NUA allows in T-IRA?

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

Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • #4522
    b1_lee
    Participant

    If I accumulate my company stock in my traditional IRA over my working years, is NUA option available just like 401K when taking it in one lump sum after retirement?

    If allow, what are the rules before/during/after taking it in one lump sum?

    If not, why NUA is allowed in 401K, but not 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.

Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.