401(K) NUA options
I am working with a prospect recently left his employer.
His 401K was valued at $ 400,000 with $60,000 invested in company stock with a basis of $20,000.
The prospect talked with a major 401K provider regarding a transfer of his 401K into a Traditional IRA. The customer service representative did not have a discussion regarding his options for NUA and totally liquidated the 401K holdings, including the company stock and invested all the proceeds into their target mutual fund.
Does the prospect have an option to go back to this 401K provider and ask them to reverse the trade and offer him the opportunity to process the company stock as a NUA transaction?
Thanks
LJB
Permalink Submitted by Alan - IRA critic on Tue, 2013-06-25 22:44
First of all, the plan would probably not reverse the transaction, but even if they did the new shares would carry a current cost basis, not the original cost basis per share which is used for LT cap gain calcalution in conjunction with NUA. Since a cost basis of 33% is not attractive for NUA unless prospect needs to sell shares very soon for cash needs, this communication gaffe could be beneficial rather than costly.