Swiss Pensions for US Citizens: Pillar 1, Pillar 2 and Pillar 3a on Your IRS Return (2026)

Switzerland runs retirement savings through three pillars. Every US citizen or green card holder working in Switzerland is inside at least two of them, and the IRS treats each one differently. Here is the system as it stands in 2026. Pillar 1 is the state pension (AHV in German, AVS in French). You and your employer each pay 5.3% of your gross salary, 10.6% in total, covering old age (AHV), disability (IV) and income compensation (EO). There is no salary cap on contributions. The minimum full AHV pension is CHF 1,260 per month and the maximum is CHF 2,520 per month. From December 2026 a 13th monthly payment is added, so the annual maximum becomes CHF 32,760. Self-employed people pay the full contribution themselves. Pillar 2 is the mandatory occupational pension (BVG in German, LPP in French). It applies once your annual salary reaches CHF 22,680. Contributions are calculated on the coordinated salary, your AHV salary between the coordination deduction of CHF 26,460 and the upper limit of CHF 90,720, so at most CHF 64,260. Minimum retirement credits rise with age: 7% of coordinated salary at 25 to 34, 10% at 35 to 44, 15% at 45 to 54 and 18% at 55 to 65, with the employer paying at least half. Most employers pay more and insure salary above CHF 90,720 in a supplementary (überobligatorisch) plan. Voters rejected a reform of these figures in September 2024, so they still apply. Pillar 3a is voluntary, tax-deductible private saving. If you belong to a pillar 2 plan, the 2026 cap is CHF 7,258. If you have no pillar 2 plan, typically because you are self-employed, you can pay 20% of net earned income up to CHF 36,288. Contributions are deducted from Swiss taxable income at federal, cantonal and communal level. Since January 1, 2025 you can also buy back missed years: starting in 2026, a gap from 2025 or later can be filled up to ten years afterwards, capped at the small 3a maximum for the missed year, provided you paid the full amount for the current year, had AHV-liable earned income in the gap year, and close each gap with a single payment. Gaps from 2024 and earlier cannot be filled. None of these Swiss tax breaks exist on your US return. That is the whole problem this guide walks through.

For US tax purposes, AHV is social security. Two agreements matter, and people mix them up. The 1996 US-Switzerland income tax treaty covers how the pension is taxed. Article 19(4) says social security payments paid by one country to a resident of the other may be taxed in the residence country, and the paying country may also tax them, but at no more than 15% of the gross amount. So a Swiss AHV pension paid to someone living in the United States is taxable in the US, and Switzerland could keep up to 15% at source. In practice Switzerland does not levy tax on AHV pensions paid abroad, so a US resident normally pays only US tax on AHV. The saving clause in Article 1(2) is what bites US citizens. It lets the United States tax its citizens as if the treaty did not exist. The exceptions in Article 1(3) protect Article 19(1) and 19(2) (government service pay and pensions) only for people who are neither US citizens nor green card holders, and they do not protect Article 19(4) at all. So if you are a US citizen living in Switzerland and drawing AHV, the United States taxes it as social security income, up to 85% of it under the normal Section 86 rules, and Switzerland taxes it as ordinary income. The Foreign Tax Credit on Form 1116 removes the overlap. The treaty does not. The totalization agreement covers which country's payroll tax you pay and lets you combine work credits. The original US-Swiss agreement took effect November 1, 1980; a revised agreement replaced it on August 1, 2014. If a US employer sends you to Switzerland for five years or less, you stay in US Social Security and Medicare with a certificate of coverage; otherwise you pay AHV and not FICA. The self-employed pay where they live. If you fall short of 40 US quarters, Swiss AHV years count toward a partial US benefit, and vice versa. Reporting: AHV is not a financial account and goes on neither the FBAR nor Form 8938. Contributions are not deductible on your US return, and your employer's 5.3% is not income to you.

