Taxation of Foreign Pensions: Application of IRC 402(b) and Avoiding Penalties for Noncompliance

Tax Rules Governing Foreign Pension Accounts, Foreign vs. U.S. Qualified Plans, Use of Tax Treaties, IRS Examinations

Recording of a 90-minute premium CLE/CPE webinar with Q&A

Conducted on Wednesday, October 30, 2019

Recorded event now available

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Program Materials

This CLE/CPE webinar will provide tax counsel and ERISA attorneys a detailed analysis of the tax rules governing foreign pension accounts, with a specific focus on avoiding penalties for noncompliance. The webinar will go beyond the basics to offer useful practice pointers on the application of IRC 402(b) to foreign pensions and annuities, the difference between foreign and U.S. qualified plans, the IRS approaches to foreign pensions during examinations, and tips to prevent potentially costly tax penalties and sanctions.


The IRS' treatment of foreign pensions held by U.S. taxpayers presents attorneys and advisers with significant compliance challenges. To ensure compliance, attorneys and advisers must possess a complete understanding of IRC 402(b)'s application to foreign pensions and annuities.

Most foreign retirement account plans are not considered "qualified plans" under IRC 401(a), which means the accounts generally do not qualify for tax-deferral treatment; instead these accounts are governed by Section 402(b) as a foreign trust. Depending on the IRS application of 402(b), employees holding foreign retirement accounts (and their beneficiaries) may receive harsher tax treatment than that of other non-tax-favored deferred compensation arrangements.

Tax advisers must have a thorough understanding of the IRS rules on reporting foreign retirement accounts and how the Service may approach compliance examinations. With penalties for failure to file Form 3520-A set at a minimum of $10,000 per year, the consequences of a missed or incorrect filing are costly.

Listen as our panel offers practice pointers on the IRS approaches to foreign pensions during examinations.



  1. Information reporting and classification of foreign pensions, annuities, and social security
  2. Differentiation between foreign plans and "U.S. qualified plans"
  3. Section 402(b) provisions and treatment
  4. Grantor trust treatment
  5. Tax treaty applicability
  6. Identifying and remedying misreporting


The panel will review these and other tactical issues:

  • Understanding the IRS' position and tests for grantor vs. employee trusts
  • The IRS' new 402(b) focus and when bifurcation is appropriate
  • Foreign pensions of highly compensated employees
  • Form 3520-A: when is it required along with Forms 3520, FBAR and 8938; penalty mitigation strategies
  • The treatment of PFICs inside a foreign pension
  • Using tax treaties to limit potential liability
  • Whether or not to use a disclosure program to correct past misreporting


Dungog, Marsha
Marsha Laine Dungog, JD, LLM (US TAX)


Ms. Dungog has over 18 years of experience providing international tax consulting services to clients seeking to infuse...  |  Read More

Hanson, Robert
Robert V. Hanson, Esq.

International Tax Attorney
Parent & Parent

Mr. Hanson’s practice focuses on individuals and organizations with offshore assets and international tax...  |  Read More

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Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include program handouts.

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