NUA Distribution Through Alight Solutions: Step-by-Step Process

Alight Solutions administers 401(k) benefits for many of the largest employers in the United States — industrial manufacturers, aerospace companies, pharmaceutical firms, and financial services corporations where employees often accumulate decades of employer stock at a very low cost basis. If your 401(k) is administered through Alight (or its predecessors Hewitt Associates or Aon Hewitt), here's exactly how the NUA election works: how to find your cost basis, what to request when you call, where the shares go (a critical difference from Fidelity and Schwab), and what your 1099-R Box 6 must show. This is not investment or tax advice for your specific situation.

Who uses Alight-administered plans

Alight Solutions (formerly Hewitt Associates, then Aon Hewitt following Aon's 2012 acquisition, and Alight Solutions after the 2017 spinoff) is one of the largest benefit administrators in the United States, primarily serving large and mid-large employers. Their client roster has historically included major aerospace and defense companies, industrial manufacturers, pharmaceutical companies, and utilities — the kinds of employers where employees work for 20 to 35 years and accumulate significant employer stock through company contributions and ESOP-style matching programs.

If your employer's 401(k) is administered by Alight, you may not see the "Alight" name prominently on your benefits portal. Alight provides white-labeled benefits platforms under employer-branded names. You might access your account through a portal called "Your Benefits Resources," "HR Direct," "Benefits Central," or a custom portal at an employer-specific URL. The service center phone number in your benefits materials is the one to call — not a general Alight public line.

Alight-administered plans are common at long-tenure industrial employers. Employees at these companies who have accumulated employer stock over decades often have the exact NUA profile the strategy was designed for: a very low cost basis relative to current value, a large position relative to total wealth, and a one-time separation-from-service qualifying event at retirement. The NUA opportunity in these situations can be $50,000 to $300,000+ in lifetime federal tax savings.

No retail brokerage: the critical difference

This is the most important operational fact before you begin: Alight Solutions does not operate a consumer retail brokerage. Alight is a benefits administration firm — it manages payroll, health benefits, and retirement plan recordkeeping — but it does not have a taxable brokerage account product that participants can open to receive in-kind stock transfers.

This matters because the NUA election requires in-kind transfer of employer shares to a taxable account. At Fidelity, you open a taxable Fidelity account and shares move overnight within the same institution. At Schwab, the same internal transfer is available. At Alight, you cannot do this. The shares must travel via the DTC (Depository Trust Company) network to a taxable account you open at an outside brokerage — Schwab, Fidelity, Vanguard, TD Ameritrade, or any other firm that accepts external DTC transfers.

External DTC transfers typically take 3 to 7 business days to settle. This settlement window, combined with the December 31 same-year lump-sum deadline, requires significantly more advance planning than at Fidelity or Schwab. Open your external taxable brokerage account before you call Alight's service center.

Step 1 — Open a taxable brokerage account at an outside firm

Do this first, before calling the service center. You need a taxable individual brokerage account — not an IRA of any type — at a firm that accepts DTC transfers of publicly traded securities. The account must exist and be funded (even with $0) before you can provide the transfer-in instructions.

• Good choices: Schwab One Individual account, Fidelity individual taxable account, Vanguard Brokerage Account, or any DTCC-connected retail brokerage.
• Opening takes 10–15 minutes online. Have the resulting account number and the broker's DTC participant number ready before your service center call. Common DTC participant numbers: Schwab 0164, Fidelity 0226, Vanguard 0062. Other brokers can provide their DTC number via support or their website.
• Do not open an IRA or Roth IRA as the receiving account. If employer stock from the in-kind transfer lands in an IRA — even accidentally, even briefly — the NUA election for those shares is permanently destroyed. Specify on every form that the receiving account is a taxable individual brokerage account.

Step 2 — Find your cost basis in the Alight benefits portal

The cost basis for NUA purposes is the plan's acquisition cost — the price the plan paid when it acquired the employer shares on your behalf through company contributions, employer matching, or profit-sharing allocations. This is not the current market price, and it is not the cost basis that would appear in a standard brokerage statement. For employees who have accumulated employer stock over 20 to 30 years, the plan acquisition cost is often a small fraction of today's market value — which is precisely what creates NUA savings.

