NUA Distribution at Lincoln Financial: Step-by-Step Process

Lincoln Financial Group (the brand name for Lincoln National Corporation, NYSE: LNC, headquartered in Radnor, Pennsylvania) administers 401(k), 403(b), and other retirement plans for thousands of employers across the United States. If your employer stock is held in a Lincoln Financial–administered 401(k) plan, this guide covers the specific mechanics of executing an NUA election: how to find your cost basis, what to request when you call, why you must open an outside brokerage account to receive the shares, and how to verify your 1099-R Box 6 after year-end. This is not investment or tax advice for your specific situation.

Lincoln Financial and the NUA process

Lincoln Financial Group operates through several divisions, but for retirement plan participants the relevant business is Lincoln Financial Distributors and Lincoln Financial's retirement plan services unit, which provides recordkeeping, administration, and participant services for defined contribution plans. The primary participant access point is Lincoln Financial's retirement plan portal at lincolnfinancial.com, where you can view account balances, investment allocations, contribution history, and — critically for NUA planning — cost basis information for employer stock positions.

Lincoln Financial administers both 401(k) and 403(b) retirement plans in significant volume, with a meaningful presence in healthcare, educational, and not-for-profit sectors. This creates the most important question to answer before doing anything else: 401(k) plans qualify for NUA under IRC § 402(e)(4); 403(b) and 457(b) plans do not. Many Lincoln Financial participants who work in healthcare or education are enrolled in a 403(b) plan without realizing it. Confirm your plan type before modeling any NUA strategy.

Like Principal Financial Group, T. Rowe Price Workplace Retirement, Nationwide, and John Hancock, Lincoln Financial does not operate a consumer retail brokerage firm in the United States. Lincoln has insurance products, mutual funds, and annuity vehicles, but there is no "Lincoln Financial brokerage account" where you can hold individual shares as a retail investor. For an NUA election, the in-kind employer stock must be transferred via the Depository Trust Company (DTC) network to a taxable brokerage account you establish at a separate firm — Fidelity, Schwab, Merrill Edge, or another DTCC-connected broker. That external DTC transfer takes 3–7 business days and must complete before December 31 of the distribution year to satisfy the lump-sum distribution requirement.

Step 1 — Confirm your plan type is a 401(k)

Lincoln Financial administers both 401(k) and 403(b) plans at scale, serving employers across industries including manufacturing, professional services, healthcare, education, and government. Because the participant portal and distribution processes are similar across plan types, participants sometimes assume they have a 401(k) when they actually hold a 403(b) or 457(b). That assumption, if wrong, permanently forfeits the NUA opportunity.

Under IRC § 402(e)(4), the NUA election applies to "qualified employer plans" — broadly, 401(k) plans, ESOPs, stock bonus plans, and other plans qualifying under IRC §§ 401(a) or 403(a). A 403(b) plan (a tax-sheltered annuity plan) is authorized under IRC § 403(b) and is explicitly excluded from the NUA rules. The same exclusion applies to 457(b) governmental plans.

• Log in to your Lincoln Financial participant portal at lincolnfinancial.com and navigate to your plan summary or account overview. The plan type is typically labeled as "401(k) Plan," "403(b) Plan," "457(b) Plan," "Profit Sharing Plan," or similar.
• Check your employer's benefits enrollment materials or your most recent plan statement. The heading will state the plan type.
• If uncertain, call Lincoln Financial's participant services line and ask directly: "What type of retirement plan do I have — is it a 401(k) under IRC § 401(a) or a 403(b) under IRC § 403(b)?" This is a factual question any representative can answer without specialist knowledge.
• If you work or worked in healthcare, a hospital system, a university, or a not-for-profit organization and your plan is with Lincoln Financial, there is a meaningful probability it is a 403(b) plan. Do not assume your plan qualifies for NUA until you have confirmed the plan type.

Step 2 — Open a taxable brokerage account at an outside firm

Because Lincoln Financial has no retail brokerage, the in-kind employer stock from your NUA election must go to a taxable individual brokerage account at a separate institution. Open this account before calling Lincoln Financial so you have the account number and DTC transfer instructions ready at the time of the call.

