This is for my wife: a USC in Canada as a PR. She is a teacher in Ontario and has a defined benefit pension which she contributes to through payroll. Because it is DB she has no control over how or where the money is invested....
Since May 2012 she has been on maternity leave and collecting EI. Her return to work date is May 2013. As a result of being on mat leave there have been no payroll deductions/contributions toward the DB pension for this period. Normal contributions will resume when she goes back to work.
The Ontario Teachers Pension Plan said that she could buy back the year through various methods if she was interested - lump sum payments or automatic monthly payments from our bank account; approx $140 per month over 5 years to buy back the approximately $8000 amount.
We haven't done anything yet as I wanted to determine if this DB pension buyback would generate any additional reporting forms for her yearly returns with the IRS?
However, we are considering the monthly payments....
She currently files an 8891 for a spousal RRSP as well as FBAR reporting.
She has no TFSA, RESP, stocks, mutual funds (outside of the RRSP) that would require f3520a, 3520, pfic etc... Only regular bank accounts and the RRSP.
Just wanted to see if the buyback would create more/new paperwork..
Does a DB pension buyback generate additional IRS forms?
Moderator: Mark T Serbinski CA CPA
Thank you nelsona!
I would imagine that in addition to having that extra pension amount from the buyback at her time of retirement, there will likely be the benefit of lowering her tax bracket in Canada each year (for the next 5 years) simply by making the monthly payments to buy this portion of the pension back?
I believe the payments were to be $135/mth. So each year of the buyback period would see a $1620.00 contribution..
I would imagine that in addition to having that extra pension amount from the buyback at her time of retirement, there will likely be the benefit of lowering her tax bracket in Canada each year (for the next 5 years) simply by making the monthly payments to buy this portion of the pension back?
I believe the payments were to be $135/mth. So each year of the buyback period would see a $1620.00 contribution..