New 60-day rollover rule
September 2015 client separates from current employer and rolls his 401(k) account (including company stock) to his T-IRA rollover.
Client also has a profit sharing plan (same employer) that contains company stock – but intends on waiting to employ NUA until 2016 when he will be in a lower tax bracket.
Question(s). My understanding is the client loses NUA since all assets from all plans of the same employer weren’t liquidated in a full LSD with a calendar year. The 2015 rollover of company stock invalidated the NUA. Am I correct in this assessment?
All help and guidance is appreciated.
Thank you
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Permalink Submitted by Alan - IRA critic on Mon, 2015-10-19 17:50
First, these plans are considered to be of the same type, so LSDs are required of both. To prevent the direct rollovers from becoming “intervening distributions”, in order to utilize NUA on the shares he must have them distributed before year end. Another possibility if he is not yet 59.5 is to wait until 59.5 which is a new triggering event and then distribute the shares which would constitute a qualified LSD. Or leave the shares in the plan until his death which would also be a new triggering event and enable his beneficiaries to utilize NUA. The question is whether his NUA cost basis is low enough to justify paying higher taxes to complete the LSD this year.