NUA Strategy for Manufacturing and Industrial Employees

Long-tenure employees at GE, Boeing, 3M, Caterpillar, Honeywell, and similar manufacturers are natural NUA candidates: 25–35-year careers with employer stock accumulated at prices from the 1980s and 1990s produce cost-basis-to-market-value ratios of 8:1 to 20:1 — the range where NUA can save $100,000 to $300,000 in lifetime taxes versus rolling to an IRA. But manufacturing employees face two layers of complexity that energy or telecom employees rarely encounter to the same degree: corporate spin-offs that split a single stock (and its cost basis) into two or three separate companies, and pension income that pre-fills the ordinary income brackets before the NUA cost basis distribution even begins. The most dramatic example is General Electric, whose shareholders saw GE split into GE HealthCare (January 2023), GE Vernova (April 2024), and GE Aerospace — requiring a cost basis allocation across three separate companies according to IRS § 355 rules. Getting that allocation wrong can materially misstate your NUA savings.

Why manufacturing employees are strong NUA candidates

Several structural features of careers at major manufacturers create favorable NUA conditions:

• Long tenure with early cost basis. Engineers, machinists, and operations staff at GE, Boeing, Caterpillar, and Deere routinely spend 25–35 years at a single employer. The employer match contributions made in the 1990s — when GE traded at $10–$40, Caterpillar at $15–$30, and Deere at $20–$35 — carry dramatically lower cost basis than current market prices. A 35-year GE veteran can hold shares with a blended basis of $3–$8/share in what is now GE Aerospace trading at $210–$260/share: a 30:1 to 85:1 ratio on those earliest lots.
• Employer match funded in company stock. Most large manufacturers historically matched 401(k) contributions in company stock. GE's RSP (Retirement Savings Plan) matched in GE shares for decades. Boeing's VIP (Voluntary Investment Plan) included a Boeing stock match. These continuous contributions, made over 25+ years at progressively higher market prices but with a cost basis reflecting the match date, create a portfolio with a very low blended basis relative to current market value.
• Defined benefit pensions reduce income need in the distribution year. Major manufacturers — GE Aerospace, Boeing, Caterpillar, Deere, and Honeywell — all maintain defined benefit pension plans for long-service employees. Pension income covers basic living expenses, which means the employee doesn't need to immediately liquidate NUA stock for cash. This creates the flexibility to sell NUA stock in tranches over a decade or more, staying within the 0% or 15% long-term capital gains bracket rather than selling everything in one high-income year.
• Plan size and complexity favor specialist advice. A manufacturing employee with $1M+ in employer stock across multiple spin-off companies, a DB pension, possible NQDC, and a complex basis history faces a genuinely difficult optimization problem. The NUA decision interacts with pension timing, Social Security claiming, IRMAA planning, and post-distribution stock sales. This is not a calculation a generalist financial advisor typically runs correctly on the first attempt.

Major manufacturing employer 401(k) landscape

Understanding which recordkeeper holds your plan — and how they handle in-kind stock distributions — is the first practical step.

Recordkeeper and plan structure can change — verify with your HR benefits portal or current Summary Plan Description before making any distribution decisions.

GE's 3-way split: the most complex basis situation in manufacturing

General Electric's restructuring between 2023 and 2024 created a basis-allocation problem that most recordkeepers and generalist advisors have not encountered before. Employees who held GE stock in their RSP now hold shares in three separate publicly traded companies — and their original GE cost basis must be distributed among all three under IRS § 355 rules.¹

The three-stage GE split

1. GE HealthCare Technologies (GEHC) spin-off — January 4, 2023. GE distributed one share of GEHC for every three shares of GE held. GE shareholders (including 401(k) plan participants) received GEHC shares automatically. The cost basis of existing GE shares had to be allocated between the remaining GE and new GEHC shares based on their respective closing prices on January 3, 2023 (the last trading day before the spin-off). GE's closing price that day was approximately $76; GEHC opened at approximately $57 on January 4. Employees received GEHC shares, and their remaining GE basis was reduced proportionally.
2. GE Vernova (GEV) spin-off — April 2, 2024. GE distributed one share of GEV for every four shares of GE held. After this transaction, GE held only its aerospace and defense businesses and renamed itself GE Aerospace (ticker: GEA). Again, basis was allocated between GEA and GEV based on their relative fair market values on the distribution date.
3. GE Aerospace (GEA) becomes the remaining entity. GE Aerospace (formerly GE) is now a standalone aerospace and defense company trading under GEA. GE Vernova is a standalone energy company (GEV). GE HealthCare is a standalone medical equipment company (GEHC).

