On 21 August 2024, the Internal Revenue Service held a public hearing on the exciting topic of “Transactions With Foreign Trusts and Information Reporting on Transactions With Foreign Trusts and Large Foreign Gifts (REG-124850-08)”
The purpose of the hearing was for the IRS to listen to public feedback on draft new regulation which (among other items) includes details on the requirement for non-US pension plans (like KiwiSaver plans) to file forms 3520 and 3520a. We have previously outlined our thoughts on the matter in an earlier article.
In that article we referred to an IRS document entitled Revenue Procedure 2020-17 which was introduced to help non-US pension plans determine their obligations (or not) to file form 3520/3520a. The definition of a foreign pension plan in the Revenue Procedure was unfortunately too narrowly worded to allow KiwiSaver plans to benefit from its introduction.
This new regulation is intended to replace the Revenue Procedure, and thus has importance with regard to the definition of who is required to file forms 3520/3520a for Kiwisaver plans. Only a few participants were able to provide oral feedback, included in those were Gary Carter and John Richardson, both of whom I participated in a conference call with in January 2020. In that call we were advised of this impending regulation change. Well, here we are 4.5 years later (noting that Covid may have slowed things down a bit) and the regulation is finally moving forward, but the definition (albeit updated in this May 2024 draft is still too narrow for Kiwisaver to benefit). (See page 41 of 46 in the PDF version.)
So where are we at?
Currently, still status quo but at least the issue is actively being considered. There was a lot of feedback outlining the inequity that would arise from a status quo and also outlining how the current narrow definition would make the exception effectively useless for a lot of foreign pension plans. There was also some good technical feedback with other alternatives. A transcript of that meeting can be accessed here.