This is where most of the US tax cost sits, because the treaty gives US citizens nothing on contributions and growth. Employer contributions are taxable wages. Your employer's share of BVG contributions, mandatory and supplementary, is compensation in the year it is credited. A Swiss pension fund is a non-qualified plan, so under Section 402(b) vested contributions to it are income to you, and BVG credits vest immediately. Add the employer share to your foreign wages on Form 2555 or Form 1116. Most people who miss this simply copy the gross salary from the Lohnausweis, which excludes it. Employee contributions are not deductible. Report the full gross salary before BVG. Growth is the grey area. The usual reading of Section 402(b) is that investment return inside the fund is not taxed until distribution. The exception is Section 402(b)(4): a highly compensated employee (roughly $160,000 of compensation) in a plan that fails US non-discrimination tests, which every Swiss plan does because it never tried to pass them, is taxed each year on the increase in the vested account. Many practitioners report growth annually for higher earners for this reason. Whichever position you take, keep a running record of what you have already included, because that is your basis at distribution. No treaty relief. Unlike the US-UK treaty, the 1996 Swiss treaty has no article letting US citizens exclude employer contributions or defer growth. Article 28(4) gives a five-year contribution deduction only to a resident who is not a national of the country granting it, so it helps a Swiss national working in the US, not an American in Zurich. The 2009 protocol, in force since September 20, 2019, changed information exchange, arbitration and dividends to pension funds and left Articles 18 and 28 alone. Voluntary buy-ins (Einkauf) are deductible in Switzerland, give nothing in the US, and add to basis.

When the money comes out, the two countries again tax it differently. Monthly pension. Switzerland taxes a BVG pension as ordinary income. The United States taxes it too, as pension income on Form 1040, with the Foreign Tax Credit for the Swiss tax. Only the portion above your basis (employer contributions and any growth you already reported, plus employee contributions and buy-ins) is taxable in the US, using the Section 72 rules. Lump sum at retirement. Switzerland taxes lump-sum withdrawals from pillar 2 and pillar 3a separately from other income, at a reduced rate. Federal tax is one fifth of the ordinary rate, and each canton has its own reduced tariff. Zurich is among the most expensive cantons for large withdrawals; Schwyz, where several vested benefits and 3a foundations are based, is the cheapest. The United States taxes the entire lump sum, less basis, as ordinary income in the year you receive it. There is no ten-year averaging and no rollover to an IRA. A CHF 800,000 payout can push a single filer straight into the 37% bracket, which in 2026 begins at $640,600 of taxable income, while the Swiss tax may be under 10%. The Foreign Tax Credit then covers only a fraction of the US bill. If a lump sum is in your future, the timing and your basis records matter more than anything else in this guide. Vested benefits account (Freizügigkeitskonto). When you leave a Swiss employer without joining a new plan, your pillar 2 money moves to a vested benefits account or policy. Nothing changes for the US: same non-qualified pension, same growth treatment, reportable on the FBAR and Form 8938. If you switch it from cash into funds, every Swiss fund is a PFIC with its own Form 8621. Keep it in cash, or in US-domiciled ETFs if the foundation offers them. Cashing out on leaving Switzerland. You can withdraw the supplementary portion when you leave permanently, and the mandatory portion too if you move outside the EU and EFTA, which includes the United States. Switzerland withholds tax at source at the rate of the canton where the foundation sits. If you are then a US resident, Article 18(1) makes pensions for past employment, including lump sums, taxable only in the residence country, so you can reclaim the Swiss withholding from the cantonal tax office within three years by proving US residence and that you reported the payment to the IRS. That is not a windfall. It moves the whole tax to the US side, at ordinary rates, in one year. If you are still living in Switzerland, the saving clause means both countries tax it and you rely on Form 1116.

Pillar 3a is the pillar people ask about most, because it feels like an IRA. For the IRS it is not. No deduction. Your CHF 7,258 (or up to CHF 36,288) contribution reduces Swiss tax and does nothing on Form 1040. It is after-tax money in US terms, so it is basis. A retroactive buy-back under the 2025 rule is treated the same way. No deferral. The United States does not recognise a 3a account as a retirement plan. The annual interest, dividends and gains are taxable each year as they arise. What that means depends on which of the three 3a products you hold. Banking 3a (interest account). The simplest case. The interest credited each year is foreign interest income on Schedule B. Report it, convert it at the average exchange rate, done. The account goes on the FBAR and Form 8938. Fund-based 3a (VIAC, Frankly, finpension, bank 3a fund solutions). Every Swiss or European fund in the portfolio is a passive foreign investment company. You need Form 8621 for each fund each year, unless all your PFICs together are worth under $25,000 (single) or $50,000 (joint) at year end and you had no distributions or dispositions. Without a qualified electing fund election, which needs an annual information statement that 3a providers do not issue, gains and distributions fall under the Section 1291 excess distribution rules: top marginal rate plus an interest charge. Automatic rebalancing triggers small dispositions every quarter. A 3a with ten underlying funds can cost more in preparation fees than the Swiss tax it saves. Insurance 3a (gebundene Vorsorgepolice). A 3a policy bundles life or disability cover with saving. For the IRS it is a foreign life insurance contract that almost certainly fails the Section 7702 definition, so the annual increase in cash value is ordinary income under Section 7702(g), and the investment portion may hold PFIC funds too. The 1% excise tax on premiums paid to foreign insurers under Section 4371 is covered by Article 2 of the Swiss treaty, which exempts premiums to a Swiss insurer entitled to treaty benefits as long as the risk is not reinsured with a non-treaty insurer; ask the insurer to confirm in writing. High costs and poor surrender values are reason enough to avoid these policies regardless of the IRS. Is a 3a a foreign trust? A 3a is held through a bank or insurance foundation (Vorsorgestiftung), which looks like a trust, and a reportable foreign trust means Form 3520 and Form 3520-A every year with penalties from $10,000. Rev. Proc. 2020-17 removes that risk. It exempts tax-favoured foreign retirement trusts that accept contributions only from earned income, cap them (a percentage of earnings, or $50,000 a year, or $1 million lifetime), restrict withdrawals before retirement, and report to the local tax authority. Pillar 3a and pillar 2 both meet every condition. The exemption covers reporting only; the income stays taxable as described above. Reporting: every 3a goes on the FBAR once your foreign accounts together exceed $10,000, and on Form 8938 at the thresholds for taxpayers abroad ($200,000 at year end or $300,000 at any time single, $400,000 and $600,000 joint).

