NUA basis and increase due to dividends

Submitted by abraham boznick on Tue, 2021-06-22 03:48

I have separated from service some time ago. I have not being contributing to my either company stock or my ESOP. Thus I expect the rise in basis to be due to dividnets distribution only after the separation. For the sake of simplicity let’s say that my company stock and NUA have the same amount of investment in it. Thus I expect the INCREASE in basis over time (after I have separated from service) to be exactly the same for either company stock or ESOP (as it only should increase due to dividends). However, the increase in basis for company stock (which is consistent with 2% rise per year) is more than 10 times than for ESOP (it is only 0.15% rise per year for ESOP). How can this be? I understand that this is beneficial for me — as I would end up paying less tax on ESOP on distribution of my 401k as I am planning to use NUA. But I still would like to find out what causes ESOP basis to increasing by such a little amount.



Submitted by abraham boznick on Tue, 2021-06-22 05:34

what I meant that I have not been contributing to my either company stock or my ESOP AFTER the separation. I was contributing to my company stock and ESOP before the separation.

Submitted by Alan - IRA critic on Tue, 2021-06-22 15:16

Are any of the ESOP dividends paid out to you directly rather than being reinvested in more ESOP shares? If so, you would be receiving an annual 1099R for these dividends.

Submitted by abraham boznick on Tue, 2021-06-22 18:13

no. Nothing is paid out to me. Is it possible that what I see is due to the fact that the company is still using very low cost shares in ESOP? And this is why my basis in ESOP is growing so little as compared to company stock (and the company stock is using shares as they are currently)?? 

Submitted by Alan - IRA critic on Tue, 2021-06-22 18:45

You should call the plan and find out the answer if the plan is not providing readable statements. I am just guessing at some of the most likely reasons based on your statement that the total value of the shares in the 401k is about the same as the total value in the ESOP. These plans might contain some unusual accounting procedures.

Submitted by abraham boznick on Wed, 2021-06-23 00:11

I checked my statements and the basis in my ESOP is much much smaller than in company stock. Though I was essentialy mimmicking my ESOP contributions amount when contribting to the company stock over the years (thus my overall investment in ESOP is roughly the same as overall investment in the company stock). Can you tell me how is it possible for the company to do this — to have different basis for the equivalent shares in ESOP and compnay stock? 

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