401k vesting lost when transferring abroad

[George]

Hello,

I'm a US Citizen working for an American company that is owned by a Dutch company. I have no idea what the exact legal status is, but we are "XXX LLC, an YYY Company" . I applied for a position in the headquarters in Netherlands, and I'm about to get transferred there on a permanent, local NL-based contract. According to my HR my 401k in XXX will be terminated and the unvested balance will be lost.

Why is that considering I'm not changing companies? Thanks!

[TPAJake]

Won't you become a non-US person receiving non-US income?

[MoJo]

It's complicated.  If you work for any entity that is part of a "controlled group" of companies (regardless of where you work, or how you are paid) you continue to accrue vesting service credit (and indeed, you don't have a distributeable event allowing you to take a distribution from the plan sponsored by the US member of the controlled group.

BUT... the HQ "company" you are going to work for may or may not be part of a "controlled group" that includes the US based company you worked for.  It's a matter of ownership.  If the US company is a "wholly owned subsidiary of the HQ company, I'm pretty confident that it would be a controlled group.  If the US company is a joint venture, or a company that is less than "wholly owned", then questions arise.

I don't think that being an ex-pat (as TPAJake calls it - a "non-US person") is relevant, and the non-US income may have a bearing on whether you can be an "active" participant in the US based plan - but what counts for "vesting" is "service" - not place of residence or income, and service is based on service with any member of the "controlled group."

I'd go back to HR and further inquire.