Foreign Pension Plan FBAR: Is it Reportable on FinCEN 114?

Foreign Pension Plan FBAR: Is it Reportable on FinCEN 114?

Foreign Pension Plans & FBAR

Is Foreign Pension FBAR Reportable: Yes. In an nutshell, the Foreign Pension Plans are Reportable on the FBAR. The FBAR is Foreign Bank and Financial Account Form (FinCEN Form 114).  It is an electronic form that is filed each year the person has an annual aggregate total in their foreign bank accounts that exceeds $10,000. Foreign pension plan FBAR reporting can be complex, and the IRS strictly enforces Foreign Accounts Compliance.

It is important to note that FBAR is not limited to bank accounts, but rather financial accounts as well.

The general proposition is that unless a specific account is exempted from reporting, it is includable.

We will summarize Foreign Pension Plan FBAR Reporting rules and requirements.

FBAR Guidance is Confusing

The IRS has a bit of guidance online regarding FBAR, and it can be confusing. That’s because it alludes to the fact that accounts within a retirement plan is not reportable.

Does that mean that foreign retirement is not reportable?

No, probably not.

What does the IRS Say About it?

Specifically, The IRS provides the following guidance:

Generally, an account at a financial institution located outside the United States is a foreign financial account.

Whether the account produced taxable income has no effect on whether the account is a “foreign financial account” for FBAR purposes.

But, you don’t need to report foreign financial accounts that are:

  • Correspondent/Nostro accounts,
  • Owned by a governmental entity,
  • Owned by an international financial institution,
  • Maintained on a United States military banking facility,
  • Held in an individual retirement account (IRA) you own or are beneficiary of,
  • Held in a retirement plan of which you’re a participant or beneficiary, or
  • Part of a trust of which you’re a beneficiary, if a U.S. person (trust, trustee of the trust or agent of the trust) files an FBAR reporting these accounts.

You don’t need to file an FBAR for the calendar year if:

  • All your foreign financial accounts are reported on a consolidated FBAR.
  • All your foreign financial accounts are jointly-owned with your spouse and:
    • You completed and signed FinCEN Form 114a authorizing your spouse to file on your behalf, and your spouse reports the jointly-owned accounts on a timely-filed, signed FBAR.

Foreign Financial Accounts in a Retirement or Pension Plan

Some individuals believe that the phrase “But, you don’t need to report foreign financial accounts that are Foreign Financial Accounts Held in a Retirement Plan” means that a filer does not need to include foreign retirement plans on the FBAR, such as the Superannuation or CPF.

This is presumably incorrect.

Of course, tax law is almost always up for interpretation. With that said, here is what (we believe) the IRS is saying:

When a person has a retirement account, then the accounts within the retirement plans do not need to be reported separately.

This does not mean that the plan is not reported. Rather, the accounts within the plan do not have to be separately parsed out.

Foreign Accounts Within a Retirement Account

What does this mean?

Essentially, if a retirement or pension plan had 30 different accounts within the pension fund, the individual accounts within the pension/retirement fund are not reportable. This is similar to a stock account, in which the total value and account number of the stock account must be reported, not each individual stock within the account.

*In addition, the section does not state that the filer does not need to report “foreign pension plans…” It specifically refers to retirement plans, and the preceding sentence refers to U.S. retirement accounts. Presumably, if the IRS was making the statement that CPFs, Superannuation, etc. were not reportable, they would be more specific.

That is our interpretation of the information from the IRS website.

*Of course, if there are Mutual Funds or other investment funds, it may impact the reporting requirement, and additional 8621 and other forms may be required for mutual funds within the pension plan.

**It is not intended as legal advice for you in preparing your own FBAR.

Unreported Form 8938 Foreign Pension Accounts

If you did not report your Foreign Pension Accounts on Form 8938 (FATCA) you may be subject to fines and 8938 penalties. You may qualify for FATCA Amnesty to limit or avoid penalties.

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