For a plan participant who held 1,000 shares of GE in their RSP before the splits, they now hold approximately:

• 1,000 shares of GE Aerospace (GEA)
• 250 shares of GE Vernova (GEV) (1 per 4 GE shares)
• 333 shares of GE HealthCare (GEHC) (1 per 3 GE shares)

How to verify your post-split GE basis

1. Log in to Fidelity NetBenefits and navigate to your GE RSP account.
2. Request a "lot-level cost basis report" for each of your three GE-derived positions (GEA, GEV, GEHC). The basis should show the allocation date (January 3, 2023 for GEHC; April 1, 2024 for GEV/GEA).
3. Cross-check: the sum of your GEA basis + GEV basis + GEHC basis should equal your original pre-split GE basis. If the math doesn't add up, the allocations may be incorrect.
4. If basis figures show "unavailable" or appear unreasonably high or low, ask Fidelity Workplace Investing's specialist team to trace the basis through the spin-off events. This is a known issue for participants with very long tenure (pre-1990 contributions) or those whose plans went through multiple sub-plan mergers over the decades.

Other corporate actions with basis implications

3M / Solventum spin-off (April 2024)

3M Company spun off its Health Care business as Solventum Corporation on April 1, 2024. 3M shareholders received one share of Solventum for every four shares of 3M held. Employees with 3M stock in their 401(k) now hold both MMM and SOLV shares, with the original 3M basis allocated between them based on relative fair market values at the April 1, 2024 distribution date.²

For a 30-year 3M employee who held $400,000 of MMM stock with a plan basis of $35,000, after the spin-off they hold MMM + SOLV shares and the $35,000 basis is split proportionally. The combined position is still NUA-eligible in a lump-sum distribution, but the basis allocation must be accurate for the 1099-R Box 6 figures to be correct.

Boeing / McDonnell Douglas merger (August 1997)

Boeing Corporation merged with McDonnell Douglas in August 1997. Former MDC employees who held McDonnell Douglas stock in their savings plan received Boeing shares at the merger exchange ratio (0.65 Boeing shares per MDC share). The MDC cost basis carried forward into Boeing shares. A 35-year Boeing veteran who was at McDonnell Douglas before 1997 may hold Boeing shares with a basis dating to the 1980s — when MDC stock was in the $30–$50 range — now translated into Boeing stock with basis of approximately $46–$77/share (adjusted for the exchange ratio). Whether Boeing's current market price represents a favorable NUA ratio depends on the individual's specific lot history and accumulation dates.³

Honeywell / AlliedSignal merger (December 1999)

AlliedSignal acquired Honeywell Inc. in December 1999, retaining the Honeywell name. Employees of both companies received shares in the combined entity. AlliedSignal employees with basis from that company's predecessor operations (Bendix, Allied Chemical) dating to the 1980s may hold Honeywell shares with basis substantially below current market values. The merger also brought a transition in plan recordkeeping, and some pre-1999 basis records have gaps. Honeywell's 401(k) plan currently uses Vanguard as recordkeeper — the in-kind distribution process follows Vanguard Institutional mechanics (see Vanguard NUA Distribution Mechanics).

General Motors Chapter 11 (2009) — a special case

General Motors filed for Chapter 11 bankruptcy in June 2009. Shareholders of "Old GM" had their shares extinguished as part of the reorganization. "New GM" (General Motors Company, ticker GM) issued new shares to the U.S. Treasury and other creditors when it emerged from bankruptcy in November 2010.

For 401(k) participants: Old GM shares held in 401(k) plans were generally converted to cash through the bankruptcy process, not exchanged for New GM shares. Employees who remained with GM after bankruptcy and accumulate New GM stock in their 401(k) have a cost basis starting from the post-2010 employer contributions — they do not carry forward any pre-bankruptcy Old GM basis. For these employees, the NUA ratio depends entirely on how much New GM stock has appreciated since their contributions began after 2010. Those with 15+ years at GM post-bankruptcy (hired or rehired from 2010 onward) can have meaningful appreciation ratios as GM stock has moved from its IPO price of $33 in 2010 to higher levels.

Pension income stacking in the distribution year

Most major manufacturers maintain defined benefit pension plans for long-service employees, though many have been frozen for new accruals or reduced for post-2009 hires. This creates both a complication and an opportunity for NUA planning.

The bracket-floor problem

If your DB pension generates $45,000–$70,000/year in ordinary income, that income is already filling the lower tax brackets before you take the NUA cost basis distribution. A 35-year GE Aerospace employee in Cincinnati (OH) with a $52,000/year pension and a $65,000 NUA cost basis sees $117,000 in ordinary income in the distribution year — well into the 22%–24% federal bracket range for MFJ filers. The cost basis distribution doesn't get to "start fresh" at the 10% bracket; it layers on top of pension income already in progress.⁴

The silver lining: pension funds living expenses, NUA stock can appreciate

Because the DB pension covers basic income needs, you are not forced to sell NUA stock immediately after distribution. The stock sits in your taxable brokerage account and can be sold in tranches over 10–15 years, staying within the 15% or even 0% long-term capital gains bracket in each sale year. A 63-year-old GE retiree with a $52,000 pension might begin Social Security at 70 ($38,000/year) — during the ages 63–69 window, the only ordinary income is the pension, and annual NUA stock sales of $40,000–$60,000 can fit within the 0% or 15% LTCG bracket depending on the pension size and filing status.

