NUA Distribution but still employed

Submitted by Sarah Walsh on Thu, 2016-11-03 16:06

I did a transfer from my 401k to my IRA last year after I turned 59 1/2. However, I left my company stock in my account. I have continued to contribute to my 401k as I am still employed with the company. Can I still use the NUA strategy after I retire? My CPA is saying that I have missed my opportunity due to already completing a distribution and now I don’t qualify under the Lump Sum definition. Also, where would I direct her to look so she can see?

Thank you for your help!



Submitted by Alan - IRA critic on Thu, 2016-11-03 20:19

  • Refer to Pub 575, p 16 here:    https://www.irs.gov/pub/irs-pdf/p575.pdf?_ga=1.226181978.1347689568.1458248194
  • Note that the triggering event will be separation from service. Once you have a triggering event, you cannot take another distribution before the year of the lump sum distribution. Since your separation will be a new triggering event, distributions before that do not disqualify your LSD. But you cannot take another distribution between your separation and the LSD. Therefore, you could still use NUA if you wanted to and the cost basis % is low enough.

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