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Worthless Stock For Corporate Employees

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What Is It

It's important that our Navient clients know about worthless stock. First, let's start with the basics — What is it? As the name implies, worthless stock has no securities market value. A company's stock becomes worthless when the company ceases operations or liquidates its assets. A company's stock is not worthless if the stock is still trading, even if only for pennies. Taxpayers may deduct the loss from totally worthless stock, but no loss deduction is allowed for a mere decrease in the value of a security. Taxpayers who take a loss deduction for worthless stock must be prepared to prove to the IRS that the shares are really worthless. IRS Publication 550 includes more information about recognizing capital gains and losses.

Tip:  Writing off worthless securities can be extremely complex. If your position is substantial, you might consider consulting a tax professional to ensure you don't make any missteps.

Caution:  A company that is in bankruptcy may not be defunct. Its stock may still be trading and, in fact, may retain some or all of its value.

When Can A Taxpayer Deduct A Loss For Stock That Is Worthless?

The Company Liquidates Its Assets and Issues a 1099-DIV

When a company liquidates, shareholders may receive a Form 1099-DIV at the end of the year that shows the liquidating distribution made to them during that year. For tax purposes, shareholders should treat this distribution as if they had sold the stock. The date of sale is the date of the distribution. To calculate any loss (short-term or long-term), shareholders should subtract their cost basis in the stock from the amount of the distribution.

Obtain Documentation That the Stock Was Worthless

If the company does not liquidate and you do not receive a 1099-DIV--and it's highly likely you won't--stockholders may still take a loss deduction for worthless stock if they obtain proof acceptable to the IRS that the stock had no value at some point in time during the year in which the deduction is taken. Examples of such proof include a letter from the company that states it has shut down and there are no assets to pay shareholders or a letter from a broker that states the stock has been delisted and no longer has value. On his or her tax return, the shareholder should state the date of sale as December 31 of the year in which the stock became worthless. The sale price is 0 or 'worthless.'

Caution:  A shareholder may deduct a loss for worthless stock only in the tax year the stock became worthless. It is essential that the shareholder declares (and can prove) this event in the correct year. However, if necessary, the shareholder can file an amended return (Form 1040X). Taxpayers have seven years to do so, unlike the usual three years for most Form 1040X filings.

Abandoning a Stock

We'd also like our Navient clients to know that you may also be able to claim a stock as worthless if you abandoned it after March 12, 2008. To do so, you must relinquish all rights to it and receive nothing in return; however, these Navient employees should consult a tax professional to ensure that the transaction is not considered a sale, exchange, contribution to capital, dividend, or gift, which could change the tax implications.

What If Shares That Are Declared Worthless Regain Value?

If a loss deduction is taken for worthless stock and that stock regains value, the taxpayer need not amend his or her tax return—he or she simply uses the worthless date as the acquisition date and 0 as the cost basis.

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How Can You Find Out If A Stock Is Worthless?

Many of our Navient clients may be wondering how you can tell if a stock is worthless. Several stock-tracing firms research obsolete securities to determine whether they have any current value in the financial markets. These firms typically charge anywhere from $30 to $100 for each company they research. Discounts may be available if a shareholder needs a number of certificates researched, or he or she might receive a refund if the firm is unable to find any information. We suggest these Navient clients find a stock-tracing firm, look in the telephone directory, contact the stockbroker, or search the Internet.

What If A Stock Is Worth Almost Nothing?

If a stock is no longer traded but is not formally defunct, there's another (though more complicated) possibility for milking tax value from an investing mistake. You could sell the shares in an arm's length transaction (to a willing, unrelated buyer for fair value). Be sure that ownership of the shares transfers to the new owner. You also could check with your brokerage firm to see whether it purchases virtually worthless shares from customers for a nominal amount in order to supply them with a trade confirmation for tax purposes.

Antique Stock Certificates May Have Collector Value

There is a market for antique stock certificates, so for any Navient employees who have certificates of stock that turn out to be worthless, don't throw them away. The hobby of collecting old stocks (and bonds) is called scripophily. Most worthless stock over 70 years old has some collector value. Many of the firms that trace old stock certificates also are aware of whatever potential collector value a certificate might have.

