How to pay death benefit to a foreign beneficiary?

[Guest Do]

The beneficiary lives in England and doesn't have a US tax ID number. Cigna won't do anything without a tax id number and the beneficiary says she doesn't want to go through the trouble of getting one for the amount (which is $190). What do we do to close out this account?

Thanks

[Guest Do]

The beneficiary lives in England and doesn't have a US tax ID number. Cigna won't do anything without a tax id number and the beneficiary says she doesn't want to go through the trouble of getting one for the amount (which is $190). What do we do to close out this account?

Thanks

[Lori Friedman]

Are you talking about a taxable lump-sum distribution? Here are a few things for you to consider:

1. The U.S.-U.K. tax treaty, signed on 07/24/01 and ratified on 03/31/03, dictates the tax treatment of this sort of distribution. In general, a lump-sum distribution is taxable in the nation of origin (in your situation, the United States).

2. How much federal income tax should be withheld? Look first to the tax treaty, and then to general federal law, for guidance. In general, income tax is withheld at the source of a payment, and the nonresident alien isn't required to file a U.S. tax return.

3. Form W-7 is the application for an IRS individual taxpayer identification number (ITIN). An ITIN is issued to someone who's required to have an i.d. number for tax purposes but who doesn't have, and isn't eligible for, a social security number. The instructions to Form W-7 are rather thorough and helpful.

[Guest jdw]

Try this thread:Here

[david rigby]

Multiple postings of the same question.

http://benefitslink.com/boards/index.php?showtopic=26771

[Guest Do]

Thanks, but the beneficiary won't fill out the W-7. We sent the form to the beneficiary and she is unwilling to go through the trouble of filling it out, signing it and submitting it.

So, what can we do to payout the account?

Thanks, I'm really in a bind.

[Guest Do]

Thanks, but the beneficiary won't fill out the W-7. We sent the form to the beneficiary and she is unwilling to go through the trouble of filling it out, signing it and submitting it.

So, what can we do to payout the account?

Thanks, I'm really in a bind.

[Lori Friedman]

Have you tried No-Tickee-No-Shirtee?

Certainly, this individual would be more than willing to go through the "trouble" of cashing a benefits check. Is there any way to make her understand that U.S. federal law might require her to jump through some (rather minor) hoops, but that there's a very real payout for her time and effort?

The TPA business can be so challenging, and I don't doubt that you've reached the end of your patience with this situation.

[Guest Do]

Thanks Lori. The beneficiary says for $190 it's not worth the trouble. This one account is holding up the final termination of the plan. We've paid all the bills and the participants have been paid out.

[Lori Friedman]

The situation's interesting, don't you think? I mean, I'm trying to remember the last time when I took $190 and threw it in the street because I didn't want or need it.

[Guest Do]

I suppose. If it was in my hand, I wouldn't throw it out. But, if I had to go get it, I would not do it. If getting it means I'll have to deal with it in my tax return, paying a large portion to the government, run the risk of an audit because I have an usual source of income, run the risk of being scammed (because I never expected a foreign company to give me money). I can understand the beneficiary's point of view.

I wonder if we can just deam the beneficiary as either lost or deceased or never existed, then pay the benefit under the plan's terms for paying death benefits when there is no beneficiary form on file.

[Harwood]

I thought that payments to Non-Resident Aliens are reported on a 1042-S and that an SSN or TIN is strictly optional.

As long as the 30% or so withholding is taken out and sent to the IRS, the goverment is happy.

So you can cut the check now, without any ID number.

[oriecat]

Could the beneficiary waive their rights to the funds and specify someone else for it to go to? (I have no idea if that is legal, just wondering!)

[WDIK]

It sounds like you have spent at least $190 worth of time and effort with regard to this beneficiary. Can you send a bill?

[Belgarath]

Maybe you can get your employer to send you to England to deliver the payment in cash. Then everyone will win! Except possibly your employer...

Seriously - could you take advantage of DOL field assistance bulletin 2004-02?

[Guest hog4you2]

If you go, definitely let her buy/serve the tea and crumpets!

[mbozek]

Two answers: have the bene assign the payment to the er and use it to pay your legal fees for this stupid question or send the $190 to the bene w/out withholding because there will be no taxes due since bene is entitled to standard deduction of $4850 plus $3100 exemption.

[Guest Do]

Bene won't do anything. So, she won't assign the payment. She knows what I think of her, so I won't eat or drink any tea or crumpets from her either. Second, we can't send the $190 because the TPA won't make any payment without a TIN.

