NUA

Submitted by Denise Sowell on Tue, 2025-06-10 16:05

I have a client who wants to initiate a direct rollover from her 401(K) which holds approximated 62 % of Company stock. She has previously taken RMDs from this 401(k). We were told by the Custodian CSR that because of these previous distributions that she can not take advantage of the NUA provision. Is this correct?

Thank you.

Denise Sowell

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Permalink Submitted by Alan - IRA critic on Tue, 2025-06-10 17:07

Yes, it’s correct if she took any RMD after retirement and prior to this year. If she retired this year, she could still do the LSD.

Those RMDs are treated as “intervening distributions” that eliminate a total distribution being qualified as an LSD for NUA purposes.

The only situation I can think of in which she would still qualify is if she was a >5% owner of the employer and had to take RMDs because of that while still working. In that case, she would get a new triggering event by her separation of service that would erase the intervening RMD distributions. This situation would apply to very few participants.