NUA (AFTER) an in-service distribution
I understand a full liquidation of the 401k must be completed with in a year after moving company stock into a standard brokerage account for NUA treatment. My question is, can an individual still take advantage of NUA treatment on company stock if they initiated an in-service rollover with a portion of their 401k assets more than a year ago?
Permalink Submitted by Alan - IRA critic on Thu, 2022-01-27 00:27
Yes. The lump sum distribution requirement is only satisfied if the entire 401k balance and the balance of similar plans of that employer are totally distributed by the end of the calendar year in which the NUA stock is distributed. An in service distribution can be taken prior to the year of the stock distribution or in the same year, but not in a calendar year after the stock distribution.
An in service distribution occurs prior to separation from service, which is an NUA triggering event and erases the effect of the in service distribution. However, if a post 59.5 employee separates, then takes a distribution before the LSD year, that distribution would be treated as an “intervening distribution” and negate NUA treatment. This is a different scenario than you asked about, but any retiree who postpones the LSD must be careful to avoid any intervening distributions.