NUA
I have a client that has a defined contribution plan with highly appreciated stock that we want to do an NUA transfer. She also has a defined contribution plan with the same company. Both plans are reported on the same statement. Part of the NUA rules states that all of the assets need to be out of the plan by year end or the NUA treatment is nullified. I am concerned about the Defined benefit plan which we plan to keep as is for now.
Any insight as to whether they are considered together for NUA purposes or are they seperate plans?
Permalink Submitted by Alan Spross on Mon, 2012-11-05 20:29
The DB plan is a pension plan and not a profit sharing plan, so it does not have to be distributed. The following is copied from Sec 402(e) with respect to defining a qualified lump sum distribution for NUA purposes:
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(I) all trusts which are part of a plan shall be treated as a single trust, all pension plans maintained by the employer shall be treated as a single plan, all profit-sharing plans maintained by the employer shall be treated as a single plan, and all stock bonus plans maintained by the employer shall be treated as a single plan, and
(II) trusts which are not qualified trusts under section 401 (a) and annuity contracts which do not satisfy the requirements of section 404 (a)(2) shall not be taken into account.
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For added peace of mind, the client can get confirmation from the plan that the NUA amount will be reported on the 1099R. The IRS determines NUA amounts from the 1099R.