- quote -

Who knows? Ask them! There is no apparent adavantage to an active particpant in
the plan because any withdrawal, and that is what it would be, would be taxed
and penalized for anyone under 59.

- quote -

in the plan. Any securities in the plan are owned by the plan not the
participants.

They are shown as being in your account. Because that is the way they keep
track of what your particular account is earning.

At some point you might be able to withdraw the actual secuirites from the plan
and have them registered in your name. But that would be a fully taxable
withdrawal with penalties if under age 59 (55 in some cases of a 401K).

Thanks for the post in reply to my question. Could you explain this a bit further? The company is giving the choice to take the dividend on a quarterly basis. I wonder why exactly they even provide that option if it does not offer any advantage other than having access to some cash now rather than later. You mentioned that the plan owns the stock and not me. I didn't quite follow that. Can you be more explicit? Thank you

vna51 wrote:

- quote -

can elect to take the dividends on the company stock alone on a
quarterly basis, i.e they will distribute the dividends quarterly. My
question is -- will this dividend be taxed at the lower rate or at the
ordinary income tax rate? Obviously, I would like to take the dividend
now if it is taxed at lower rate, but that sounds too good to be true.
Any opinions? Thank you.


Those types of dividends don't qualify for the reduced rates.

-Tad

- quote -

tax rate. The only exception are Roth withdrawals at retirement age.

In the case you describe, the dividend is actually paid to the retirement plan
and the retirement plan is paying it to you.

There is no way the company can pay the dividend directly to you since you
don't own the stock, the plan does.

I have two different 401k plans-- one from current employer and another from previous employer. Both of them offer a choice by which I can elect to take the dividends on the company stock alone on a quarterly basis, i.e they will distribute the dividends quarterly. My question is -- will this dividend be taxed at the lower rate or at the ordinary income tax rate? Obviously, I would like to take the dividend now if it is taxed at lower rate, but that sounds too good to be true. Any opinions? Thank you.