NUA Rollover

[jane123]

If an individual completes a rollover of employer stocks from one qualified plan to another qualified plan of a different employer, how does that affect the NUA? I read somewhere that this can be done for plans belonging to the same employer and the NUA is not lost then. But I cannot find anything about rolling the assets between different employer’s plans.

Thanks in advance

[Guest jashendo]

If the employer securities are rolled over in kind to another employer's plan (or to an IRA, for that matter), they no longer will be "securities of the employer corporation", so any NUA included in a subsequent distribution from the new plan (or IRA) will be includible in income upon distribution.

This is not the case if the rollover is to a plan of the same employer (or a plan of a parent or subsidiary corporation) because the securities will them continue to be "securities of the employer corporation", within the meaning of 402(e)(4)(E).

[jane123]

I read in the Aspen panel publishers on-line reference service that if employer stocks are rolled over between two plans, then the basis is “stepped up” to the total value of the assets when they are distributed from the first plan. I also read in a PLR on EBIAs website that the basis remains the same if the rollover is between plans of the same employer. This PLR caused me to think that the Aspen article refers to plans of different employers.

Your thoughts.

Thanks in advance for your help

Jane

[Guest Harry O]

A rollover is technically a distribution from the plan and NUA will clearly be lost if the stock is rolled over to an IRA or another employer's qualified plan. There are old revenue rulings (and PLRs) that permit NUA to be retained even if the stock is transferred to a plan of a new employer as long as the shares are moved in a trustee-to-trustee transfer (NOT a rollover or direct rollover). This is typically the case in the event of a divestiture where employee accounts from the seller's plan are transferred to the buyer's plan. Employer stock from the seller can be maintained in the buyer's plan and will be eligible for NUA treatment upon eventual distribution.