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October 5, 2009

Employer Stock or Employer Securities

Your Guide

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Definition

Employer stocks or employer securities, refers to shares of stock, bonds or debentures issued by a corporation with interest coupons or in registered form.  The corporation must be the plan sponsor (employer that adopts the qualified plan), in order for the security to be treated as ‘employer stocks’ for qualified plan purposes.
Securities of parent or Subsidiary Corporation of the employer corporation can also qualify as employer stock.
The NUA on distributions of employer stocks are taxed at capital gains rate, when the stock is sold.
Cite
IRC § 402(d)(4)(E)
Additional Helpful Information
  • Parent corporation: The term “parent corporation” means any corporation (other than the employer corporation) in an unbroken chain of corporations ending with the employer corporation if, at the time of the granting of the option, each of the corporations other than the employer corporation owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
  • Subsidiary corporation: The term “subsidiary corporation” means any corporation (other than the employer corporation) in an unbroken chain of corporations beginning with the employer corporation if, at the time of the granting of the option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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