Topic overview

Many 401(k) plans allow participants to invest in stock of the sponsoring employer. This opens the door to a potential tax-savings strategy associated with the net unrealized appreciation (NUA) in the stock (the difference between the stock’s value when it was purchased and its market value when distributed from the plan). To qualify for NUA tax treatment, participants must withdraw the stock “in kind” (as shares) as part of a lump-sum distribution, payable within one taxable year, and transfer it to a taxable brokerage account.

Use these tools to see if your clients could realize tax savings as a result of using an NUA tax strategy.
 

Is this relevant to my clients?

Plan participants could benefit if they are eligible to receive lump-sum distributions from their workplace retirement plans where there is appreciated employer stock, particularly:

• Workers preparing to retire and seeking ways to reduce taxes on their qualified plan employer stock
• Investors who are terminating employment and planning to roll over employer stock into an IRA