NUA Stock and Computershare

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Topic Author
Oil Boiler
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NUA Stock and Computershare

Post by Oil Boiler »

I am in the process of completing a rollover of a company 401K to Vanguard. All cash assets have been rolled over and on account at Vanguard and the stock component is being handled by Computershare. There is an NUA batch of shares that has arrived at Computershare and an IRA batch of share that is in process. I have been told the IRA shares will land in a Computershare IRA. The 401K account is now empty. My question is, can these shares simply remain with Computershare for the time being or do they need to get into the Vanguard accounts to protect the NUA status? Does having these shares resting at Computershare before the end of the year, meet the requirement to have the 401K fully distributed before year end.

Thank you,
Oil Boiler
Alan S.
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Re: NUA Stock and Computershare

Post by Alan S. »

Oil Boiler wrote: Sun Nov 28, 2021 7:33 pm I am in the process of completing a rollover of a company 401K to Vanguard. All cash assets have been rolled over and on account at Vanguard and the stock component is being handled by Computershare. There is an NUA batch of shares that has arrived at Computershare and an IRA batch of share that is in process. I have been told the IRA shares will land in a Computershare IRA. The 401K account is now empty. My question is, can these shares simply remain with Computershare for the time being or do they need to get into the Vanguard accounts to protect the NUA status? Does having these shares resting at Computershare before the end of the year, meet the requirement to have the 401K fully distributed before year end.

Thank you,
Oil Boiler
This should not be a problem. The 401k has been fully distributed, so the LSD requirement is met. However, to utilize NUA the company shares earmarked for NUA must not be rolled into an IRA at any point. Hopefully, Computershare executes the rest of the transfer into the proper VG brokerage account.
Topic Author
Oil Boiler
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Re: NUA Stock and Computershare

Post by Oil Boiler »

Alan,
Thank you so much for the concise and speedy reply!
Newaygo
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Re: NUA Stock and Computershare

Post by Newaygo »

Oil Boiler,

Did the plan administer indicate how long it would take Computershare to make the final distribution to Vanguard? Since the plan administrator executed your rollover order, a 1099R should be triggered for the year 2021. Let's say that Computershare completes the stock transfer in early January. It is still 2021 1099R. Hopefully, the plan administrator issues a correct 1099R.
Topic Author
Oil Boiler
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Re: NUA Stock and Computershare

Post by Oil Boiler »

Currently I'm at week #2 what the plan admin says is a 2-4 week process. And you are right, a correct 1099R will be the icing on the cake.
BigJohn
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Re: NUA Stock and Computershare

Post by BigJohn »

Oil Boiler wrote: Sun Nov 28, 2021 7:33 pm The 401K account is now empty.
One word of caution on this. Depending on timing of share transfer, the ex-dividend date and the payment date, it was possible in my former employers 401k plan to have a dividend hit the account after it looked empty. If not removed by YE, this small balance would negate the NUA treatment since it would not be a total distribution. If this is even a remote possibility, I’d suggest you confirm the zero balance in late December with enough time to get it taken care of if an issue.
"The greatest enemy of a good plan is the dream of a perfect plan" - Carl Von Clausewitz
Newaygo
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Re: NUA Stock and Computershare

Post by Newaygo »

I am going through a 401k rollover into a traditional IRA and Roth. My equity shares will have been transferred to Computershare by the time I get the mid-December dividend payment. I was instructed by the plan administrator to call back and have the dividends transferred to the traditional IRA. This is not automatic. I thought that Computershare would receive the dividends. I was wrong.

I was also told that the 1099R will be the year 2021 even if Computershare takes until January 2022 to deposit shares into my brokerage IRA. This is a great relief as the Backdoor Roth could be disallowed in 2022.
Topic Author
Oil Boiler
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Re: NUA Stock and Computershare

Post by Oil Boiler »

Thanks Guys!!! This is great information, I'll keep a close watch.
Alan S.
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Re: NUA Stock and Computershare

Post by Alan S. »

I think that most plans will check the "Total distribution" box on the 1099R even with a trailing dividend hitting the account based on the following:

https://retirementlc.com/does-the-recei ... lan-negate

Still better to have the dividend transferred out before year end if possible to reduce the chance of the 1099R being issued with the total distribution box blank.
Topic Author
Oil Boiler
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Re: NUA Stock and Computershare

Post by Oil Boiler »

Thanks Alan, very good link on the topic. The dividend pay date is next week so I'll be checking the account and move to promptly transfer any funds that may show up.
Newaygo
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Re: NUA Stock and Computershare

Post by Newaygo »

After rolling my 401K to a traditional IRA and Roth IRA (zeroed out my 401K) at the end of November, I just received dividends in my 401K account.