NQDC stacking for senior engineers and executives

Senior technical staff and executives at GE, Boeing, and Honeywell often accumulate substantial nonqualified deferred compensation (NQDC) through long-term incentive plans. IRC § 409A requires these payouts on fixed schedules that cannot easily be altered after 12 months before distribution. If your § 409A payout schedule overlaps with the year you planned to take the NUA distribution, the combined ordinary income (NQDC + NUA basis) can push the cost basis into a higher bracket — or trigger IRMAA on a two-year look-back — than you expected. See NUA + Nonqualified Deferred Compensation for sequencing strategies.

State tax considerations for manufacturing employees

Unlike energy employees (concentrated in Texas and other no-income-tax states), manufacturing employees are distributed across a range of states with very different tax treatment of long-term capital gains.

The federal NUA advantage is real and substantial even in states that tax LTCG as ordinary income — the 15%–37% spread between federal LTCG and federal ordinary income rates is the primary savings driver. State taxes simply reduce (but rarely eliminate) that advantage. The exception is Minnesota at up to 9.85% state income tax on capital gains — at that rate, for lower-ratio positions (below 5:1), you should model whether the NUA economics still work after combining federal LTCG + 9.85% MN tax vs. federal ordinary income + 9.85% MN tax. The federal spread narrows to essentially nothing for lower-bracket retirees in Minnesota. See NUA and State Taxes for the full state-by-state analysis.

Worked example: 35-year GE Aerospace employee

Marcus, age 63, retired in late 2025 after 35 years in GE Aviation (now GE Aerospace), based in Evendale, Ohio. His GE RSP (administered by Fidelity) contains employer stock in three positions after the two GE spin-offs:

He also holds $460,000 in diversified index funds (to be rolled to a traditional IRA) and receives a $49,000/year GE Aerospace pension. He files MFJ; his wife has no employment income. He plans to delay Social Security to age 70 (estimated $41,000/year). He lives in Ohio (state income tax, no special LTCG rate).

Distribution year income (age 63, 2026)

Lifetime tax comparison (federal only)

NUA scenario: Marcus pays approximately $16,800 in federal tax on the $64,000 cost basis distribution (lands at blended ~26% rate after standard deduction and pension occupying lower brackets). The $976,000 NUA appreciation is held across three stocks in his taxable brokerage account. He sells in tranches of $80,000–$90,000/year from ages 64–75, staying in the 15% LTCG bracket (pension income fills ordinary income, but his MAGI in NUA sale years stays below the $613,700 MFJ threshold for 20% LTCG, and below the $250,000 MFJ threshold for NIIT in the early years before SS). Federal LTCG on $976,000 at blended 15%: approximately $146,400. Total federal tax on employer stock: ~$163,200.

IRA rollover scenario: $1,040,000 rolls to IRA. Over 25 years of distributions (RMDs begin at 73 or 75 per SECURE 2.0 § 107), the entire $1,040,000 plus growth is distributed as ordinary income. At a blended 26% effective federal rate (as pension + IRA RMDs stack, his bracket remains elevated): ~$270,400 in total federal tax on the employer stock portion.

Illustration only. Ohio state income tax applies to both OI and LTCG at the same rate, so there is no additional state-level NUA savings (Ohio does not differentiate between ordinary income and capital gains). Federal savings are real and substantial. Actual results depend on annual bracket in each sale year, IRMAA exposure, growth in the three GE-derived stocks, and estate planning choices. Verified against 2026 tax rates per IRS Rev. Proc. 2025-32.

When NUA wins for manufacturing employees

• High appreciation ratio with pre-1995 employer contributions. Employees who accumulated employer match contributions in the 1990s at GE, Caterpillar, or Deere hold shares with basis at prices that have multiplied 10:1 to 20:1 since. At those ratios, converting the appreciation from 22%–37% ordinary income to 15%–20% LTCG produces six-figure lifetime federal savings even in states that tax capital gains as ordinary income.
• Pension income covers living expenses without forced NUA stock sale. Because the DB pension pays the bills, NUA stock doesn't need to be sold immediately. The tranche-selling strategy — $70,000–$90,000/year in LTCG sales, targeting the 0% or 15% LTCG bracket — is only viable if you have another income stream. Pension retirees are among the best positioned to execute this strategy.
• Boeing employees in Washington state. Washington has no state income tax. A Boeing engineer in Everett who retires with 30 years of BA stock accumulation captures the full federal LTCG spread with no state tax on NUA appreciation — a material advantage over otherwise identical employees in Illinois or Ohio.
• Very large positions with estate step-up planning. For positions of $1.5M+ across multiple GE spin-off stocks, holding shares until death converts all post-distribution appreciation to a step-up for heirs. Only the NUA layer itself (the appreciation at distribution date) is IRD. Combined with the $15M estate exemption (permanently set by OBBBA in 2025), most manufacturing retirees will never face estate tax — meaning the step-up opportunity on post-distribution appreciation is essentially free of additional estate tax cost.⁵

