Is the keren hishtalmut tax-free for US citizens?

The keren hishtalmut is tax-free in Israel — both the growth and the withdrawal after six years. But for US citizens and green card holders, the IRS does not recognise it as a tax-exempt pension plan. Employer contributions may be treated as taxable US income in the year they are made, and the account's growth may be subject to US reporting and potentially tax on an ongoing basis. There is also a contested question about whether the fund requires Form 3520 reporting as a foreign trust. The penalties for getting this wrong are high. US citizens with keren hishtalmut accounts should work with a US-Israel dual-tax specialist.