401k distribution/NUA
A 55 1/2 year old has retired from a company that he has worked for over 30 years that he has a 401k that contains company stock. The company stock has a large gain.
Client wants to take advantage of the NUA rules by distributing his company stock to a personal brokerage and the remainder of his 401k to a rollover IRA – trustee to trustee.
Does the client have a 10% withdrawal penalty on the company stock distributed to his personal brokerage account or the trustee to trustee transfer to a rollover IRA.
Permalink Submitted by mk foss on Mon, 2014-05-12 21:47
Was he over 55 when he retired? If so, the distributions at 55-1/2 will have no 10% penalty. There is never a penalty on a rollover to an IRA or conversion to a Roth. The transfer to the personal brokerage account is the only transaction that could have a penalty and if he/she qualifies for NUA only the plan cost of the shares would be liable for the penalty and not the FMV of the shares. Conclusion: only a penalty if he retired before age 55 and then only on the shares not rolled over.