Regulations concerning ex-patriots of US qualified DC plans

[Guest ATaylor]

Can someone confirm if there is a regulation, and provide a specific cite, regarding the treatment of non-active participants in a US qualified dc plan who transfer jobs to work in another country (in this case Canada) for an Affiliate of the US Company sponsored plan. The specific question posed by the plan sponsor is whether regulations would mandate that the account of the non-active ex-patriot participant be distributed in full no later than 5 years following non-residence in the US.

Your assistance and knowledge are appreciated.

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AMT

[M R Bernardin]

This probably won't be helpful, but I've never heard of any such requirement. I think the general qualified plan distribution rules would apply, regardless of where the employee has gone. I believe the U.S. Company could continue to cover an employee of a foreign affiliate, although tax issues for the employee would have to be addressed. So, if the employee is still working for an affiliate, even if it is a foreign entity, there may be an issue as to whether there has even been a termination of employment. If this is a DB plan, I would look to the plan document; if it's a 401(k) plan, I would assume there has not been a separation from service.

[Disco Stu]

I am in agreement with the previous post. Absent any plan language to the contrary, I don't believe the code would have anything regarding timing of distributions solely based on a ex-participant's status as an expatriate.

[Guest ATaylor]

I agree with both of you. This certainly makes sense. Thanks to both of you for your assistance.

[Guest bswift]

im coming into this kinda late, but i have dealt with this issue in the past. The canadian employee (although a us citizen may not be able to participate in the plan if he or she is working for a canadian company. no us source income. the canadian company of course could adopt a 401(k) type arrangement, which is permissible in canada. With regard to the termination of employment issue. that is determined on a controlled group basis and 1563, the applicable section, makes no distinction between us and foreign companys in the controlled group. my thought is that if the employee is transferred to an employer in the controlled group, no termination of employment has occurred. hope that helps.