• The receiving account must be a taxable individual brokerage account — not an IRA, Roth IRA, rollover IRA, or any other tax-advantaged account. If employer stock reaches an IRA, even briefly, the NUA election is permanently forfeited on those shares under IRC § 402(e)(4)(B).¹ Specify "taxable individual brokerage account" explicitly when describing the account to Lincoln Financial.
• Good receiving brokers: Schwab One individual account (DTC participant # 0164), Fidelity individual taxable account (DTC participant # 0226), Vanguard individual account (DTC participant # 0062), Merrill Edge individual account (DTC participant # 8862), or any other DTCC-connected brokerage. Opening an account takes 10–15 minutes online at most major brokers.
• Have the account number and the receiving broker's 4-digit DTC participant number ready before you call Lincoln Financial. Your receiving broker can provide its DTC participant number via account support or on its website under "transfer instructions."
• If the employer stock is in a privately held company (not publicly traded), contact both Lincoln Financial and the receiving broker in advance. Closely-held shares may not be eligible for standard DTC transfer and may require special arrangements. Confirm the plan document allows in-kind distribution of private shares before proceeding.

Step 3 — Find your employer stock cost basis in the Lincoln Financial portal

The NUA cost basis is the plan's acquisition cost — what the plan paid when employer stock was contributed to your account over the years. This is often far below today's market price for long-tenure employees, which is the source of the NUA benefit.

• Log in to your Lincoln Financial retirement plan portal and navigate to your account detail or investment summary. Look for the employer stock position and any associated "cost basis," "acquisition cost," or "original value" figure.
• Confirm that the figure shown represents the plan's acquisition cost, not the current market value. The plan cost basis for NUA purposes is the price at which shares were allocated to your account through employer contributions — not a mark-to-market or estimated average cost.
• If cost basis information is not clearly displayed in the portal, or if the displayed figure appears estimated: call Lincoln Financial participant services and ask specifically for the "plan cost basis for employer stock for NUA purposes under IRC § 402(e)(4)." Request written confirmation of the cost basis figure before initiating any distribution.
• If you have been in the plan for many years and the plan recordkeeper or administrator has changed at any point (due to an employer switching plan providers, a plan merger, or a Lincoln Financial internal platform migration), ask Lincoln Financial explicitly whether cost basis records are complete and lot-level for all contribution periods. Incomplete basis data will affect the accuracy of your NUA calculation and may require additional verification before executing.

Step 4 — Call Lincoln Financial's participant services line

In-kind employer stock distributions for NUA purposes must be initiated by phone — not through the Lincoln Financial portal self-service distribution flow. The participant services number is available on the Lincoln Financial website under "Contact Us" or on your most recent plan statement. When you reach a representative, ask for a "distribution specialist" or "complex distribution team" — in-kind employer stock transfers are non-standard and should be handled by someone experienced with them. If the initial representative is routing you toward a standard IRA rollover or cash distribution, ask to escalate before proceeding.

Use this specific language when you reach the right representative:

• "I want to take a lump-sum distribution triggered by my separation from service [or age 59½ / disability / participant death — whichever qualifying event applies to your situation]."
• "I want to distribute the employer stock in-kind — as shares transferred to my [broker name] individual taxable brokerage account, not sold. This is a taxable brokerage account, not an IRA."
• "I want to roll the remaining non-stock plan balance over to an IRA at [IRA custodian and account number]."
• "I am electing Net Unrealized Appreciation treatment on the employer stock under IRC § 402(e)(4)."

Using the specific statutory citation, "lump-sum distribution," "in-kind," and "taxable brokerage account" signals to the representative that this is an NUA election requiring specialist processing. Do not proceed with a representative who is routing you toward a standard rollover-everything instruction without acknowledging the in-kind transfer requirement.

Step 5 — Provide the external DTC transfer instructions

Because Lincoln Financial cannot receive in-kind employer stock on its own platform, you must provide the external DTC transfer instructions for the receiving taxable brokerage account. Have the following ready when you call:

• Receiving broker's DTC participant number — the 4-digit DTCC identifier for the receiving brokerage. Schwab: 0164; Fidelity: 0226; Vanguard: 0062; Merrill Edge: 8862. Other brokers can provide their DTC participant number via account support.
• Your account number at the receiving taxable brokerage — the individual (non-IRA) account opened in Step 2.
• Company name, ticker symbol, and number of shares to be transferred in-kind.
• Explicit written instruction that the receiving account is a taxable individual brokerage account, not an IRA or Roth account — this distinction should appear in any written confirmation Lincoln Financial provides.