• Log in to your employer's Alight-powered benefits portal (whatever brand name it carries at your company). Navigate to your 401(k) account summary and locate the employer stock position.
• Look for a "cost basis," "plan cost," or "average cost per share" figure. If it is shown, confirm it represents the plan's acquisition cost — not the current market price and not an approximation.
• If cost basis is not displayed in the portal, or if you are unsure whether the figure is the plan acquisition cost versus a market-based estimate, call the service center before initiating any distribution and ask specifically: "What is the plan cost basis per share of [company name] employer stock for NUA purposes under IRC § 402(e)(4)? I need this in writing before I proceed."
• Request written confirmation of the cost basis — via secure message, portal export, or mailed statement — before taking any distribution step. The cost basis is the foundation of your entire NUA calculation. An incorrect cost basis could mean under- or over-paying the distribution-year tax, which cannot be undone after the shares transfer.

Step 3 — Call your employer's HR/Benefits Service Center

In-kind distributions must be initiated by phone — not through the portal's online distribution flow. The number to call is your employer's dedicated HR or Benefits Service Center, shown on your benefits portal under "Contact Us" or on your plan statement. Because Alight white-labels its platform for each employer, you are calling a line specific to your employer's plan — not a generic Alight public number.

When you reach a participant services representative, use the following precise language:

• "I want to take a lump-sum distribution triggered by my separation from service [or age 59½ / disability / death of participant — whichever applies]."
• "I want to distribute the employer stock in-kind — transferring shares directly to my [broker name] taxable individual brokerage account without selling them. This is a taxable account, not an IRA."
• "I want to roll the remaining non-stock plan balance over to an IRA."
• "I am electing Net Unrealized Appreciation treatment on the employer stock under IRC § 402(e)(4)."

These specific phrases — "lump-sum distribution," "in-kind," "NUA," "IRC § 402(e)(4)," and the explicit statement that the receiving account is a taxable account — signal that this is a non-standard transaction. Many service center representatives handle standard rollovers and cash distributions daily but have limited experience with NUA elections. If the representative cannot confirm that they can process an in-kind transfer for NUA purposes, ask to be transferred to a "distribution specialist" or "complex distribution team" before providing any instructions.

Step 4 — Provide external DTC transfer instructions

Because Alight has no retail brokerage, all in-kind transfers require you to provide the external transfer routing instructions. Have the following ready when you call:

• Receiving broker's DTC participant number — the 4-digit identifier for the receiving brokerage at the Depository Trust Company clearing network (Schwab: 0164, Fidelity: 0226, Vanguard: 0062; other brokers can provide their own).
• Your taxable account number at the receiving brokerage.
• Company name, ticker symbol, and share count of the employer stock being transferred.
• Explicit statement that the receiving account is a taxable individual brokerage account, not an IRA.

The service center representative will use these instructions to initiate an outbound DTC transfer from the plan's custodian bank to your receiving brokerage. Confirm the expected settlement timeline on the call — typically 3 to 7 business days. If you are distributing near year-end, see the December 31 deadline section below.

Step 5 — Get confirmation in writing

Before ending the call, ask the representative to confirm all distribution instructions in writing — through the portal's secure messaging system, by email, or by mailed statement. The written confirmation should specify:

• That the employer stock is being transferred in-kind (as shares, not cash) via DTC to a taxable brokerage account
• The receiving broker name, DTC participant number, and your account number
• That the remaining plan balance is being rolled to your IRA (specify the receiving IRA institution and account)
• The qualifying event (separation from service / age 59½ / disability / death)
• The expected completion timeline for both legs

Written confirmation protects you if the distribution is processed incorrectly. Employer stock liquidated instead of transferred in-kind, or stock accidentally included in the IRA rollover leg, are the two most damaging errors — both permanently disqualify NUA treatment for the affected shares. A paper record creates a basis for requesting correction before the tax year closes.