I called the plan administrator to have the dividends transferred to the traditional IRA. However, their computer had a portion going to the Roth IRA. My understanding is that all dividends are considered "pre-tax" and all should be going to the Traditional IRA. So I have temporarily stopped the distribution and I am waiting on a call back from the plan administrator. The customer agent was not knowledgeable on the tax nuances.

Could the logic be that a portion of the dividends are related to the Roth so that the earnings should be are part of the Roth?
Freefun
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Re: NUA Stock and Computershare

Post by Freefun »

I’m in the same boat and I’m leaving my shares with computer share
Remember when you wanted what you currently have?
Alan S.
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Re: NUA Stock and Computershare

Post by Alan S. »

Newaygo wrote: Mon Dec 13, 2021 10:16 am After rolling my 401K to a traditional IRA and Roth IRA (zeroed out my 401K) at the end of November, I just received dividends in my 401K account.

I called the plan administrator to have the dividends transferred to the traditional IRA. However, their computer had a portion going to the Roth IRA. My understanding is that all dividends are considered "pre-tax" and all should be going to the Traditional IRA. So I have temporarily stopped the distribution and I am waiting on a call back from the plan administrator. The customer agent was not knowledgeable on the tax nuances.

Could the logic be that a portion of the dividends are related to the Roth so that the earnings should be are part of the Roth?
Their computer is probably following the split you made with your first direct rollovers. But you should be able to override it with a specific request to roll the dividends to your TIRA. However, if you are doing an NUA distribution this year, it is more important to have these dividends rolled out before year end so there is no question that you completed an LSD. You cannot always rely on other PLRs such as the one I linked above.

In short, I would ask them to roll the dividends to your TIRA ASAP, but if that is not possible due to the plan's operating procedures, then let them split the rollover in the same proportion as your first rollover. While you would owe taxes on the Roth rollover portion, my guess is that the amount is quite small.
Topic Author
Oil Boiler
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Re: NUA Stock and Computershare

Post by Oil Boiler »

BigJohn wrote: Tue Nov 30, 2021 1:38 pm
Oil Boiler wrote: Sun Nov 28, 2021 7:33 pm The 401K account is now empty.
One word of caution on this. Depending on timing of share transfer, the ex-dividend date and the payment date, it was possible in my former employers 401k plan to have a dividend hit the account after it looked empty. If not removed by YE, this small balance would negate the NUA treatment since it would not be a total distribution. If this is even a remote possibility, I’d suggest you confirm the zero balance in late December with enough time to get it taken care of if an issue.
Following up here on Big John's excellent advice. The trailing dividends did in fact land in the empty 401K on the dividend payment date and because the account was set up to reinvest the dividends, more stock was purchased. Because I was aware of this possibility, I was able to quickly have the 401K agent sell the funds and transfer the proceeds directly to the Vanguard IRA. This left the 401K at 0 balance on 12/31 and thus the transaction remained a total distribution within the calendar year.
Newaygo
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Re: NUA Stock and Computershare

Post by Newaygo »

by Newaygo » Mon Dec 13, 2021 10:16 am

After rolling my 401K to a traditional IRA and Roth IRA (zeroed out my 401K) at the end of November, I just received dividends in my 401K account.

I called the plan administrator to have the dividends transferred to the traditional IRA. However, their computer had a portion going to the Roth IRA. My understanding is that all dividends are considered "pre-tax" and all should be going to the Traditional IRA. So I have temporarily stopped the distribution and I am waiting on a call back from the plan administrator. The customer agent was not knowledgeable on the tax nuances.
I called back to the plan administrator two days later and again requested my dividends be sent to my traditional IRA. The person said no problem and my 401K was zero by December 31.
BigJohn
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Re: NUA Stock and Computershare

Post by BigJohn »

Well done Oil Boiler and Newaygo! Glad to hear it worked out for both of you.
"The greatest enemy of a good plan is the dream of a perfect plan" - Carl Von Clausewitz
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Re: NUA Stock and Computershare

Post by LadyGeek »

New member Boron1913 has a question which I've moved into a new thread. See: NUA Stock and Computershare - How is cost basis reported?
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