NUA when changing jobs

Submitted by Robert McKinney on Thu, 2018-09-20 16:44

I am looking at a scenario where a person will be leaving one employer for another and wants to do an NUA distribution of his current employer stock. However, I am concerned on the timing. Does the NUA distribution from the current employer plan need to be fully executed prior to him starting a job with a new employer?

Thank you.



Submitted by Alan - IRA critic on Thu, 2018-09-20 17:08

  • No. It can be done anytime as long as the person avoids taking “intervening distributions” in the meantime. This person’s triggering event will be separation from service, so as long as he takes no partial distributions before the lump sum distribution for NUA, he can use NUA anytime up to age 70.5, when his RMDs would become intervening distributions.
  • Of course, since he will be taxed on the cost basis of the shares, it is often beneficial to take the LSD when he is not working or after an early retirement to avoid the cost basis increasing his marginal rate.
  • The age 55 exception will eliminate the 10% penalty on the cost basis, but if he separated prior to the year he reaches 55, then he would owe the penalty if he takes the LSD prior to age 59.5.
  • Note that NUA is most beneficial if the cost basis is less than 25% of the FMV at distribution.

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