Your residence status can affect your 401(k) plan in two ways: eligibility and withholding on distributions.
Eligibility
You are considered a non-resident alien (NRA) if you are authorized to live and work in the US but are not a permanent resident or US citizen. As a NRA, you are eligible to participate in your employer’s 401(k) plan as long as the following requirements are met:
Your employer’s plan allows participation by NRAs.
You are earning US-sourced income.
You meet the plan's eligibility requirements (applicable to all employees), such as age or length of service requirements.
Provided you meet the requirements above, you will be able to participate in the 401(k) plan with the same rights and benefits as a resident alien or US citizen.
Withholding
Your residency can also affect how a distribution (or withdrawal) from your 401(k) is treated. If you take a distribution from a Guideline 401(k) and you are not considered a “US Person,” there are specific withholding rules that will apply.
To be considered a US person, you must:
Have a social security number and
A mailing address either in the US or in a county that has a treaty with the US exempting their residents from US tax on retirement plan distributions.
Additionally, distributions from a US-based retirement plan cannot be directly rolled over to a non-US-based retirement plan.
If you are not a US person, the IRS requires that 30% federal withholding apply to your distribution. You cannot waive this withholding. However, your current country of residence may include a different withholding rate in their tax treaty with the US.
For more information about withholding and taxation for non-US persons, see Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign Entities and Pub. 519, U.S. Tax Guide for Aliens.
This information is for general education purposes only and not intended to be tax advice. We encourage you to consult a qualified tax professional before relying on the information provided herein. You may also refer to IRS publications for information about requesting a distribution as a non-resident.