NUA timing clarification
We have a 61 year old in 401k plan that only allows for 1 rollover a year. Individual has substantial portion of 401k in Exxon stock. Do they have to decide on NUA the year of retirement? OR can it be a year later if the company allows account to remain in 401k plan? Curious if there is a timeline that it has to be done, and is the timeline based on calendar year or one year from the date of triggering event?
Thank you!!!
Permalink Submitted by Alan - IRA critic on Fri, 2021-06-18 16:58
There is no deadline for a qualified LSD if the plan allows the balance to be maintained there. However, the participant cannot take a distribution in a year after the triggering event (59.5 or separation from service) and before the LSD year or the LSD will not be qualified for NUA. So if the person does not take one of these intervening distributions, they could hold off until age 72 or even 73 when the first RMD must be taken. The distributions of the company shares would also satisfy the RMD. As always, diversification should trump tax benefits so the participant may find it safer to sell some of the shares in the plan sooner rather than later or do the LSD sooner and unload some of the shares at the lower LTCG rate.