Lincoln Financial will initiate the DTC transfer from the plan's custodial bank to your outside brokerage. Confirm the expected settlement timeline with the representative — typically 3 to 7 business days — and explicitly flag the December 31 same-year deadline if you are initiating in Q4. Because the transfer must complete at the receiving broker before year-end, build in significant buffer time if executing late in the calendar year.

Step 6 — Get written confirmation of all distribution instructions

Before ending the call, ask Lincoln Financial to provide written confirmation of every instruction — through the plan portal secure messaging, by email, or by mail. The written confirmation should specify:

• That the employer stock is being transferred as shares in-kind to a taxable brokerage account via DTC transfer (not liquidated to cash, not included in an IRA rollover)
• The receiving broker's name, DTC participant number, and your account number at that broker
• That the remaining non-stock plan balance is being rolled over to an IRA (with the receiving IRA custodian and account number)
• The qualifying triggering event for the lump-sum distribution
• Expected completion timelines for both distribution legs

Written confirmation is essential if either leg is processed incorrectly — employer stock liquidated to cash, shares routed to the IRA instead of the taxable account, or the December 31 deadline missed. It also serves as documentation if Lincoln Financial issues an incorrect 1099-R that requires correction before your tax filing.

Step 7 — Complete both legs before December 31

The lump-sum distribution requirement means the entire plan balance must leave the plan within a single calendar year. Both legs must complete before December 31:

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

External DTC transfers take 3–7 business days to settle at the receiving broker. IRA rollovers to external custodians typically take 3–10 business days. If you are initiating in November or December, explicitly raise the December 31 year-end deadline with Lincoln Financial and request confirmation that both legs will complete before year-end. Lincoln Financial has no control over settlement timelines at the receiving brokerage — build in at least 10 business days of buffer before the end of the calendar year.

After both legs settle, verify completion: your Lincoln Financial plan balance should reach $0, shares should appear in your external taxable brokerage account, and the rollover should be visible in your IRA. If the DTC transfer has not appeared within the expected window, follow up with both Lincoln Financial and the receiving broker before December 31.

Step 8 — Review your 1099-R from Lincoln Financial

Lincoln Financial will issue a Form 1099-R in January of the year following the distribution. For an NUA election, verify these boxes are populated correctly:²

If Box 6 is missing or Box 2a equals Box 1 (meaning the full fair market value is taxed as ordinary income), the distribution was processed without recognizing the NUA amount. Do not file your return with an incorrect 1099-R. Contact Lincoln Financial's plan services team to request a corrected form. See the NUA tax reporting guide for how to report the distribution on Schedule D in both the distribution year and the sale year.

403(b) plan-type trap: the most common Lincoln Financial NUA mistake

Among the custodians in this series, Lincoln Financial shares with John Hancock the highest risk of plan-type confusion: the company is a substantial provider of both 401(k) and 403(b) retirement plans, and 403(b) plans do not qualify for NUA treatment under IRC § 402(e)(4).

Lincoln Financial serves a wide range of employer types, including many in sectors that frequently use 403(b) plans instead of 401(k) plans:

• Hospitals and healthcare systems (often 403(b) or 403(b)(7))
• Universities and educational institutions (often 403(b))
• Not-for-profit organizations (often 403(b))
• Government entities (often 457(b), which also does not qualify for NUA)
• For-profit employers of all sizes (typically 401(k))

If you work or worked for any organization in these sectors and your plan is with Lincoln Financial, confirm your plan type before doing any NUA modeling. If your plan is a 403(b) or 457(b), NUA is unavailable. You may still hold significant employer stock, but the tax planning approach is entirely different. Confirm plan type in the Lincoln Financial portal or by calling participant services before taking any action.

Common Lincoln Financial–specific pitfalls

Assuming Lincoln Financial has a consumer brokerage account

Lincoln Financial offers a range of financial products including annuities, life insurance, and mutual fund investment products, and has investment management and financial planning arms. This can create the impression that Lincoln Financial has a retail brokerage where plan participants can hold individual stocks in a taxable account. It does not. Lincoln Financial Retirement Plan Services is a recordkeeping and administration business, not a consumer brokerage firm. If you call Lincoln Financial and ask to "transfer the shares to a Lincoln Financial brokerage account," there is no such product available for the in-kind stock receipt. You must establish a taxable individual brokerage account at a separate firm — Fidelity, Schwab, or another DTCC-connected broker — before initiating the NUA distribution.

