NUA and 401(k) plan
I have a client- 52- will be separating from his company in the spring.
He has a large position in his company’s stock within the 401(k) plan.
For basis reasons it makes sense to do the NUA with the company stock.
Is there a time limit for moving the stock into an individual account from the 401(k) after he separates from his company?
Can he move the stock out of the 401(k) plan using NUA into an individual account and keep balance in the 401(k)?
Permalink Submitted by Alan - IRA critic on Tue, 2015-02-17 18:49
There is no time limit, but he cannot take any distributions from the plan between separation and the year of the lump sum distribution (LSD) or NUA will not be allowed. His triggering event is separation, and if he took any non NUA distributions he would have to wait for the next triggering event which would be reaching 59.5. Since a qualified LSD is required for the entire plan in order to utilize NUA, he could not keep the 401k balance and just distribute the stock. His NUA cost basis would be taxed upon distribution and would also be subject to penalty if he takes the LSD before 59.5.