If there is one long-term lesson that came out of the global pandemic, it is that employees are no longer tied to an office. Thanks to technology and almost two-years of successful remote working, employees have enthusiastically embraced some degree of remote work. To take it a step further, not only are some employees seeking to work remotely from another state in the U.S. (which can create certain income tax issues for both employer and employee), but U.S. employers are also fielding requests from employees wanting to work from far-flung locations abroad.

Although employers are flexing toward remote work-environments given all of the advantages, including increased worker satisfaction and work-life balance, there are many complexities employers must consider before permitting employees to work in a foreign country. Having U.S. employees live and work abroad may create significant immigration, corporate and income tax obligations for the employer. Moreover, permitting remote workers to live abroad introduces complicated new challenges for employee benefits design and administration.

Employers may need to consider customized health care solutions to specifically cover employees living in a foreign country. Many large insurers offer international insurance, so an employer should check to see if its current provider has global health insurance solutions. If global health insurance is not an option, employers may offer a medical insurance stipend to remote workers to assist with financing coverage while working abroad. To avoid adverse tax consequences to its employees, the employer will need to set up reimbursements through a proper IRS-approved funding vehicle. For example, the employer may reimburse its U.S. workers for foreign medical coverage through a Health Reimbursement Arrangement or a Qualified Small Employer Health Reimbursement Arrangement.

Typically, qualified retirement plan participation is not affected for U.S. citizens living and working abroad for a limited of time. That said, employers must closely review qualified retirement plan documents to determine if contributions may continue while its workers are located outside the U.S. Employers should also consider childcare benefits, employee wellness programs, tuition reimbursement, travel insurance and expense reimbursement benefits to address eligibility for workers living abroad. Finally, employers should also evaluate the employee’s rights and benefits in the foreign country, as the jurisdiction in which the worker resides may have different rules that impact the U.S. employer.