External DTC transfer timeline vs. December 31 deadline

Because in-kind employer stock must travel through the DTC network to an outside brokerage, the settlement time is longer than an internal Fidelity-to-Fidelity or Schwab-to-Schwab transfer. The 3–7 business day DTC settlement window in late December can push the share arrival into January if you initiate too late. A transfer that settles January 2 instead of December 31 means the lump-sum distribution spans two calendar years — a potential disqualification of the entire NUA election for those shares. If executing in Q4, initiate the process in early November at the latest to build in adequate buffer. Do not wait until mid-December to call.

Employer stock accidentally liquidated at distribution

Lincoln Financial's default distribution process for participant-initiated requests may route plan assets through a cash liquidation step. If a representative processes the request as a standard IRA rollover of all assets without correctly flagging the in-kind employer stock transfer requirement, the employer stock will be sold to cash — and once liquidated, the NUA opportunity on those shares is permanently lost. Before any distribution form is confirmed or signed, verify explicitly that the employer stock instruction reads "in-kind transfer of shares to taxable brokerage account" — not "liquidate and transfer" or "rollover." Check the receiving brokerage within 5–7 business days after the expected settlement date to confirm shares — not a cash wire — arrived.

Employer stock included in the IRA rollover leg

A common processing error at any custodian: when the non-stock plan balance is rolled to an IRA, employer stock is inadvertently bundled into the rollover instruction. This can happen if the distribution system defaults to "rollover everything" and the in-kind stock transfer is not flagged separately. Any employer stock that ends up in an IRA permanently loses NUA treatment for those shares, with no recourse.¹ After both legs settle, verify that the IRA received only non-employer-stock assets, and that the taxable brokerage account received actual shares.

Annuity or insurance product exposure in the employer stock account

Some Lincoln Financial retirement plans include annuity-based investment options or group annuity contracts alongside mutual fund and employer stock options. These annuity products within the plan are not employer stock and do not qualify for NUA. The NUA election applies exclusively to employer securities — stock of the company that employs (or employed) you, contributed to the plan as employer matching contributions, profit-sharing allocations, or ESOP contributions. Confirm that what you are treating as "employer stock" is actual shares of your employer's company, not an investment fund or annuity contract that happens to have "employer" in the name.

Cost basis records incomplete after plan provider changes

Some employers have changed retirement plan providers multiple times over the years, with plan assets migrating from one recordkeeper to another. If your plan was previously administered by a different recordkeeper before Lincoln Financial, or if Lincoln Financial has migrated its own platform at any point, cost basis records for employer stock contributions made prior to the migration may be estimated rather than exact, or incomplete for the earliest contribution years. Ask Lincoln Financial explicitly: "Are the cost basis records for my employer stock complete and lot-level for all years of plan participation, including any periods before the current recordkeeping system?" If there are gaps, a fee-only NUA advisor can help reconstruct basis estimates from historic payroll and plan records.

After the transfer: next steps

Once employer stock appears as shares in your external taxable brokerage account:

• The NUA amount automatically qualifies as long-term capital gains when the shares are eventually sold, regardless of how long you hold them after distribution. Post-distribution appreciation above the NUA amount is short-term if sold within one year of distribution, long-term after one year. In most situations, holding at least one year after distribution converts all gains to long-term rates.
• Review your post-NUA diversification strategy — tranche selling to stay in the 15% LTCG bracket, direct charitable donation, DAF/CRT, and holding for estate step-up are all worth modeling before selling a large concentrated position.
• The Box 6 NUA amount is reported on Schedule D as a deemed long-term capital gain in the year of sale, not the year of distribution. See the NUA tax reporting guide for the full mechanics. An NUA-specialist tax advisor should review both the distribution year return and the first sale year return.
• Other custodian guides in this series: Fidelity · Empower · Vanguard · Schwab · Merrill Lynch · Principal · T. Rowe Price · Nationwide · John Hancock.