Notice 2014-54 and NUA Transaction

Submitted by Craig Bolanos on Mon, 2014-12-15 17:58

Trying to ascertain the ability to move After Tax monies directly to a Roth IRA as part of a NUA transaction.

*401(k) Value is $1.4Million
*Separate Accounts total $.4
*Employer Stock total $1M
*Cost Basis of Stock $.4
*After Tax Plan Balance is $55,000

*We will roll the $400,000 of Separate Account Money to the IRA.
*We will deposit the $1,000,000 of employer stock into the client’s Trust account.
*The total tax liability to be reported is the $400,000 of cost basis less the $55,000 of after tax monies for a total of $345,000.

Question: Given the $55,000 of after tax money is reflected in the value of the employer stock is there any way to roll the $55,000 into a Roth IRA (citing notice 2013-54?)



Submitted by Alan - IRA critic on Mon, 2014-12-15 19:27

  • No. The 55k is a portion of the NUA stock share value. None of the stock share value used for NUA can be rolled over. For the same reason, if you distribute NUA shares and then sell those shares to get LT cap gain treatment, you cannot roll over any of the proceeds.
  • Note that even if the plan provisions allowed the 55k to be allocated to the non stock portion so that a Notice 2014-54 rollover could direct 55k to the Roth IRA and 345k to the TIRA, this would just result in the NUA shares being fully pre tax and the taxable cost basis of the share distribution being 400k instead of 345k. So you are paying taxes on 55k extra in order to get the 55k into a Roth IRA. Same net result as doing as originally planned and then converting 55k from the rollover TIRA to a Roth IRA. In fact, that would probably be better since it could be done in the following year so all income was not in the same year.

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