In-Service Distribution (impact on NUA)
I have a what I feel is a straightforward question – although I am unable to locate a definitive answer
NUA tax treatment is available only upon certain stated events such as (59 1/2, death, separation from service). Does an individual that that takes an in-service withdrawal (of non company stock) need to satisfy another “triggering” to receive NUA treatment upon a subsequent (second) withdrawal?
thank you
Permalink Submitted by Alan - IRA critic on Mon, 2015-04-20 18:32
Yes, unless the in service withdrawal is in the same year as the LSD. To meet the requirements for a qualified LSD, the LSD must be taken because of the triggering events you mentioned. If there is an intervening distribution in a year, then the IRS takes the position that the triggering event did not result in an LSD, rather the intervening distribution only. This is not stated in the tax code, but the IRS has interpreted things this way, and plan administrators should complete their 1099R forms accordingly. In other words, they should not be showing NUA in Box 6 unless the total distribution box in 2b is also checked.