Non US Citzen Non-Spouse Beneficiary

[Guest glhotdog]

Guidance needed here!

Client has a participant who has died without a valid Designation of Beneficiary. The Participant was not married. the plan document calls for a beneficiary succession that includes his parent(s). The participant's mother resides and is a citizen of Mexico. The Plan Sponsor wants to pay the vested account balance (exceeds $5,000) to the participant's mother but is unsure as how to proceed with the assets going to a non-US resident. Is it as simple as getting the mother to make the election for the distribution and sending here a check less the 20%?

[Leopurrd]

I don't think so, but it's not as hard as you would think.

Once the distribution is requested:

Have them complete a W-9 if they are considered a US citizen or a W-8 BEN if they are not a US citizen.

Next, distribute to them the cash and withhold based upon the US treaty with the country (sorry - can't help you with where to find it. Maybe someone else on the board knows where to find this info)?

the distribution is reported on a 1042-S for a foreign payee.

[david rigby]

You can start here for tax treaties:

http://www.irs.gov/businesses/small/intern...d=96454,00.html

[Guest glhotdog]

Thanks for the assistance and road map.

[GMK]

FWIW, here's some information. Scroll down a little to read about withholding 30% (or less depending on treaties) for pension and annuity payments to nonresident aliens:

http://www.irs.gov/businesses/small/intern...=129241,00.html

and there's IRS Publication 515.