Any Remedy for faulty roll over re NUA?
If 401(k) rollover already took place and involved huge loss of NUA benefit, is there any remedy?
Thank you.
If 401(k) rollover already took place and involved huge loss of NUA benefit, is there any remedy?
Thank you.
Permalink Submitted by Alan Spross on Wed, 2008-11-12 03:36
Unfortuneatly, no IRS remedy.
The IRS has ruled that once NUA shares are ever deposited in an IRA account, the NUA benefit is irrevocable forfeited. There was a PLR requested by a party that realized the error and had the IRA distribute the shares in kind the next day. The request was denied.
However, there may be some legal recourse against any party who directed or handled this negligently. Before a 401k rollover is done, the plan should issue a 402(f) Notice advising the employee of all the potential tax ramifications of a rollover. While the format for this notice has been subject to revision, I recall that there is a limited reference to employer shares and other lump sum distributions options such as 10 year averaging etc. Therefore, if the plan can show that they mailed the 402f notice to the most recent address of record, they are probably bullet proof. However, if an advisor handled everything for the employee, then the agreement with the advisor is probably material to any litigation potential.