NUA and ESOP
Hello all.
Are the NUA rules any different if the company stock being rolled out of the 401k plan started as ESOP stock?
Have a client who purchased ESOP stock in her 401k. Company went public and the price of the stock went through the roof.
Client wants to consider doing a NUA out of her 401k where the non company stock is rolled to an IRA and the company stock is rolled out to a brokerage account.
Goal is to pay tax on the original cost basis of the stock (Plan Adminitrator does track the cost basis). She is under 59 1/2 so she also wants to know what value the 10% early withdrawal penalty is based on (market value or original cost basis)
Any help that someone can provide would be greatly appreciated
Howard
Permalink Submitted by Alan - IRA critic on Wed, 2013-05-22 20:33
ESOP shares are eligible for NUA treatment. The taxable cost basis for the shares for the year of the LSD is the only portion subject to the 10% penalty (NUA is not subject). There is a penalty exception for separation from service at age 55 or later, age 59.5 in all cases, or for certain expenses paid such as higher education, medical etc.