Employer Stock (NUA) Rollover Calculator

When leaving an employer or retiring, most employees default to rolling their entire 401(k) tax-deferred into a Traditional IRA. However, if your 401(k) holds highly appreciated company stock, rolling that stock into an IRA can be a costly mistake.

What is Net Unrealized Appreciation (NUA)?

Net Unrealized Appreciation (NUA) is the difference between the original cost basis of employer stock inside your 401(k) and its current market value. Under Internal Revenue Code Section 402(e)(4), eligible participants can distribute company stock in-kind to a regular taxable brokerage account while paying ordinary income tax only on the original cost basis.

Pre-Distribution vs. Post-Distribution Appreciation

IRC § 402(e)(4) capital gains tax rules apply strictly to the unrealized growth accumulated inside the plan prior to distribution. Any additional stock growth that occurs after the shares are transferred into your taxable brokerage account is taxed under standard capital gains rules (short-term gains if sold within 12 months of distribution, long-term gains if held for more than 12 months).

The 3 Mandatory Qualification Requirements

To take advantage of NUA tax treatment, the IRS strictly enforces three requirements:

1. Lump-Sum Distribution: The entire balance of your qualified plan (401(k), profit-sharing, etc.) must be distributed within a single calendar year. Non-stock assets can be rolled over tax-free into a Traditional IRA.
2. Triggering Event: The distribution must take place following one of four qualifying events:
   • Separation from service (leaving your employer)
   • Attaining age 59½
   • Total disability
   • Death
3. In-Kind Distribution: The employer shares must be distributed directly "in-kind" into a non-retirement taxable brokerage account. If shares are sold to cash inside the 401(k) prior to distribution, NUA eligibility is permanently lost.

The Basis-to-Value Heuristic

NUA is not universally beneficial. Because ordinary tax is paid immediately on the cost basis upon distribution, NUA is generally most advantageous when the cost basis represents a small percentage of total market value (typically 25% to 30% or less). If your cost basis is high relative to total value, tax deferral inside an IRA may yield better long-term wealth.

Note: The 25%–30% basis benchmark is a general financial planning rule of thumb, not a statutory tax threshold. The optimal choice between NUA and IRA rollover depends on your age, expected retirement time horizon, estate planning goals, and future tax brackets.