Rollover from Foreign plan to U.S. Plan?

[kwalified]

a dutch dual citizen has appx $100K in his plan overseas. He now resides in the states and is wanting to establish a plan for his sole prop. company here and avoid taxes. I did a search on foreign plans on this thread and did not come up with anything. My guess is that any U.S. DB/DC plan would NOT accept rollovers from other countries unless perhaps if they were a U.S. owned company.

Any suggestions?

Thanks

[Kevin C]

Before you can roll it into a qualified plan, it must be an eligible rollover distribution. It must also come from a qualified plan. That makes it unlikely a US plan could accept a rollover from a foreign plan.

§1.402©-2

Q-2: What is an eligible retirement plan and a qualified plan?

A-2: An eligible retirement plan, under section 402©(8)(B), means a qualified plan or an individual retirement plan. For purposes of section 402© and this section, a qualified plan is an employees' trust described in section 401(a) which is exempt from tax under section 501(a) or an annuity plan described in section 403(a). An individual retirement plan is an individual retirement account described in section 408(a) or an individual retirement annuity (other than an endowment contract) described in section 408(b).

Q-3: What is an eligible rollover distribution?

A-3: (a) General rule. Unless specifically excluded, an eligible rollover distribution means any distribution to an employee (or to a spousal distributee described in Q&A-12(a) of this section) of all or any portion of the balance to the credit of the employee in a qualified plan. Thus, except as specifically provided in Q&A-4(b) of this section, any amount distributed to an employee (or such a spousal distributee) from a qualified plan is an eligible rollover distribution, regardless of whether it is a distribution of a benefit that is protected under section 411(d)(6).

(b) Exceptions. An eligible rollover distribution does not include the following:

(1) Any distribution that is one of a series of substantially equal periodic payments made (not less frequently than annually) over any one of the following periods—

(i) The life of the employee (or the joint lives of the employee and the employee's designated beneficiary);

(ii) The life expectancy of the employee (or the joint life and last survivor expectancy of the employee and the employee's designated beneficiary); or

(iii) A specified period of ten years or more;

(2) Any distribution to the extent the distribution is a required minimum distribution under section 401(a)(9); or

(3) The portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation described in section 402(e)(4)). Thus, for example, an eligible rollover distribution does not include the portion of any distribution that is excludible from gross income under section 72 as a return of the employee's investment in the contract (e.g., a return of the employee's after-tax contributions), but does include net unrealized appreciation.

[masteff]

You'd have to look to the tax treaty. If it doesn't qualify as a rollover as Kevin notes then the money would be a contribution to the IRA and subject to the standard IRA contribution limits. You then also need the tax treaty to determine if the contribution would reduce the person's Dutch taxable income.

[Nassau]

Internal Revenue Code (IRC) Section 402© provides rules applicable to rollovers. With limited exceptions, an eligible rollover distribution is any distribution of all or any portion of the balance to the credit of an employee in a qualified trust paid to the employee in an eligible rollover distribution. A qualified trust is defined under IRC Section 401(a) as a trust created or organized in the United States. Foreign pension plans are not governed by the U.S. Tax Code therefore they cannot be classified as qualified trusts. Accordingly, amounts from these (i.e.,foreign pension) plans cannot be rolled over to a U.S. retirement plan or any qualified trust account.