Pension Fund Change

I live in Israel. I have a provident fund (like a pension fund) paid from after-tax income when I worked. It is run by an insurance company. Now another company wants me to transfer the fund to them. I am worried about a taxable event. I certainly don't want to pay US tax on the whole thing at once. Is this a taxable event?

Reply to
Lawrence Israel
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Operating under the assumption that the Israeli provident fund is not a PFIC (foreign passive investment company) but is a foreign pension plan, then I believe that moving your investment from the company managing it directly to another company should not trigger US tax. Only a distribution to you would trigger tax.

While I am not 100% sure that your provident plan is not a PFIC, everything I have read on the subject tells me that it operates just like a US 401(k) plan that allows certain individuals to make both pre-tax and after-tax contributions to the plan and therefore is a foreign pension plan. Foreign pension plans are not US qualified retirement plans. However, if they meet the definition of being an employer sponsored plan (everything tells me that the provident plans are employer sponsored plans), then you would not have been subject to US tax on the annual earnings in your plan as long as you also did not meet the definition of being a highly compensated employee under the US rules. If you were a highly compensated individual, then you should have been reporting the interest, dividends and capital gains inside the plan on your US tax return.

The use of my words "I believe" mean that I am reasonably certain but not absolutely sure of that which follows those two words.

Reply to
Alan

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