Alien - Pensions

A pension is a regular payment made to retirees, some beneficiaries, and disabled individuals, either by the state or from an investment fund. Pension payments at the University are administered and paid by Fidelity and UC Human Resources and Benefits.

Eligibility

Eligibility to participate in the University’s retirement programs is the same for all employees regardless of their tax residency status. An employee is eligible for membership if:

  • hired to work at the University continuously for at least 50% time for one year or longer or
  • appointed for less than 50% time or less than one year and accumulate 1,000 hours on pay status during 12 consecutive months
  • And is not hired in an ineligible title.

For more information regarding the criteria to participate in University pension programs, see UCRP Membership in the related information section.

Distribution of Benefits 

A nonresident alien employee can elect to retire and receive benefits from the University when they reach the age of 50 years old and have accumulated at least 5 years of service credit. Please see the UCRP Summary Plan descriptions for more detailed information.

Tax on Distributions

Retirement distributions are subject to federal and state income taxes unless exempted by provisions in the law. Two exemptions are:

  1. Foreign Sourced Income
    • A pension earned for services performed in the United States is U.S. sourced income and subject to tax withholding.
    • A pension earned for services performed outside the United States is Foreign Sourced and is not subject to U.S. taxes.
  2. Tax Treaty Exemption

To determine the appropriate tax withholding for a distribution of University retirement funds, the nonresident alien is required to complete the University Tax Withholding Election Form (UBEN 106NR). This form will establish foreign status as well as a claim for tax treaty exemption. A link to the form is provided in related information.

Tax Withholding Rate 

U.S. sourced pensions are subject to 30% federal tax withholding unless exempted by a tax treaty.

Tax Statement 

Tax withholding and reporting on pension payments are administered by UCOP and Fidelity. At year end, the tax reported distributions will be reported on Form 1042-S.

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