Type of account to receive NUA stocks
I have a question on what type of account I should have to receive my employer stocks if I want to distribute/transfer these stocks (using NUA option) from my company’s retirement plan. I have an existing (texable) brokerage account with Scottrade, but it is a joint account with my wife. Can I use this joint account to receive my stock shares ? or I have to have an account under my own name for this purpose ? Thanks.
Permalink Submitted by Alan Spross on Thu, 2012-09-13 19:53
No problem with distributing to the joint account, since these shares will no longer be in a retirement account. Just be sure to keep track of these shares and their cost basis. Inform the broker what the cost basis is before they assign some other basis to it. And be sure to keep the 1099R which shows the amount of NUA distributed. Actually, you should get confirmation of the 1099R numbers before you decide on the LSD. Be sure your LSD is a qualifying LSD for NUA purposes.
You can change your mind and roll the NUA shares over to an IRA within 60 days of receipt if you decide a rollover is better because the cost basis is too high. You CANNOT sell the shares using NUA and roll the proceeds over to an IRA.
Permalink Submitted by Cima Locert on Thu, 2012-09-13 20:43
Thanks a lot. That answered my question. Now You mentioned LSD, I think I am OK for NUA, but I have a different question related to LSD (Lump Sum Distribution). Can I distribute my company stocks (using NUA option) multiple times ? another word, I plan to distribute 30% of my 401k stocks now to my Scottrade account, after that, may be next month, I will distribute the rest of my 401k stocks (also using NUA option) to another account (I do have another account with Fidelity). I read some LSD rules, says as soon as I distribute all my assets within one year, I am OK. Is this correct ? Thanks.
Permalink Submitted by Alan Spross on Fri, 2012-09-14 00:02
That’s correct. You must distribute your total balance in retirement plans of a like kind of this employer by the end of the calendar year the NUA shares are distributed. For a 401k plan, other plans of a like kind are profit sharing, stock bonus, ESOPs, etc. A defined benefit plan is not considered a like kind plan.
Therefore, as long as you have distributed all of these balances by the end of the year, you can take as many distributions as you wish. Your LSD year also has to follow a triggering event, typically separation from service. It does not have to be the same year as you separated, but if the LSD is taken in a later year, there cannot be any intervening distributions in a year following the triggering event and before the year of the LSD.
Example: You separated from service in the year you reached 56. In the following year you took a partial distribution from the plan which is considered an intervening distribution. Therefore, you would then have to wait until a new triggering event (age 59.5) before you could take your LSD.
Also, if you passed, your wife would inherit your NUA shares and could continue to sell them and pay LT cap gain rates. There is no step up to DOD value for the NUA, only for the increase in value that occurred after your distribution of the shares.
Permalink Submitted by Cima Locert on Fri, 2012-09-14 03:02
Thank you for the quick response. This helped me a lot.