Revenue Procedure 2020-17, section 5.03(4) Checked |
| Rev. Proc. 2020-17 lifetime contribution limit for a tax-favored foreign retirement trust Alternative to the annual limit or a percentage-of-earned-income limit, set by the law of the trust's country; converted at the Treasury Bureau of the Fiscal Service rate on the last day of the tax year | $1,000,000 | IRS: Revenue Procedure 2020-17, section 5.03(4) Checked |
Primary sources
- IRS: The taxation of foreign pension and annuity distributions
- IRS: Revenue Procedure 2020-17
- IRS: Instructions for Form 3520
- IRS: Instructions for Form 8938
- IRS: Form 843, Claim for Refund and Request for Abatement
- FinCEN: BSA electronic filing requirements for the FBAR (FinCEN Form 114)
- IRS: Publication 5569, Report of Foreign Bank and Financial Accounts (FBAR) reference guide
- 26 CFR 1.1298-1, Section 1298(f) annual reporting requirement (govinfo)
- 26 U.S.C. 402, Taxability of beneficiary of employees' trust
- 26 U.S.C. 401, Qualified pension, profit-sharing and stock bonus plans
- 26 U.S.C. 83, Property transferred in connection with performance of services
- 26 U.S.C. 671, Trust income taxable to grantors
- Treasury: United States–United Kingdom income tax convention (2001)
About this guide
Published by Cloud Accounting under standing professional approval. This version has no separately recorded personal review. It explains general rules for the tax year shown. It is not advice for your situation.
Changes
- : First published.