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401(k)s for nonresidents
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June 6, 2000: 8:34 a.m. ET
Should you set up a retirement plan in a country you may not stay in for long?
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NEW YORK (CNNfn) - As the global market develops, more and more U.S. companies are hiring people from other countries who become eligible for 401(k) plans. But there are different rules for taxes and distributions.
In response to a reader's question, Mark Groesbeck, a certified financial planner from Houston and a member of the Financial Planning Association, suggested thoroughly investigating the company's "plan document" before making any hasty decisions.
Ask the experts a question
I came from India to work as a software professional in the United States. I can work here for six years with a visa, but if I don't get a green card I'll have to go back to India. I am interested in investing 15 percent of my salary in my 401(k) plan. But what happens if I have to return to India in 2004? Can I get the entire amount I've invested in my 401(k) back? Will I have to pay taxes and a penalty? Do you think it's a good idea for me to invest in this plan?
Retirement plans are established with something called a "plan document." A plan document outlines who can participate, the contribution limits, the investment options, plan distributions, and other important information.
Assuming that you, as a so-called "nonresident alien" (NRA), have met rules to participate in the company 401(k) plan, the IRS will assign you a tax identification number. The tax ID number will be in lieu of a Social Security number.
When an NRA leaves the company, and perhaps the country, it is the plan document that dictates when the former employee will be allowed to leave the assets in the plan or if the NRA will have to distribute the assets.
NRAs do have some special rules on the taxation of plan distributions from qualified plans. The plan administrator will have additional forms that you will need to complete before having assets distributed.
I would suggest you consult with your company plan administrator about participating in the plan, and then discuss what the plan document will require for distributions if you return to India. 
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