one more NUA question
Is there any time limitation on when one must withdraw his 401(k) following separation from service in order to utilize NUA treatment? Can one do it any number of years following retiring or otherwise leaving employment? I know it has to be done all in one calendar year.
Thank you,
Permalink Submitted by Alan - IRA critic on Tue, 2016-12-06 17:49
The LSD can be taken in a later year, but there cannot be any years in between in which there is an “intervening distribution”. If so, the NUA is lost unless there is another triggering event to follow. For example, taxpayer retires and that is a triggering event for NUA. 10 years could pass and NUA is still available, but if the taxpayer took a distribution in year 3 the NUA potential is lost unless there is another triggering event. If the retirement was at 55 and distribution taken at 58, then taxpayer gets a new triggering event by reaching age 59.5. NUA then becomes available again unless there is another intervening distribution. However, the options run out once RMDs begin at 70.5, as an RMD would be another intervening distribution. Therefore, the LSD should be done not later than the year of the first RMD distribution at the latest. The plan administrator should know this and reflect it on the 1099R. Short answer then is that it is OK to delay the LSD as long as there are no intervening distribution years in the interim.