NUA
[color=darkblue][b]AT&T has a 401k plan that includes LESOP and ATT Shares Fund. Description says that account holders do not own AT&T stock but have shares in the fund. Do these shares qualify for NUA?[/b][/color]
[color=darkblue][b]AT&T has a 401k plan that includes LESOP and ATT Shares Fund. Description says that account holders do not own AT&T stock but have shares in the fund. Do these shares qualify for NUA?[/b][/color]
Permalink Submitted by Alan Spross on Wed, 2007-08-01 21:40
Yes, these unitized company stock funds generally qualify for NUA treatment, but of course actual share certificates of an equivalent number of shares will have to be distributed as part of the LSD. These funds typically incorporate dividend reinvestment, and each quarterly dividend reinvested contributes to the average cost basis per share which is currently taxable in the year of the LSD. ESOP share dividends however may be paid in cash and not reinvested.
Permalink Submitted by Ora Citron on Wed, 2007-08-01 23:10
Thank you for your information. Do I understand correctly that though dividends possibly are not reinvested, that LESOP shares will be distributed as stock certificates when an employee retires? They and stock fund distributions are then both eligible for NUA treatment? Many thanks!
Permalink Submitted by Ora Citron on Wed, 2007-08-01 23:15
I have read that NUA can apply in special circumstances to non-lump-sum distributions. Does anyone know what those special circumstances might be? For example, if the company allows account holders to take one-third of their vested account each year and rollover to an IRA, does that constitute a special circumstance?
Permalink Submitted by Alan Spross on Thu, 2007-08-02 03:03
Yes, the ESOP shares MUST be distributed in certificate or electronic form representing actual shares in order to qualify for NUA. I am not sure what the “L” stands for before ESOP (perhaps maybe “leveraged”). This applies whether dividends are reinvested or not.
There is also an abbreviated version of NUA when distribution does not qualify as a LSD. In that case, only shares considered contributed to the plan by the employee, not the employer are eligible. Since cost basis is usually averaged, this causes the NUA to be relatively depressed.