NUA eligibility
I am 60 years old, and retired for 5 years. In 2005, I took a distribution of less than $2000 of aftertax dollars from my 401k. I just started the process to roll my 401k over to an IRA, and to pull my company stock out of the 401k using the NUA provisions. The plan administrators (not company people, but a third party who administers the plan) who hold the account tell me I am ineligible for the NUA provisions because I took the intermediate distribution. I believe I get a new trigger at 59.5 and can proceed as planned.
Can you tell me whether the Plan Adminsistrators are correct or not, please?
Permalink Submitted by Alan Spross on Tue, 2008-07-08 22:07
You are OK and the administrator is incorrect.
You did take an intervening distribution after separation from service, but that was before you received a new triggering event by reaching 59.5. All you should need to do now is complete a valid LSD in order to utilize NUA potential.
You can still wait, but there are no more “pleasant” triggering events. The only remaining ones are disability or death, so you should be careful not to take any new intervening distributions.
If you have any after tax basis remaining in the plan, it should be applied to the cost basis of your employer stock. That will not change the amount of NUA per share, but it will reduce the cost basis on which you will be taxed in the year of the LSD.