NUA – Then returning to work for the same company
We recently completed a NUA transaction (March 2018) for a client and she is contemplating returning to work for the same company. She becomes eligible for stock shares and profit sharing after having worked for 1,000 hours. She has about 350 hours in from the first two months of the year. How would her returning to work this year and becoming eligible for stock/profit sharing impact her NUA transaction from earlier this year? What if she stays under 1000 hours this year and then becomes eligible again in 2019? Can she do NUA again? Does hours worked and shares received in 2019 impact her 2018 NUA?
Permalink Submitted by Alan - IRA critic on Wed, 2018-07-25 15:28
Her 1099R must indicate a lump sum (aka total ) distribution, cost basis, and NUA amounts for her to qualify for NUA. I expect that the plan would issue such a 1099R if no balance in company plans (ESOP, 401k) is acquired by 12/31/2018. However, if more shares are acquired by year end, the plan provisions could nullify the LSD. In the end, this is a specific plan provision or plan policy, so she needs to get clarification before returning to work. Keep in mind that the prior distribution if not eligible for NUA would result in the full value being taxable and also subject to penalty depending on age. There is no reason that a second separation would not include possible NUA potential in the future, but the March, 2018 distribution might not qualify if she returns this year and/or acquires a balance in affected plans by 12/31. Obviously, the dollar amounts involved here are key.