ESOP Diversification Election disqualifying NUA
Can someone please provide guidance regarding if a 25% diversification ESOP election would disqualify a client in the future from using NUA for highly appreciated company stock. My understanding is that NUA is an all or none type of provision. So does a partial distribution for diversification purposes prior to retirement represent a violation of that all or none provision?
Thank you in advance for your time and consideration.
Thank you
Permalink Submitted by Alan - IRA critic on Sat, 2017-07-22 00:07
A qualified LSD must be completed for NUA to be utilized, and I am not aware of any exceptions. I suppose the final installment would still qualify as an LSD for purposes of that final distribution of shares only, but the timing of the last distribution would also have to follow a new triggering event such that the earlier distributions were not intervening distributions that would erase the earlier triggering event such as separation from service. For the most part however, partial distributions would probably eliminate NUA entirely.