Step 6 — Complete both legs before December 31

The lump-sum distribution requirement means the entire plan balance must exit the plan within a single calendar year. Both the in-kind stock transfer and the IRA rollover must settle before December 31 of the distribution year:

• The in-kind employer stock DTC transfer to your external taxable brokerage account
• The IRA rollover of the remaining plan assets to your receiving IRA custodian

The external DTC transfer through Alight typically takes 3 to 7 business days after the service center processes the request, plus additional time for the receiving broker to post the shares. The IRA rollover leg typically takes 3 to 10 business days. If you are distributing in November or December, tell the service center representative explicitly that you have a December 31 same-year deadline and ask them to confirm that both legs will settle in time.

Do not initiate an Alight NUA distribution later than early to mid-November if you want to be certain of completion before December 31. If you are targeting a specific tax year, beginning the process in Q2 or Q3 provides the most comfortable margin and allows time to resolve any service center or DTC complications without deadline pressure.

After both transfers initiate, verify completion at both ends: your plan balance with Alight (or the employer portal) should reach $0, and the employer stock shares should appear in your external taxable brokerage account as shares — not as a cash deposit. Follow up with both institutions if completion is not confirmed within the expected window.

Step 7 — Review your 1099-R

Alight will issue a Form 1099-R in January of the year following the distribution. For an NUA election, the 1099-R must show the following:¹

If Box 2a equals Box 1 (meaning the full market value is reported as ordinary income), Alight has processed the distribution without recognizing the NUA amount — the in-kind transfer may have been treated as a cash distribution or the recordkeeper did not properly flag the Box 6 NUA election. Do not file your tax return with an incorrect 1099-R. Contact Alight's service center and request a corrected form. If the error is not resolved before the filing deadline, consult a tax advisor about filing for an extension while you pursue the correction.

Common Alight-specific pitfalls

Employer-branded portal obscures who the recordkeeper is

Because Alight white-labels its platform, participants often don't know their plan is administered by Alight until they call the service center. If you search online for distribution guidance and look for "Fidelity NUA" or "Schwab NUA" instructions, you may find custodian-specific guidance that doesn't apply. Confirm that the relevant guide is for Alight (or a non-brokerage administrator) before following any specific steps about where shares land. The no-retail-brokerage constraint means instructions written for Fidelity or Schwab do not apply — you will not be able to keep shares at "the same institution."

Assuming the in-kind transfer can be done online

The Alight-powered portal may allow participants to initiate standard distributions, hardship withdrawals, and basic rollovers through an online workflow. NUA elections — which require in-kind stock transfer to a taxable account — are not part of the standard online distribution menu at Alight-administered plans. Attempting to initiate the distribution through the portal's self-service tools risks either a cash distribution (liquidating the employer stock) or a full IRA rollover, both of which permanently eliminate the NUA opportunity for those shares. The phone call with a distribution specialist is not optional.

Legacy Hewitt/Aon Hewitt cost basis data gaps

Alight's platform incorporates plan history from Hewitt Associates (pre-2012) and Aon Hewitt (2012–2017). Plans migrated across three platform generations during that period. For long-tenure employees — those who have been in the plan for 15 or more years — cost basis records from the pre-Alight era may be incomplete, aggregated at the annual level rather than the lot level, or reconstructed using estimates rather than actual transaction data. If you have accumulated employer stock over more than one platform generation, verify explicitly with the service center that the cost basis records are complete and include all years of contribution history. An understated basis overstates your NUA benefit on paper but understates your distribution-year income — a mismatch that will not be caught until you file, and cannot be corrected without a 1099-R amendment.

External DTC transfer settlement delay causes missed year-end deadline

Because shares must travel via external DTC transfer rather than an internal custodian move, the settlement window is longer than participants accustomed to Fidelity or Schwab expect. A DTC transfer initiated in the second half of December has a meaningful risk of settling in January — pushing the employer stock leg of the lump-sum outside the distribution calendar year and technically disqualifying the NUA election. If you are targeting a specific tax year, initiate no later than early November to allow 6 to 8 weeks of settlement margin for both the DTC transfer and the IRA rollover leg.

