NUA completed in ’16, residual dividends and PS contributions in ’17

Submitted by Dennis A. Parker on Wed, 2017-11-08 22:49

I have a client who completed an NUA transaction in 2016, upon her separation from service for P&G. The 1099-R is marked “total distribution” and there is an amount in box 6.

In 2017, she received notice of a balance in the P &G Profit Sharing account, which is the result of dividends and profit sharing contributions to the plan in 2017 based on 2016 events.

We are concerned that this balance in the account could negate the lump sum distribution requirement of the NUA. Is this of concern?

She is under 591/2. Is my understanding correct that if she does not withdraw these funds until after she turns 59 1/2 that she will not negate the NUA LSD?

Thank you, in advance, for your consideration.



Submitted by Alan - IRA critic on Thu, 2017-11-09 00:47

  • Apparently there was a total distribution in 2016 or the 1099R would not so indicate. This is in the hands of the plan with respect to whether they issue a corrected 1099R or not. But this situation may indicate that a lump sum distribution should be requested before October such that any trailing dividends could also be distributed before year end. I am not aware of whether IRS Regs address this situation where there is an LSD, but then trailing dividends or some other source of income is deposited into the account. If no corrected 1099R yet, that is good news. 
  • As for your last question, I think you are asking about a new triggering event with respect to these dividends. That would not affect the current LSD whether there is a new triggering event of not since the first distribution was in a prior year. All it would do is make the dividends now in the account eligible for another LSD if the first distribution is changed to an intervening distribution due to receipt of a corrected 1099R.

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