NUA Process
I have two clients retired from Honeywell and GE. They want to take advantage og NUA of company stock. How do you proceed and do they have to sell the stock right away?
I have two clients retired from Honeywell and GE. They want to take advantage og NUA of company stock. How do you proceed and do they have to sell the stock right away?
Permalink Submitted by Alan Spross on Tue, 2007-08-21 21:45
Attached is a detailed link on the subject of NUA utilization.
Proper diversification should always be considered before tax advantages if clients hold too much in employer shares. However, GE is unique in some respects due to it’s size and diversity of underlying businesses.
Clients should get a cost basis quote on their shares and perhaps an idea of what accounting flexiblity the plan allows. For example, are they able to use the lowest cost basis shares only for NUA, or is all accounting done on an average cost basis? NUA is more compelling when the cost basis is under 40% of the FMV of the shares.
Clients can sell the NUA shares at anytime. Gains are taxed at LT rates, although gains that occur after the distribution of shares are taxed at ST rates until held over a year in the taxable account. There is no step up in basis upon client’s death because NUA is considered IRD. A proper LSD must be made of all similar plans of the employer, and there should be no intervening distributions between the NUA triggering event year and the LSD year. Triggering events are separation from service, age 59.5, disability or death. Taking distributions during years in between are considered intervening events, and force client to wait until the next triggering event. This is critical after age 59.5 particularly.
http://www.fidelityresearchinstitute.com/pdf/nua_may2007.pdf