Completing Form 3520 for distributions from foreign retirement plan

Forum|Forum|2 years ago
March 29, 2024
2 replies
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I worked in Norway for 3 years and my Norwegian employer contributed amounts towards a defined benefit type pension. When I left many years ago and moved back to the US, it was converted to an annuity type contract for me, but I could not take distributions until I reached retirement age, death or disability. I reached retirement age in 2023 and they began sending me monthly distributions. I received some type of statement from them with information such as return on premier reserve, added yield, etc, but nothing that translates to information I would need to complete Form 3520, which asks about DNI of the trust, accumulated distributions etc. The Form says I should get a Foreign Nongrantor or Grantor Trust Beneficiary statement and I have asked the Norwegian entity for information but have not received anything. In the absence of that the Form says to fill out a default calculation of trust distributions, which refers you to Form 4970 and schedule J of Form 1041, with lots of information that I don't have. Any ideas about how to fill out a Form with no information? the only info I have really is the amount of the distributions sent to my bank.

DaveF1006

Level 15

Yes, Foreign Pensions can be tricky and stiff fines could occur if not reported properly. As a result, you need to make all reasonable efforts to comply with the reporting requirements for the pension.

Complete Part 11 and part 111 of the 3520 the best you can with what information you have. You may attach an additional statement to your 3520 stating that you have tried to obtain as much information as you can about the trust but the Norwegian entity has not complied with your request.

If you are unable to obtain a copy of a Grantor Trust Beneficiary statement, you will check in part 111 that you are unable to obtain one. You may mention this in the statement also. Select N/A for the non-grantor trust as pension plans are considered a Grantor Trust since you own the plan.

In part 111 of the 3520, after you enter the information in sections 24-28 and checked you do not have a Grantor Trust Beneficiary statement, Schedule A is easy to fill out. You will skip Schedule B and fill out Schedule C if line 37 has an amount greater than 0. In Schedule A when it asks how long this has been a trust, you will mention how many years you have paid into the pension plan.

Based on what you told me, this is the first year you received the distribution. As you complete this section, I don't think you will need to fill out Schedule C because line 37 will be a negative number, less than zero. There will be no need for Form 4970 or Schedule J of a 1041.

There are additional reporting requirements. There is a FBAR reporting requirement if the balance of the plan exceeds $10,000 during the year. Your plan is a prime candidate for this type of report. You will report that here. Hopefully you have knowledge of your pension balance or it is listed in the statement sent to you. This information is critical.

Also, if your pension plan has a balance of over $50,000 at any time during the year or $75,000 ( If filing single) on the last day of the year, you need to file form 8938. If you file Married Filing jointly, it's $100,000 and $150,000 respectively.

To enter a 8938:

open your tax return
Go to Federal
Other Tax Situations
Other Tax Forms
Prepare a report on foreign financial assets

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sr41Author

Level 2

Thank you!

pk_

Level 15

@sr41 , having read through your post and the response by my colleague @DaveF1006 ( which I agree with as far as 3520 ), I have a different take on this. From what decare as the whys and wherefore of this source and because it was tied to a retirement age, to me this pension/ annuity. It had your contribution ( yes?) and employer contribution plus growth. Thus you should treat this as Foreign pension/annuity and the distribution is periodical. Please consider filling out a 1099-R ( this will come in once you tell TubroTax that you have pension income -- fill out everything i.e.. distribution amount , taxable amount ( foreign pensions often will have taxable amount same as the distribution amount ), distribution code 7 ( normal distribution) and use a dummy EIN for the payor ( something like 23-1234567 ( just to keep the software happy).

Is there more I can do for you ?