Hi all,
Is there a way to keep maintaining the Swiss 3a account after leaving Switzerland? Currently, I have it with PostFinance but not sure if they allow it for people living outside. But if there are organizations who offer this, would be great to know.
Also, what happens to the pillar 1 and pillar 2 contributions? I assume it depends on where one moves. So for more context, in my case it is CH to US. Is there a time frame within which I can or need to cash out my pension accounts out of CH?
I read about vested accounts. What are these? Are my pillar 1 and 2 pension accounts moved to a safe place by my employer (named "vested accounts") where they can be kept as long as I want? How is the growth of these accounts in terms of investment returns? Since CHF is doing better than USD, do you think it is a good choice to maintain these accounts or will I be better off cashing them out and investing in the US? I am assuming that there will be no fees needed to maintain these accounts in CH.
Cash out everything before you step on US soil. US doesn't recognize pillar 2 and 3a as tax privileged, if you keep them it will complicate your tax reporting (PFIC etc), if you cash out on US soil you will likely owe full US income taxes on payout which are going to be way more than the swiss taxes.
Some pension institutions are willing to pay you off while you are still CH resident so long as you send them deregistration form - it can be requested a few weeks in advance. Others pay out once you leave the country. In the latter case it may be more beneficial to move the funds to Schwyz to optimize on taxes, for non-resident it's the canton of pension funds that matters and SZ has the lowest pension w/h taxes. But again, don't try to do it while on US soil else whatever you save in taxes you'll owe to IRS and then some / a lot more.
Whether you can cash out pillar 1 depends mostly on your nationality, not where you move to. It is more complicated and slowest process by far.
Thanks for the reply. Unfortunately, I am already in the US. Given the lack of easily accessible information (or my knowledge) on these matters, I could not cash them out while in CH, and didn't know what would make sense or would be allowed.
I am not a US citizen however. Does that make it easier? Does it make sense to leave these accounts and let them grow in CH?
You said moving to Schwyz is better. How does one do that? I have 3a in a bank and pillar 2 in an employer designated vested account manager. I do not know where the pillar 1 is. If I can move 3a and 2 to a fund manager in Schwyz, are there some recommendations? What is the general recommendation for pillar 1 --- should I cash it out or leave it in CH?
I’m happy to know next to nothing about US tax. Typically tax becomes due when an event (in this case the payout) happens when you are tax resident in that country in the same tax year as the payment. Are you saying that if you are physically in the US on the day the payout is made, regardless of your tax status there, you are liable for income tax? That doesn’t seem right to me, but I realise the IRS are particularly greedy (unless you are a billionaire it appears).
No, tax status matters of course but OP would likely acquire it the moment he lands there, so if payment reaches his a/c after that he's screwed
Well, then you're screwed wrt US taxes.
How long are you staying in the states? If just for a few years I'd suggest not touching pension money to not trigger US taxes
Not really.
It won't help in your situation. Swiss withholding tax would be lower by withdrawing from Schwyz but you should get it 100% refunded since you'd owe (a lot of) money to IRS now. You should be a lot more concerned about the US side from now on.
Always in GE
Well what's your take on sustainability of swiss public pensions and nationality? You won't get all AHV contributions refunded btw, only a small part up to ~80% of contribution / net present value of your future swiss pension. You can write them to request a calculation, https://www.zas.admin.ch/zas/de/home...otisation.html
Thanks for all the info. So, to understand this correctly, as soon as I take a payout from Swiss pension, does it trigger a US tax event? How much is the tax rate %? Is it taxed as income, long-term capital gains, short-term gains or something else? More details would be really appreciated. If I decide to cash out, what is the best way to manage this situation?
Finally, can I move my 3a account from Post Finance to some institution that is willing to maintain it long-term for foreigners?
Yes, if you're subject to US taxation.
The problem is that there's no special exemption in the US/CH tax treaty for lump sum payments, unlike with some other countries, and swiss pension plans aren't considered something special, "qualified", etc under US rules.
Just ordinary income afaik, so you'd owe your regular federal and state income taxes on it
Here's a bit dated preso from some novartis/EY folks if you don't want to take my word for it
https://www.versicherungsberatung-no...US_Buerger.pdf
Pay the tax if you can't change your residency status before cashing out. Everyone pays IRS if they owe them, they got even the british PM to pay!
Is your 2P in a pension plan, or in an account?
Tom
Yes if that's what the situation means, I will pay the tax. Just wanted to know if cashing out one way means a certain % rate than cashing out some other way. Or if cashing out at a later date (during low income) changes the tax rate.
I want to close my PostFinance account but I also have my 3a there. Would someone know how to manage this 3a in some other institution as a non-resident foreigner?
The 2p was managed by my employer, and has been transferred to a vested account now. So I guess that means it is a pension plan? Sorry, I'm not sure about the differences. Would it be easier to tell if I mentioned the institution that manages this amount?
If it's in an account, then it is no longer in the pension plan.
Tom
Would you be able to help me identify what type is it, and what are the implications of each? Thanks!