Swiss law lets you take pillar 2 and pillar 3a money early to buy or build your main home, to start a self-employed business, or on leaving Switzerland permanently. You can also draw 3a up to five years before AHV retirement age. Switzerland taxes each early withdrawal at the reduced lump-sum rate. The United States taxes it as ordinary income to the extent it exceeds basis, but with no 10% early distribution penalty under Section 72(t), because a 3a is not a US retirement plan. That is the one place non-qualified status helps you. Hold several 3a accounts and empty one per year. It lowers the Swiss progression and puts Swiss tax into the same year as the US inclusion, where you can credit it. Avoid a withdrawal year in which the Foreign Earned Income Exclusion has already absorbed your wages and left little Swiss tax to credit. A pillar 2 home-purchase withdrawal that is later repaid is a taxable distribution followed by an after-tax contribution; record both.

Swiss lump-sum tax is gentle by design: federal tax at one fifth of the ordinary tariff, plus a reduced cantonal tariff. Zurich taxes the capital as if one twentieth of it were annual income, which is cheap on small amounts and the most expensive in Switzerland above CHF 1 million. For a non-resident the withholding rate follows the canton where the foundation sits, which is why 3a and vested benefits foundations cluster in Schwyz, where withholding tops out at about 4.8%. The United States applies ordinary brackets to the taxable part. For 2026 a single filer pays 10% to $12,400, 12% to $50,400, 22% to $105,700, 24% to $201,775, then 32%, 35% and 37% from $640,600, after a $16,100 standard deduction ($32,200 joint). A CHF 300,000 pillar 2 withdrawal at 1.25 dollars per franc is $375,000 of income, mostly in the 32% and 35% brackets, against Swiss tax of perhaps CHF 20,000 to 30,000 in a mid-cost canton. The credit covers a quarter of the US bill. The 3.8% Net Investment Income Tax does not apply to pension distributions. So: prefer a monthly pension if a lump sum would land in the top brackets; if you want capital, split it across vested benefits and 3a accounts and take it over several years; and move the foundation to a low-tax canton before you become a non-resident.

- Pillar 1 (AHV/AVS): not reportable. It is a state benefit, not an account. - Pillar 2 (BVG/LPP): report the vested benefit (Austrittsleistung) from your annual pension certificate on Form 8938, and on the FBAR too. The FBAR rules for employer pension funds are unsettled, but the value is known and there is no cost to including it. Vested benefits accounts are ordinary accounts, reportable on both. - Pillar 3a: reportable on both forms in every version, bank, fund or insurance (cash surrender value). - Form 8621: one per PFIC fund in a 3a, vested benefits or insurance portfolio, subject to the $25,000 and $50,000 de minimis rule. - Form 3520 and 3520-A: not required under Rev. Proc. 2020-17. Keep the plan documents. - Wages: employer BVG contributions added to gross wages on Form 2555 or Form 1116. The FBAR is due April 15 with an automatic extension to October 15, once your foreign accounts together exceed $10,000 at any moment in the year. Pillar 2 alone gets you there within a year or two.

