Do I qualify for NUA?
[b]Do I qualify for NUA treatment from my 401k?[/b]
Here is the situation:
My client retired in 2003 at age 55 and was in four plans at that time. She took a lump sum distribution from the retirement plan and rolled it over to an IRA. She elected a deferred distribution from the severance plan and the supplemental retirement plan. She retained her 401k. She has taken partial distributions and dividend distributions from her 401k in the past. She will not take any partials in the future. She will turn age 59.5 in late 2007. Immediately after that (early in 2008), she wants to take a lump-sum distribution from her 401k, take the company stock in-kind, and claim NUA. Will she qualify?
Will her past partial distributions disallow her from claiming NUA even though she will do the lump-sum after turning 59.5? Will her previous participation in “other plans” disallow her from claiming NUA from her 401k?
Thanks,
Permalink Submitted by Alan Spross on Tue, 2007-07-31 22:28
The prior distributions do not affect NUA potential since attaining age 59.5 becomes a fresh new qualifying event.
However, I would be seek plan verification that the SERP is not considered a plan of the same type as the 401k. I am reasonably sure that it is not qualified and not subject to Sec 401, and any such trusts are exempted from the LSD requirements for NUA. Nonetheless, I suggest getting plan verification of that if the SERP is not yet fully distributed. That should be the only pitfall to a qualified LSD and NUA in 2008.
Permalink Submitted by Steve Richards on Thu, 2007-08-02 03:14
I do know that the Supplemental Retirement Plan was called the Supplemental Pension Bonus Plan was a cash payment made at the time of retirement based upon 1) the three highest Incentive Cash Bonuses given to the employee in the previous 10 years, 2) interest rates at the time of retirement, 3) age and years of service by the employee at retirement. Then, at retirement, the employee was offered the opportunity to take a LSD, or take cash payments over 5 years, or 10 years . The employee choose 10 years.
Does this information help you determine whether this Plan could have been considered the same kind of plan as a 401k?
Thanks again.
Permalink Submitted by Alan Spross on Thu, 2007-08-02 19:57
Just the term “supplemental” suggests that this plan is a SERP, even more likely if she was highly paid. A SERP is not a qualified plan, and accordingly lacks many of the asset protections of a qualified plan. If not qualified it is NOT the same kind of plan as the 401k, and therefore the deferred payout should not affect the LSD and NUA utlization.
That said, I would definitely seek confirmation from the 401k plan administrator that this is indeed the case. They also need to know this in order to properly code the 1099R showing the LSD.