Workshop 13: International Employees and Employers: Retirement Plan Issues

Transcription

1 Workshop 13: International Employees and Employers: Retirement Plan Issues Virginia Sutton, QKA, QPFC VKS Consulting; Johnson & Dugan Virginia is a Investment advisory representative of Global Retirement Partners, LLC, a registered investment advisor. Global Retirement Partners, LLC, VKS Consulting and Johnson & Dugan Insurance Services Corporation are separate and non-affiliated companies. Johnson & Dugan CA Insurance License

2 Workshop 13: International Employees and Employers: Retirement Plan Issues There are a myriad of issues that arise when an international employer sponsors a retirement plan and when there are international employees participating in a retirement plan. The types of laws that apply to international employees and employers; How taxation issues may arise; and How to evaluate common plan document issues that need to be addressed.

3 Global Mobility & Impact on Qualified Plans Plan Document/ Plan Design Statutory Exclusions Plan Design exclusions Definition of Compensation Controlled Groups Compliance Non-Discrimination Testing Who are Eligible Employees Compensation Qualifying Events M&A/Coverage Operational Census & Payroll Data Compensation Tax-deferral Account tracking Addresses

4 Legal Issues (some ) Immigration Global Mobility of workers: Resident/Non-Resident Aliens Visa & Documentation Does the employee have a SSN? Tax Compensation Plan Personal Tax returns Tax Return in home country Documentation of Account postseverance: 1099 ERISA Controlled Groups Coverage/Eligibility Compensation Qualifying Events Participant Disclosures/Notices

5 To work in the US, You Must Have: Worker Documentation: A Permanent Resident Card (also known as a Green Card), An Employment Authorization Document (I-765/work permit), An employment-related visa which allows you to work for a particular employer. Employer Sponsored Work Visas L1 Visa Worker on Assignment from another part of the company B-1 Business Visa Temporary US Work Visa: 1-6 months H1B-Visa

6 H-1B Visa-Compensation The taxation of income for H-1B employees depends on whether they are categorized as either non-resident aliens or resident aliens for tax purposes. A non-resident alien for tax purposes is only taxed on income from the United States A resident alien for tax purposes is taxed on all income, including income from outside the US. H-1B employees should be on the census for compliance & testing, as they will have US income. Their date of hire will typically reflect US date of hire

7 L-1 Visa Workers An L-1 visa is a visa document used to enter the United States for the purpose of work in L-1 status. It is a non-immigrant visa, and is valid for three months-5 years based on a reciprocity schedule. With extensions, the maximum stay is seven years Short duration visa employees will likely not participate in the Plan, but if on US payroll they should be included on census. Employer should also be advised these workers are eligible for the Plan unless specifically excluded & plan passes coverage.

8 L-1 Visa Workers L-1 visas are available to employees of an international company with offices in both the United States and abroad. The visa allows such foreign workers to relocate to the corporation's US office after having worked abroad for the company for at least one continuous year within the previous three prior to admission in the US. The US and non-us employers must be related in one of four ways: parent and subsidiary; branch and headquarters; sister companies owned by a mutual parent; or 'affiliates' owned by the same or people in approximately the same percentages

9 Tax Issues Participant Tax Issues Employee will pay tax in US and foreign country depending on how long of residence Length of employment & employer contribution influences enrollment Taxation of distributions Home country & tax treaties will determine Plan Issues Plan Document Plan Qualification Who is a participant Non-discrimination testing Compensation Distributions Beneficiaries

10 Plan Document Issues Who is eligible? Statutory Exclusion of Non-Resident Aliens Potential exclusion of employees of Foreign Parent Company or other affiliated Non-US companies with no US income Any employee on US payroll should be included if they meet age/service eligibility criteria

11 Compensation Plan Document Issues Is there compensation paid by Foreign Parent? Does it run through US payroll Equity Compensation Is Compensation paid by Foreign Parent Excluded in the Plan Document Exclusion by Foreign/Non-Adopting Employer

12 Plan Contributions Straightforward when employee is on US payroll Note employee can be paid prior to SSN becoming available Does Plan Sponsor (HR/Payroll Dept.) understand how to capture compensation? If Foreign Parent is responsible for payroll; do those individuals understand what is required to remit deferral contributions timely?

13 Compliance Testing Non-Discrimination Testing Coverage testing ADP/ACP Depending upon how large a H1B population, participation may suffer as well as ADP results, unless H1B are HCE Audit requirements & 5500 preparation may be more complex Data Management HR/Payroll contacts may need help/reminder of who should be included on census Verify Compensation is reported accurately with component parts (e.g. excluded compensation)

14 Qualifying Events Is there separation of service? Employee transfers back to Non-US Parent Company or other affiliated company in controlled group, Employee is terminated from US Payroll; no longer eligible for contributions Not eligible for rollover/distribution either This dynamic will be a communication issue for HR & affected employees Maintaining accounts and address information is a key data management issue

15 Vesting & Distribution Payments How will Vesting Be Calculated? Employee transfers back to Non-US Parent Company or other affiliated company in controlled group, Years of service are captured for time at US Company Break in Service Rules Rollover to IRA at Financial Institution Online access to account balances allow cross-border access Direct Distribution & 1099 Reporting Most Foreign Pensions have immediate vesting so companies may adopt 100% immediate vesting for the US Plan. Alternatively, Co s will look to provide benchmark appropriate vesting

16 Beneficiaries Requirement/Best Practice to get Beneficiary Information Operational Issues: Beneficiary may not have SSN Beneficiary may not live in the US Who/how provide benefit to Beneficiary

17 Notice & Disclosure Rules Does Population qualify for electronic delivery of disclosures & required notices If Employee returns to home country, can statements & notices/disclosures reach them? Will record-keeper mail to foreign locations?

18 Practical Matters Globally Mobile worker are more likely to become lost participants Catch 22 of plan participation Data management is key especially if foreign entity responsible for US finance/hr functions Plan Governance can also become an issue Do Employees/Executives of the Foreign parent have sufficient knowledge/expertise of ERISA to be committee members Fiduciary training & ERISA counsel to assist

19 In Conclusion Use statutory exclusions to your advantage & know your Plan Document s base language Educate clients get you proper data Partner with record-keepers to leverage online tools & partner with advisors for employee communication Reach out to ERISA Counsel