Facts. Single, age 38, US citizen, B permit, employed in the city of Zurich, gross salary CHF 150,000 in 2026, no children, no church tax. The employer runs a pillar 2 plan at the BVG minimum. The employee pays the maximum CHF 7,258 into a banking 3a. Exchange rate 1 franc = 1.25 dollars. Swiss side. - AHV/IV/EO: 5.3% of CHF 150,000 = CHF 7,950 employee, matched by the employer. Unemployment insurance about CHF 1,630. - BVG: coordinated salary CHF 90,720 minus CHF 26,460 = CHF 64,260. Age-band rate 10% = CHF 6,426 a year, split CHF 3,213 employee and CHF 3,213 employer. - 3a: CHF 7,258, deductible. - Swiss taxable income after social contributions, BVG, 3a, professional expenses and insurance deductions: roughly CHF 123,000. - Federal, cantonal and communal income tax in the city of Zurich: about CHF 24,000 to 26,000. Because the salary exceeds CHF 120,000, the Quellensteuer withheld from pay is provisional and a mandatory ordinary assessment follows, where the 3a deduction is actually applied. US side. - Wages for US purposes: CHF 150,000 salary plus CHF 3,213 employer BVG = CHF 153,213 = about $191,500. - Foreign Earned Income Exclusion: $132,900 for 2026, claimed on Form 2555 under the bona fide residence test. - Remaining wages $58,600, plus 3a interest of perhaps CHF 60 ($75) and any other investment income. - Standard deduction $16,100. Taxable income about $42,600. Because of the stacking rule, the tax is computed as if the excluded income were still there, so the marginal rate on the $42,600 is the rate at the $175,000 to $191,500 level, 24%. Tentative US tax roughly $9,600. - Foreign Tax Credit on Form 1116, general category: Swiss tax of about CHF 25,000 ($31,250), reduced pro rata by the share of income that was excluded. With about 31% of wages remaining taxable, the creditable Swiss tax is about $9,600 or more, enough to wipe out the US tax. - Result: US tax due about $0, but only after Form 2555, Form 1116, Schedule B, the FBAR and Form 8938 are filed. Skipping the FEIE and using the credit alone gives the same $0 result and leaves a Foreign Tax Credit carryforward of roughly $20,000, which is the better choice for anyone expecting a lump sum later. What goes wrong in practice. Taxpayers report CHF 150,000 instead of CHF 153,213. They leave out the 3a interest. They hold a fund-based 3a and never file Form 8621. And they wait until a lump-sum withdrawal at 65 to think about basis, by which point nobody has records of thirty years of employer contributions.

Without a C permit or Swiss citizenship, your employer withholds Swiss tax at source (Quellensteuer) from each payslip. Two rules matter for the US return. First, at CHF 120,000 or more of gross salary the canton must issue an ordinary assessment afterwards (nachträgliche ordentliche Veranlagung), and the withholding becomes a prepayment. Below that you can request one by March 31 of the following year, and you should, because it is the only way to deduct 3a contributions and pillar 2 buy-ins. Second, the creditable tax on Form 1116 is the tax finally assessed, not the amount withheld. A refund from the ordinary assessment in the following year reduces the credit you already claimed. Electing the accrual method on Form 1116 avoids the mismatch.

Before you move to Switzerland. - Do not roll a US 401(k) or IRA into a Swiss plan; there is no mechanism and it would be a full distribution. - Choose a bank 3a over insurance or fund 3a. Hold equities as US-listed ETFs in a brokerage account that accepts US citizens in Switzerland, and use 3a for fixed income. - If a US employer sends you for five years or less, get a certificate of coverage and stay out of AHV entirely. While in Switzerland. - Keep a spreadsheet of employer BVG contributions, employee contributions, buy-ins and 3a deposits in both currencies. This is your basis. - Prefer the Foreign Tax Credit over the Foreign Earned Income Exclusion when Swiss tax covers the US tax, so you build a carryforward for the eventual withdrawal. - Check each year whether your PFICs together exceed $25,000. Before you leave Switzerland for the United States. - Move vested benefits and 3a to foundations in a low-withholding canton first. - Withdrawing while still Swiss resident means Swiss reduced-rate tax plus US tax with a credit. Withdrawing after you become a US resident means reclaiming the Swiss withholding under Article 18 and paying full US tax on the gain over basis. Since the US tax is usually the larger figure and can be timed into a low-income US year, most people do better withdrawing after departure. - Do not cash out the 3a on the way to the airport: a CHF 100,000 withdrawal in your last Swiss year lands in the same US tax year as your final Swiss salary. If you plan to give up US citizenship while Swiss resident, pillar 2 and 3a balances count toward the $2 million net worth test and pillar 2 is a deferred compensation item under the exit tax rules. Get advice before the consulate appointment, not after.