Employer stock accidentally liquidated to cash

Alight's distribution workflow, if not precisely coded for in-kind transfer, may default to liquidating the employer stock position to cash and sending proceeds via direct rollover to an IRA. This is the standard path for all other assets in the plan — and it is catastrophic for NUA. Once the stock is sold inside the plan, the NUA election is gone permanently: all proceeds become ordinary income when eventually distributed from the IRA. Confirm in writing before the distribution processes that the employer stock is being transferred as shares, and verify by checking the receiving taxable brokerage account for shares (not a cash deposit) within the expected settlement window.

Employer stock included in the IRA rollover leg

When Alight processes the two-part distribution — in-kind stock to your taxable account, remaining cash/funds to an IRA — there is a risk of the employer stock being swept into the IRA rollover if the instructions are not precisely specified. Even a small number of employer shares landing in the IRA permanently forfeits NUA treatment for those shares. After settlement, verify that your IRA received only non-stock plan assets (cash, mutual funds, or bond holdings), and that no employer stock appears in the IRA balance.

Worked example: long-tenure industrial manufacturer

Raymond retired at 62 after 31 years at a large Midwestern manufacturer. His 401(k) is administered by Alight through the company's HR portal. The plan holds 14,200 shares of company stock.

NUA path: Raymond elects NUA. In Year 1 he recognizes $39,000 as ordinary income (cost basis) — taxed at 12% on his retirement income profile, costing roughly $4,680. The $741,000 NUA appreciation is not income yet; it sits in his Schwab taxable account as shares. When he sells the shares over the following 5 years, the NUA amount qualifies as long-term capital gains at 15% federal — a tax of approximately $111,150 on the NUA portion. Total federal tax on the employer stock: ~$115,830.

IRA rollover path: If Raymond rolled all $780,000 to an IRA, each dollar distributed as an RMD or withdrawal is ordinary income. At an effective rate of 22% (a conservative estimate given the $410,000 IRA rollover compounding alongside the employer stock), $780,000 of ordinary income over time costs approximately $171,600. Total federal tax: ~$171,600.

Estimated NUA savings: ~$55,770 federal — and this understates the benefit if Raymond's bracket rises with Social Security and RMDs later (which would make the ordinary income comparison even worse), or if his estate plans to hold the shares until death (heirs get a step-up on post-distribution appreciation, while only the NUA layer is treated as IRD).

The Alight mechanics for Raymond: He opened a Schwab Individual taxable account before calling. On the call, he provided Schwab's DTC number (0164) and his account number. He initiated in mid-October to allow ample time before December 31. He confirmed in writing that the 14,200 shares would transfer as shares — not cash — and that the $410,000 IRA rollover was going to a separate IRA at Schwab. He verified settlement in November. In January, his 1099-R showed Box 1 $780,000, Box 2a $39,000, Box 6 $741,000. He filed Schedule D in the year he sold the shares, reporting $741,000 as a deemed long-term capital gain.

After the transfer: next steps

• The NUA amount automatically qualifies as long-term capital gains when sold, regardless of how long you hold the shares after distribution. Post-distribution appreciation above the NUA amount is short-term if sold within one year of the distribution date; long-term after one year. Most situations favor holding at least one year to qualify post-distribution gains for long-term rates as well.
• Review your post-NUA diversification strategy — tranche selling, direct charitable donation, 0% LTCG bracket harvesting, and holding for estate step-up are all worth modeling before selling.
• The Box 6 NUA amount is reported on Schedule D as a deemed long-term gain in the year of sale, not the year of distribution. See the NUA tax reporting guide for the mechanics. An NUA-specialist tax advisor should review the return for both the distribution year and the first sale year.
• Other custodian guides: Fidelity · Empower · Vanguard · Schwab · Merrill Lynch · Principal · T. Rowe Price · Nationwide · John Hancock · Voya.