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I have transferred from a US company to a branch in home country. I'm paid through local country payroll and have no ties with US or the US branch payroll any longer.

When I requested a distribution the 401k Plan administration says I cannot withdraw while employed overseas by foreign branch of the parent company. They typically allow after separation from the company or at age of 59. I understand this rule applies to US citizens or residents temporarily working abroad.

I understand that is a misinterpretation of IRS rules as I'm not expat (American citizen living abroad) nor am I US resident, my retirement system is not US based either.

However, I cannot find any IRS text that cover my case, it typically refers only to US citizens working abroad.

Only some incidental website text speak about foreign nationals but no mention to whether foreign employment with a associate company should allow plan to hold the funds.

This website says a foreign national can stagger withdraw but also no reference to a IRS link.

https://www.blacktowerus.com/news/626-non-resident-management-of-401k-and-ira-accounts "You may also have the option of staggering your withdrawals. Non-resident aliens are allowed an annual personal exemption of $4,050. However, to qualify, this must be your only US-based income"

Is there any IRS text on this situation available?

Thanks Lucas

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  • Assuming you have no affiliation with the resource you referenced in your question, could you link it so we can see what that source says? May help in the search for more official verdict. – Grade 'Eh' Bacon Jun 2 at 17:14
  • Added the link, sorry. – Lucas Jun 5 at 8:55
  • @Lucas The $4,050 you found in your article is not a loophole and it is out of date. The $4,050 was the personal exemption, which reduced taxable income for any tax filer. The article was just saying that because of the personal exemption, if you were eligible for withdrawals from your 401k, the first $4,050 each year would not be subject to income tax. However, the personal exemption was removed in the 2017 with the Tax Cuts and Jobs Act. It will return in 2026 if no other changes to the law are made before then. – Eric Jun 5 at 14:26
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When I requested a distribution the 401k Plan administration says I cannot withdraw while employed overseas by foreign branch of the parent company. They typically allow after separation from the company or at age of 59. I understand this rule applies to US citizens or residents temporarily working abroad.

I used to worked for the a company that grew by making many acquisitions. Some were manufacturing, some were high tech, some were government contracting, while others were consumer based. All these purchases and mergers, and splits, and whatnot resulted in many different retirement programs. Some were all pensions, some were only 401(k), some were a mix and a few were almost non-existent. Even those with the same type of plan differed on vesting schedules and matching rates.

This meant that it was possible to change jobs and vastly change the retirement plan options. This happened to me, I found a job less than 10 miles from the one I was in. But I went from a division with a great match, to one with no match. I discovered that there were other contracts in the area with no access to the 401(k).

Even if you moved to a division or contact with no 401(k), the company didn't let you pull the funds out of your 401(k) unless you met the age, or hardship rules. You were still employed by the company.

I have transferred from a US company to a branch in home country. I'm paid through local country payroll and have no ties with US or the US branch payroll any longer.

The fact that you are not tied to the US, means you will not let you add funds. The corporation may still see you as potentially moving back to the US, and don't want to to pull the funds out of the program.

The document you quoted on is all about what to do about taxes, and discussed the situation if you were leaving the country and the employer.

You may also have the option of staggering your withdrawals. Non-resident aliens are allowed an annual personal exemption of $4,050. However, to qualify, this must be your only US-based income.

This quote was about how to avoid any tax impacts.

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    But the company opinion and assumptions don't matter. There must be laws and IRS rules governing what company can and cannot do? Difficult to find though. Especially relating to non citizen and non resident foreign nationals. – Lucas Jun 5 at 13:13

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