US Expat Company DC Pension (確定拠出年金) Tax Liability
Posted: Wed Feb 01, 2023 2:24 am
My employer in Japan provides a company DC pension (確定拠出年金), to which any contributions can be managed with a variety of mutual funds or simple savings. However, I understand as a US citizen any foreign based mutual funds are considered PFICs by the IRS, subsequently punitively taxed (or at least it makes US taxes more complicated), and are generally to be avoided. Is this understanding correct, and applies also to a DC pension like this?
It would appear then the only available course of action would be to use one of the savings options, but the interest there is effectively nothing. Furthermore I understand while Japan considers these pension contributions tax free, the US does not, making it not that advantageous to match any contributions either. So it seems while it is of course nice to have this benefit, there's not much I can do with it...
Is my general understanding here correct?
Any other US expats in a similar situation out there who could share their experiences?
It would appear then the only available course of action would be to use one of the savings options, but the interest there is effectively nothing. Furthermore I understand while Japan considers these pension contributions tax free, the US does not, making it not that advantageous to match any contributions either. So it seems while it is of course nice to have this benefit, there's not much I can do with it...
Is my general understanding here correct?
Any other US expats in a similar situation out there who could share their experiences?
