Non citizens going back overseas
Here is the question as I received it from the Benefits Coordinator of a 401k Plan I advise….I am not sure how to respond to the more generic question of WHAT CAN A FOREIGN NATIONAL DO WITH HIS/HER 401k ONCE WORK COMPLETES IN THE USA?…. here is the actual question:
“We have questions about our H1B employees. We have over (6) H1Bs working for us. Three of them are now eligible to participate in the 401k program. So, our question is, let’s say they work the 3 year term here in the U.S. (there is 3 year cliff vesting of employer discretionary match) then they decide to go back to India once their VISA has expired. At that point, VISA expiration, their SSN# are likely longer valid.
So what can they do with their money and the vested portion?
In India they do not have 401k’s. What they do have is a government fund and that fund does not accept out of country distributions from USA 401k Plans. I did tell one of the employee’s asking that he can leave the money in the plan. But long term, that is not what he wants to do.
So what are the legal options for these employees who want to take the EE and ER vested money with them. You know, VISA and SS# expired, never coming back to U.S. to work or live. What can they do?”
Permalink Submitted by Denise Appleby on Fri, 2012-07-13 14:18
[quote=”[email protected]“]Here is the question as I received it from the Benefits Coordinator of a 401k Plan I advise….I am not sure how to respond to the more generic question of WHAT CAN A FOREIGN NATIONAL DO WITH HIS/HER 401k ONCE WORK COMPLETES IN THE USA?…. here is the actual question:
“We have questions about our H1B employees. We have over (6) H1Bs working for us. Three of them are now eligible to participate in the 401k program. So, our question is, let’s say they work the 3 year term here in the U.S. (there is 3 year cliff vesting of employer discretionary match) then they decide to go back to India once their VISA has expired. At that point, VISA expiration, their SSN# are likely longer valid.
So what can they do with their money and the vested portion?
In India they do not have 401k’s. What they do have is a government fund and that fund does not accept out of country distributions from USA 401k Plans. I did tell one of the employee’s asking that he can leave the money in the plan. But long term, that is not what he wants to do.
So what are the legal options for these employees who want to take the EE and ER vested money with them. You know, VISA and SS# expired, never coming back to U.S. to work or live. What can they do?”[/quote]
Since they cannot rollover the amount to a foreign plan, their options would be to invest/spend as they/their financial advisor see fit.
Reminder: Special withholding rules apply to distribution amounts sent overseas.
Permalink Submitted by Robert Taylor on Fri, 2012-07-13 15:12
Denise– thank you.
I understand they cannot roll over to a foreign plan. They can keep it here.
If they are under age 59-1/2 arent they penalized as anyone else would be if they “spend it” early?
Permalink Submitted by Alan Spross on Fri, 2012-07-13 17:43
Yes, they would be unless they qualify for another penalty exception.