Help with regards to moving abroad and 401(k) plans

[Guest joapepchi]

I am a financial planner in Texas and I was hoping for some direction on 401(k) plans if possible. I have a client who is a U.S. citizen who is planning on moving to Switzerland within the next couple months. My question is once he moves abroad what happens to his 401(k) plan that is held in the U.S.?

1. Assuming he leaves his current job here in the U.S. and joins a Swiss based company. Can he simply roll the funds into an IRA rollover? What if He maintains his current job with his U.S. based firm but lives in Switzerland?

2. Are there any immediate tax issues to be concerned with if he is no longer employed in the U.S.? The client is in his early 30's and has no plans or need to withdraw the funds.

3. The assumption is that the client will maintain his U.S. citizenship.

4. Does anyone know of any resources regarding Swiss employee benefits and retirement plans?

I realize my query might be a bit unorthodox but if anyone can provide any insight or resources to me that would be extremely helpful.

Thanks.

[ETA Consulting LLC]

Just a few parameters on the surface.

The US tax code is specific to the US; not Switzerland. What this means is that he will not lose his tax deferred status under the US tax code. He can roll over from his qualified plan into an IRA. Qualified plans are Section 401(a) of the Tax Code while IRAs are Section 408 of the Tax Code. Nothing changes in that regard.

With that said, he will not be able to conduct a tax-free rollover to a Swiss retirement plan because you are now dealing with an entirely separate tax code in another country.

One typical issue that exists between the US and other countries is a type of reciprosity (through treaty) that basically allows an individual with assets in a retirement plan of another country not to be recognized as income in this country while they are in the plan. The details are specified within the treaty. The only treaty I am vaguely familiar with is one between US and Canada where there are several non-recognized income items for U.S. Citizens in Canadian Retirement Plans. Don't know full details off hand, but it is something like the contributions are still not deductible from U.S. income but the gains remain tax deferred (but don't take this as law because it's late and I'm shooting from the hip).

Hope this adds a little more structure to your equation.

Good Luck!