NUA
I recently completed an NUA transfer from an ESOP plan to an individual brokerage account through ComputerShare. We previously rolled over his 401k balance to a rollover IRA. During the phone call to request the rollover and NUA transfer, the client requested that any stock dividends be paid in cash. Prior to the stock transfer out of the ESOP but after the 401k rollover to his IRA, a dividend from the stock was paid and a check was mailed to the client payable to his IRA. The stock transfer is completed into his individual, non-qualified account and he has an existing rollover IRA. It seems that there isn’t a problem to deposit the stock dividend from the ESOP into the rollover IRA since that is how the check is made payable and the dividend was paid while the stock was still in a qualified ESOP plan. Am I missing anything? Just trying to be cautious.
Thanks,
Larry
Permalink Submitted by Alan - IRA critic on Tue, 2017-11-28 00:32
Sounds like a typical trailing distribution where dividends are automatically distributed in a follow up direct rollover check to the same IRA custodian that received the main rollover earlier. This is not a problem, and it is important that the entire balance of the 401k be distributed by year end in order to meet the requirement of a qualified LSD for NUA purposes. The check can be forwarded to the IRA custodian for deposit. This amount will probably just be added to the 1099R reporting the first direct rollover.