[Harwood]

Like I said in my earlier post, a TIN is not necessary for this situation.

[rlb64]

What about getting a disclaimer from the beneficiary and having the document determine who is next in line?

[Guest Do]

Harwood: The TPA won't do it without a TIN.

RLB64: The beneficiary won't fill out any forms or write any letters. We're lucky if she doesn't hang up the phone.

[mbozek]

Why do you need a TPA ? Cant the Trustee prepare a check payable to the bene and withhold 30% required under 1441, prepare a manual w-8 form and send it to the IRS ? In the future find another TPA.

[Guest Do]

"In the future find another TPA. " - That's so helpful. Thanks Einstein

[Belgarath]

Do - I might suggest that if you hope to get contructive answers on these boards in the future, you might want to refrain from that type of comment. Remeber, you are the one who solicited help. Mbozek provided a reasonable answer - you may not want to take the advice, but you aren't helping your cause any. These boards are for discourse between professionals, and although there are sometimes some intemperate responses, those who engage in that sort of conduct quickly get a "reputation." I would hope you don't want to be listed among them.

[jquazza]

Could the beneficiary waive their rights to the funds and specify someone else for it to go to? (I have no idea if that is legal, just wondering!)

If she waives her rights, then the contingent beneficiary under the plan gets the benefits.

I do think it is the proper way to handle the situation. Have the beneficiary waive her ights to the benefits and pay them to the contingent beneficiary under the plan (might end up being the estate if no one is named, you will have to look at the plan default provision.)

[GBurns]

Do,

While mbozek and a few others of us get caustic in our comments at times, that has nothing to do with the validity of the advice.

You have a TPA who you pay to do a job. This TPA passes a part of their job to you and leaves you scrambling around for opinions. Suggestions are given and what the law allows is pointed out. Your paid TPA neither wants to use what is allowed by law nor to give you any assistance or alternative solution. If this TPA renders such poor service in this simple matter, I can only shudder to thing of how much else they either do not do for you or do less than optimally. If the service is poor now chances are it will be just as poor in the future. What will be the consequences of poor service in the future when there is a really big problem with penalties???

So all mbozek did was an attempt to look out for your future best interest by giving some sensible advice, namely, for the future get a new TPA. One who will help with problems with which they are supposed to be knowlegeable about and not pass things off to you. If you do not think that the advice is good or you love your TPA no matter what, just shrug it off.

[AndyH]

If I may chip in after looking up the word "caustic" on dictionary.com, what is a TPA? Is not the first word "Third", as in not the sponsor and not the investment provider? As mbozek asked initially before becoming "caustic", why would a "TPA" be making these decisions and writing checks from a 401(k) plan?

[rlb64]

What's the risk of just paying the estate without the disclaimer? We're only talking about $190.

[GBurns]

Do's post of December 15 was:

Harwood: The TPA won't do it without a TIN.

Whether this means CIGNA or not makes no difference because the investment provider could also be the payor of claims and distributions as is implied by Do's wording in the initial post. All we have is what Do puts in postings.

Regardless of who does what, Do is not getting what some of us would call adequate or acceptable service which is probably why you have to wonder who does what when..

[Guest TAG]

Do,

We do NRA stuff all the time and while it can be amazingly complex, the scenario you listed is pretty cut and dry.

1) Valid W8 BEN on file?

2) if no, valid W9 on file?

3) if no, TIN on file?

4) if no, Do initial solicitation of TIN?

5) if TIN not received, US Address?

6) if not US address, Withhold at §1441 rate of 30%

7) issue 1042S.

Assumption: lump payment from QRP to UK

As long as uncle sam gets his correct withholding whatever the participant does after that is his/her problem. Important thing is to report properly on our end.

TAG, CPA, QKA

[Guest Do]

TAG you are it. You are awesome. Thank you so much.

[GBurns]

I thought that payments to Non-Resident Aliens are reported on a 1042-S and that an SSN or TIN is strictly optional.

As long as the 30% or so withholding is taken out and sent to the IRS, the goverment is happy.

So you can cut the check now, without any ID number.

Do,

Isn't this exactly what Harwood suggested way back on November 17th???

[Guest TAG]

Do,

Glad to help.

TAG

[jquazza]

I don't see how it solved your problem, doesn't your TPA/Payor require the foreign recipient to get a TIN? I think most everyone on this board agreed that the TIN wasn't required (unless the recipient requested the reduce tax withholding rate per his/her country's tax treaty.)

So, will the payor will issue the check now? Maybe they should have read the instructions to the 1042-S first, before denying the payment.