German Riester and Betriebliche Altersvorsorge: US Reporting

Germany's supplemental pension schemes — the Riester-Rente (individual pension with government subsidies) and Betriebliche Altersvorsorge (employer-sponsored workplace pension) — may receive favorable treatment under the US-Germany tax treaty for US persons living and working in Germany. The US-Germany tax treaty's pension article has been interpreted to allow contributions to certain German pension arrangements to be treated similarly to US qualified plan contributions — potentially deductible and tax-deferred — but the analysis is fact-specific and the treaty language is not entirely clear on all fund types. Distributions from these plans in retirement should generally be taxable in Germany rather than the US if the recipient is a German resident at the time, under the treaty's pension article. Both types of accounts would be reportable on FBAR and likely on Form 8938 as foreign financial accounts. Given the treaty complexity, US persons participating in German pension schemes should get specific professional advice about their US tax treatment rather than assuming they're fully deferred.