LONDON, 5 November 2013 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), has said that multinational companies need to establish a clear plan of action for handling the FATCA benefits measures due to be introduced by the United States in 2014.

The Foreign Account Tax Compliance Act – known as FATCA - aims to combat Federal Income Tax evasion by US citizens and 'green card' holders through the use of accounts at what are referred to as Foreign Financial Institutions (FFIs). When it is implemented, FATCA will require FFIs to register with the US tax authorities, the IRS, and to report information about US accounts or be subject to a 30% withholding tax on all investment income from US sources.

Richard Lawrey, partner at Aon Hewitt, said:
"This may be US tax legislation but its effects are far-reaching. For example, if a pension plan has US-source investments, such as US treasury bonds, US equities or even a fund of funds that has any US assets, it will be treated as an FFI and FATCA will potentially apply to it - wherever in the world it is based - unless the plan is exempt or excluded from FATCA.

"While nine nations, including the UK, Switzerland and Germany, have signed agreements with the US to exempt plans, plenty of other countries, notably Canada and France have not. Multinational companies will need to understand how to deal with FATCA, and to decide whether to register their non-exempt plans with the IRS or potentially face significant additional US taxes."

Aon Hewitt has suggested a six-step plan for for developing a FATCA Strategy for Benefits:

Step 1 – Work with headquarters and local operations around the world to create/update a worldwide high-level inventory of the multinational's non-US pension and other long term benefits plans.

Step 2 – Determine which plans need to be included in FATCA's reporting by individuals.

Step 3 – Determine which Step 2 plans are exempted from FATCA's plan level reporting (e.g. as a result of the final FATCA regulations).

Step 4 – Evaluate the pension and long-term benefits plans remaining from Step 3. For example, is a plan design or structure change feasible (to avoid registering a plan with the IRS)? If not, the plan may need to be registered on the IRS portal.

Step 5 – Sign a Participating FFI (PFFI) agreement with the IRS for each IRS-registered benefits plan.

Step 6 – Review external service providers for PFFIs and, also, for exempt plans to confirm their FATCA compliance.

Richard Lawrey continued:
"Multinationals are now just coming to realise that FATCA could have a significant cost impact on their benefits programmes.  For non-exempt programmes, the dilemma is whether to accept the increased costs of registering with the IRS and reporting information on employees who are US taxpayers.

"The alternative is not to register and to pay additional taxes on the US-source investments of these programmes."
 

Media Contact:
Colin Mayes                                         Adam Leviton
 Aon Hewitt                                          Capital MSL
 01372 733689                                     020 3219 8810
 colin.mayes@aonhewitt.com                adam.leviton@capitalmsl.com
 

Notes to editors

About Aon Hewitt

Aon Hewitt empowers organisations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organisational and personal performance and growth, navigate risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness.  Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide.  For more information on Aon Hewitt, please visit www.aonhewitt.com.

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About Aon
Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 65,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world’s best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon’s global partnership and shirt sponsorship with Manchester United