The Big Disconnect - Unknowingly Disconnecting Expatriates from Survivor, Retirement, and Annuity Benefits Plans

February 21, 2014 2:20:00 PM EST | By: Michelle Dopps

by Pam Buchanan
Lexicon Consulting Services

global mobility binocularsRelocating to another country can be exhilarating and exciting for an employee building a career. With the continuing growth of international assignments, planning and preparation tends to take place so quickly that sometimes important key components get lost in the hustle and bustle of preparing for this type of assignment.

It is important not to overlook survivor, retirement, and annuity benefit plans when planning expatriate assignments. Companies and their employees should be careful not to “disconnect” from benefits such as 401K, stock, pensions, retirement accounts, life insurance, social security, etc. while on an expatriate assignment. The overall goal for expatriates is to gain a “life” changing job experience without losing “life” changing benefits!

Here are some general guidelines companies typically use when administering expatriate benefit programs:

Home country plans – Short-term and long-term assignments up to five (5) years

  • Avoid fragmentation unless otherwise dictated by law
  • Maintain home country plans
  • Tax equalization applies
  • Social tax/totalization agreements apply where applicable
  • Aligns with employee expectations
Host country plans – Localizations, international new hires, permanent transfers
  • Leave home country plans and join host country plan
  • can fragment plans as dictated by law
  • Maintains equity between expats and locals
  • Tax equalization does not apply
  • Notice of Impact Statement recommended (description below)
International plans – Global nomads
  • Join dedicated international off-shore benefit programs
  • Participation in home and host country programs may be waived
  • Provides common design, addresses home country coverage limitations
  • Tax equalization applies
  • Social tax/totalization agreements apply where applicable
  • Notice of Impact Statement recommended (description below)

The company and the employee should make it a priority to discuss benefit plans prior to relocation to ensure both are fully knowledgeable of any tax implications with payment distribution, vesting issues, vital enrollment dates, transfer options, and any applicable caps on benefit plan limits tied to benefit distributions. We recommend employees discuss their situation with a financial consultant, pension plan expert, and/or tax advisor to be sure everyone is in agreement with benefit terms and conditions before accepting an expatriate assignment. 

We further recommend the company have the employee sign a Notice of Impact Statement which is a document providing notice to the employee accepting either localization from assignee status, international new hire (local status) or permanent transfer to a new host country location that they will be subject to the host country social security contributions in the host location, and the Company will not be making contributions to their origin (home) country social insurance programs or pension schemes, and that their personal continuation of the programs may not be legally possible.

Companies can take specific steps to deal with these problems by establishing umbrella retirement programs to cover shortfalls that may arise due to unknowingly administering expatriate benefits incorrectly. It can be extremely complicated and expensive for a company to “buy back” into the social security scheme for an employee. Proper planning and timing are critical components when administering expatriate benefit plans.

For information or questions about this blog post please contact Pam Buchanan, Lexicon Consulting Services, +1-904-858-1255 or via email at

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