What is the 401(k) plan offered by Navient?

Navient offers a 401(k) plan that allows employees to save for retirement through pre-tax contributions, providing a tax-advantaged way to build their savings.

Does Navient provide a company match for the 401(k) contributions?

Yes, Navient offers a company match for employee contributions to the 401(k) plan, enhancing the overall retirement savings for employees.

How can I enroll in Navient's 401(k) plan?

Employees can enroll in Navient's 401(k) plan through the company’s benefits portal during the enrollment period or after a qualifying life event.

What are the contribution limits for Navient's 401(k) plan?

The contribution limits for Navient's 401(k) plan are set according to IRS guidelines, which may change annually. Employees should check the current limits for the specific year.

Can I change my contribution percentage to Navient's 401(k) plan?

Yes, employees can change their contribution percentage to Navient's 401(k) plan at any time through the benefits portal.

What investment options are available in Navient's 401(k) plan?

Navient's 401(k) plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles to suit different risk tolerances.

When can I start withdrawing from my Navient 401(k) plan?

Employees can typically start withdrawing from their Navient 401(k) plan at age 59½, but specific rules may apply based on the plan's provisions.

Does Navient allow loans against the 401(k) plan?

Yes, Navient may allow employees to take loans against their 401(k) plan, subject to specific terms and conditions outlined in the plan documents.

What happens to my Navient 401(k) if I leave the company?

If you leave Navient, you can choose to roll over your 401(k) balance to another retirement account, cash out, or leave the funds in the plan if permitted.

Are there any fees associated with Navient's 401(k) plan?

Yes, there may be administrative and investment fees associated with Navient's 401(k) plan, which are disclosed in the plan documents.

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
Name of Pension Plan: Navient Pension Plan Details: The Navient Pension Plan provides a defined benefit pension to eligible employees. The plan offers a monthly benefit upon retirement based on years of service and salary history. Years of Service and Age Qualification: Employees are eligible for the pension plan after reaching 5 years of service. Normal retirement age is 65, but early retirement options may be available starting at age 55 with reduced benefits. Pension Formula: The formula for calculating benefits is based on a percentage of the employee's average salary over their highest earning years multiplied by the number of years of service. Pension Plan Terminology: Defined Benefit Plan: A pension plan where retirement benefits are predetermined based on salary and years of service. Normal Retirement Age: The age at which an employee can retire with full pension benefits. Early Retirement: Option to retire before normal retirement age with adjusted benefits. Name of 401(k) Plan: Navient 401(k) Plan Details: The Navient 401(k) Plan is a defined contribution plan where employees can make pre-tax contributions. The company may offer a matching contribution up to a certain percentage of the employee’s salary. Eligibility: Employees are eligible to participate in the 401(k) plan upon hire. There is no minimum service requirement to begin contributing.
In 2023, Navient announced a significant restructuring plan, including layoffs as part of its strategy to streamline operations and reduce costs. This move aligns with the company's shift towards focusing more on its core business areas and reducing overhead expenses. It is essential to address this news due to the current economic climate, which is marked by fluctuating market conditions and evolving investment strategies. The restructuring may impact employees' job security and future career prospects, making it crucial to stay informed about these changes.
Stock Options and RSUs Available: For Navient employees, stock options and RSUs are typically part of the company's compensation package, particularly for senior executives and key employees. Stock options (SO) and RSUs are designed to align employee interests with shareholder interests by providing potential financial rewards based on the company's stock performance.
Healthcare Benefits Overview: Navient provides a comprehensive benefits package that includes medical, dental, and vision insurance. They offer several plan options to suit different needs, including HMO, PPO, and high-deductible health plans (HDHPs). Acronyms and Terms: HMO (Health Maintenance Organization), PPO (Preferred Provider Organization), HDHP (High-Deductible Health Plan), FSA (Flexible Spending Account), HSA (Health Savings Account).
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