Titling of company stock
A client has taken an in-service 401k withdrawal of company stock to take advantage of NUA teatment. It is being held in his name in an account with the company’s custodian bank. He wants to transfer the shares to a brokearage account in his and his wife’s name. He has been told this is not a problem for tax or NUA purposes or any other reason. Any thoughts or is it a nonissue?
Permalink Submitted by Alan Spross on Wed, 2011-05-04 21:16
It is not an issue. Once the funds are no longer in a tax deferred account, they can be in either an individual brokerage account or a joint account with a spouse.
However, the bigger issue is whether he can execute a qualified LSD at all. A triggering event for NUA is separation from service, death, or reaching 59.5. If this is an “in service” distribution, then he will have to be over 59.5 and he will also have to distribute the entire balance of all like plans in the same tax year. Being an active participant in these plans therefore makes a qualified LSD highly problematic.
Permalink Submitted by Mark Samwebber on Fri, 2011-05-06 11:22
Thanks, Alan. It was an in-service distribution, but he had reached 59 1/2. He rolled mutual fund proceeds from the 401k into an IRA and took all of the company stock as I described. He emptied the 401k, all in 2011.
Permalink Submitted by Alan Spross on Fri, 2011-05-06 16:27
And stopped contributions to the plan? If there is any balance in the plan for whatever reason on 12/31/2011, the LSD would be disqualified. He could actually contribute the rest of the year, but needs to totally drain the plan before year end and all plans of similar type. A DB pension plan is NOT of a similar type so it can remain with the employer.