BVG Vested Benefits Accounts (Freizügigkeitskonto): A US Tax Guide

What a Freizügigkeitskonto Actually Holds

When you leave a Swiss employer and don't roll your occupational pension directly into a new employer's pension fund, Swiss law doesn't let that money simply sit or disappear. It has to go into a vested benefits account — a Freizügigkeitskonto — which parks your accumulated Pillar 2 savings until you take a new job in Switzerland, retire, emigrate, or hit one of a short list of allowed early-withdrawal events. Pillar 2 is the mandatory occupational pension that sits alongside Switzerland's state pension (Pillar 1) and voluntary private savings (Pillar 3). If you want the fuller picture of how all three pillars interact with US tax law, our Swiss pension plans compliance guide for American expats walks through the whole system.

Bank Account or Securities Account: Two Very Different Vehicles

You typically get to choose between two structures when opening a vested benefits account, and the choice matters more for a US person than for a Swiss or non-US resident.

• Bank vested benefits account: your Pillar 2 money sits in cash, earning modest interest, at a bank or dedicated vested-benefits foundation.
• Securities vested benefits account (Wertschriftenlösung): your money is invested in funds — typically a mix of equities and bonds chosen from a menu of options — with the goal of higher long-term growth in exchange for market risk.

Why the IRS Doesn't See a 'Pension' Here

This is the part that surprises most people: a Freizügigkeitskonto is not a qualified retirement plan under the US Internal Revenue Code. Switzerland treats it as a continuation of your retirement savings, tax-deferred until withdrawal. The US generally doesn't extend that same deferral. Depending on how the account is structured and how the interest or investment growth is treated, you may need to report and pay US tax on that growth as it accrues each year — not decades from now when you finally withdraw the funds. There's no single blanket rule that applies to every account structure, which is exactly why this is a 'get this reviewed for your specific account' situation rather than a do-it-yourself guess.

FBAR and Form 8938: What You Must File

Whether your vested benefits account sits in cash or in funds, it's a foreign financial account, and it counts toward your US reporting obligations. If the combined value of all your foreign accounts — bank accounts, brokerage accounts, and yes, your Freizügigkeitskonto — exceeds $10,000 at any point during the year, you have an FBAR filing requirement. Our FBAR filing guide for Americans in Switzerland covers the deadlines and mechanics in detail. Separately, Form 8938 (Statement of Specified Foreign Financial Assets) kicks in at higher thresholds — for most Americans living abroad, that's $200,000 at year-end or $300,000 at any point during the year for single filers, with different numbers for married couples. You can owe both filings for the same account; they serve different agencies and different purposes, and neither one substitutes for the other.

Basis Tracking: The Step Most People Skip

Because a Freizügigkeitskonto isn't a qualified plan, and because you may be paying US tax on growth annually rather than at withdrawal, you need to track your cost basis carefully from the day the account is opened. Without that record, you risk being taxed twice on the same money: once as it grows year by year, and again when you finally withdraw it and Switzerland (or the US) looks at the lump sum as if none of that tax had already been paid. This is one of the most common — and most avoidable — expensive mistakes we see. Our detailed walkthrough on Pillar 2 basis tracking and avoiding double taxation on Swiss pension withdrawals shows exactly what records to keep and why starting late makes the reconstruction much harder.

When You Can Actually Access the Money

A vested benefits account isn't meant to be a flexible savings account — Swiss law restricts when you can touch it, generally to these situations:

• Reaching the standard retirement age framework (around age 59.5 at the earliest for early withdrawal in most cases).
• Buying and occupying your own primary residence in Switzerland.
• Becoming self-employed and ceasing to be subject to mandatory Swiss occupational pension coverage.
• Leaving Switzerland permanently, subject to specific conditions that depend on your destination country and the type of account.

Practical Steps When You Leave a Swiss Employer

If you're changing jobs, leaving the workforce, or moving away from Switzerland, here's the sequence worth thinking through before your Pillar 2 money lands somewhere new:

1. Confirm with your outgoing pension fund whether the money transfers automatically to a new employer's plan or needs to go into a vested benefits account.
2. Decide between a bank vested benefits account and a securities-based one, weighing growth potential against the added US tax and reporting complexity of a fund-based account.
3. Start a basis-tracking record from the very first franc that goes into the account, not years later when the details are harder to reconstruct.
4. Add the account to your FBAR and, if applicable, Form 8938 filings for the year it's opened — don't wait for a 'round number' balance.
5. Revisit the account each year as part of your regular US tax filing, since the annual tax treatment of growth doesn't pause just because you're busy.

None of this makes a Freizügigkeitskonto a bad idea — for most people leaving a Swiss employer, it's simply the required next step for money you've already earned. The goal isn't to avoid it; it's to open the right type of account, keep the right records, and file the right forms so the account does its job without quietly creating a US tax problem down the road. We work with Americans in Switzerland on exactly this kind of cross-border pension question, and it's the kind of decision worth getting a second, informed opinion on before you sign anything.