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rocknrolls2

US Citizens Working for Chilean Sub of US Parent - US Plan Coverage Options

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Company X, a US Company, maintains its headquarters and the bulk of its employees in the US. It has a Chilean sub to which a number of US citizen employees have been assigned. What are X's options for covering these employees in the US benefit plans (viz., 401(k) and medical plan)?

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You raise a lot of issues in your post. From the 401(k) (or other qualified retirement plan), you can always INCLUDE anyone, anywhere. indeed, a U.S. citizen working abroad is not a "statutorily" excludible class of participants implying they clearly are "includible." It would require some clear plan language to include only the ex-pats and not the other employees, but it can be done. Now for the can of worms.... What I just said is from the U.S. perspective, concerning U.S. law. What Chilean law says is another matter. Participation in such an extraterritorial (from Chile's perspective) plan may or may not be permitted, and most likely there would be no Chilean income tax advantages to such participation. In addition, in SOME countries, being covered by a private pension arrangement (DB or DC) may have consequences on your ability to earn benefits under the country of residence equivalent to "Social Security" (if they have one). Best to involve benefits experts with international experience on the team to vet ALL of the issues. As far as medical plans go, that is probably even more difficult (due to single payer systems, local control, and even the ability cover someone really, really out of network). Again, seek expertise in international benefits before proceeding.

In some cases, at least on the retirement plan side, a non-qual plan in the US covering the ex-pats may be a viable option....

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You raise a lot of issues in your post. From the 401(k) (or other qualified retirement plan), you can always INCLUDE anyone, anywhere. indeed, a U.S. citizen working abroad is not a "statutorily" excludible class of participants implying they clearly are "includible." It would require some clear plan language to include only the ex-pats and not the other employees, but it can be done. Now for the can of worms.... What I just said is from the U.S. perspective, concerning U.S. law. What Chilean law says is another matter. Participation in such an extraterritorial (from Chile's perspective) plan may or may not be permitted, and most likely there would be no Chilean income tax advantages to such participation. In addition, in SOME countries, being covered by a private pension arrangement (DB or DC) may have consequences on your ability to earn benefits under the country of residence equivalent to "Social Security" (if they have one). Best to involve benefits experts with international experience on the team to vet ALL of the issues. As far as medical plans go, that is probably even more difficult (due to single payer systems, local control, and even the ability cover someone really, really out of network). Again, seek expertise in international benefits before proceeding.

In some cases, at least on the retirement plan side, a non-qual plan in the US covering the ex-pats may be a viable option....

I have little or no involvement with these sorts of thing, but that was one terrific, informative post!

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