Reply To: NUA allows in T-IRA?

Home Fairmark Forum Retirement Savings and Benefits NUA allows in T-IRA? Reply To: NUA allows in T-IRA?

#4525
Alan S.
Participant

The NUA provisions were passed several decades ago to encourage employees to purchase and hold employer shares in their 401k plans (qualified trusts). For this to be of benefit to the employee, the LT cap gain rates had to be offered upon sales of those shares or simply holding these shares in a taxable account would be preferable for the employee. Since an IRA is a plan owned and controlled by the taxpayer instead of a 401k which is sponsored by the employer, Congress passed rules in which both the contribution and distribution of these shares had to be made from a qualified plan and reported by the qualified plan. These rules included the lump sum distribution requirements that do not apply to IRAs. Therefore, once any employer shares eligible for NUA are rolled into an IRA, NUA is forfeited on those shares.