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Author: tjfields Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 124931  
Subject: Retirement plan distribution Date: 1/16/2002 5:29 PM
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I have a few questions regarding a retirement plan distribution I received after I left a job. First, the story. Then, the questions.

Approximately 3 months after leaving a job, I (to my great surprise) received a company stock certificate as a "lump sum payment" of a portion of my retirement account. In the letter, it explicitly states (in bold, even) that "Unlike a distribution from a 'qualified' retirement plan, distributions from this plan may not be rolled over to another plan." This plan was entirely funded via employer match, and contained nothing but company stock.

The total value of the plan at the time of "reckoning" was $6105.45, then they witheld federal (approximately 27%) and state taxes from this amount. The remainder was used (evidently) to purchase 359 shares at $11.68, which was subsequently sent to me.

The letter ends with "The amount of this disbursement will be reported to the IRS and you will receive a 2001 W2 from [Company Plan Administrator] in January of 2002"

Am I correct in interpreting this whole shenanigans as follows?

1) There was a cash liquidation of this account, which was (evidently) W2 income and taxed at that rate.
2) What remained after these taxes was used to purchase those 359 shares.

If so, it seems to me that my cost basis in this is stock $11.68. However, the monkey wrench in this is that the original source of funds in the account was an employer match and this is clouding my thinking into thinking the cost basis should be zero.

Anyone with any insight?


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