When NUA doesn't help manufacturing employees

• Low appreciation ratio despite long tenure. Not every manufacturer's stock performed well. Boeing's stock has experienced significant volatility due to the 737 MAX issues (2019), COVID production disruption, and subsequent quality and safety concerns. An employee who accumulated Boeing stock heavily in the 2017–2022 period may have a lower appreciation ratio than assumed. Model the actual basis vs. current FMV before assuming NUA makes sense.
• GM post-bankruptcy employees with only post-2010 contributions. If you joined GM after the 2009 bankruptcy or your pre-bankruptcy shares were extinguished, your GM stock in the savings plan has basis dating only to 2010 or later. With 12–15 years of accumulation rather than 30+, the ratio may be insufficient to justify NUA.
• Plan document prohibits in-kind distribution. Some manufacturing company plans — especially for unionized employees with collectively bargained plan terms — may not allow in-kind stock distribution. This is plan-specific and must be confirmed in writing from the plan administrator. If in-kind distribution is unavailable, NUA is not an option regardless of appreciation ratio.
• Minnesota or New Jersey residency. Minnesota taxes capital gains as ordinary income at rates up to 9.85%. For lower-ratio positions (below 6:1) with a manufacturing employee in the 22%–24% federal bracket, the combined federal LTCG + Minnesota state rate can approach or exceed the combined federal OI + MN state rate for an IRA distribution, making NUA marginally beneficial or neutral. Model the combined state + federal picture carefully. See NUA and State Taxes.
• NQDC payout schedule overlaps with any feasible NUA year. Senior engineers and executives with § 409A NQDC plans may face a narrow timing window. If all available distribution years are heavy NQDC payout years, the NUA basis distribution stacks on top of NQDC ordinary income and hits a higher bracket than the standalone NUA analysis suggests. Model the overlapping income carefully before committing.

Questions to ask your plan administrator

1. Does my plan hold employer stock as an investment option — and does the plan allow in-kind distribution of actual shares (not liquidated proceeds) at separation or retirement?
2. What is my lot-level cost basis for each of my employer stock positions? If I hold GEA, GEV, and GEHC (or MMM and SOLV), how was the basis allocated between the spun-off companies?
3. Were basis records from the pre-spin-off parent company (old GE, old 3M) preserved through the spin-off events, and has the plan allocated the basis according to IRS § 355 rules using relative fair market values at the distribution dates?
4. Is a lump-sum distribution — covering all employer stock positions and all other plan assets in one tax year — available under my plan document?
5. What is the process for transferring multiple stock positions in-kind to a taxable brokerage account, and what is the December 31 deadline relative to when I need to initiate the request?
6. Will the plan issue a 1099-R with the NUA amount correctly reported in Box 6 for each employer stock position I distribute in-kind?
7. Are there any plan-specific restrictions on in-kind distribution (e.g., minimum years of service, vesting schedule, MDO restrictions) that apply to my situation?

Sources

1. IRC § 355 — Corporate Spin-offs and Distributions. Tax-free spin-off rules govern cost basis allocation when a corporation distributes stock of a controlled corporation. IRS requires basis to be allocated between old and new shares based on relative fair market values at the distribution date. Applies to GE HealthCare (Jan 2023) and GE Vernova (Apr 2024) spin-offs.
2. 3M Investor Relations — Solventum Spin-off Completion (April 2024). 3M distributed one Solventum share per four 3M shares. Cost basis in 3M stock was allocated between MMM and Solventum (SOLV) based on relative fair market values at the April 1, 2024 distribution date per IRC § 355.
3. IRC § 402(e)(4) — Net Unrealized Appreciation rules. Employer stock held in a qualified § 401(a) plan trust is eligible for NUA election upon a qualifying event. Cost basis in employer stock carries through plan mergers following corporate acquisitions; merger exchange ratios adjust the per-share basis.
4. Tax Foundation: 2026 Federal Tax Brackets. MFJ ordinary income brackets: 22% begins at $96,950 taxable income; 24% at $206,700; 32% at $394,600; 35% at $501,050; 37% at $751,600. Standard deduction $30,000 MFJ (2026). Pension income, NQDC distributions, and NUA cost basis all constitute ordinary income that stacks within these brackets.
5. IRC § 1014 and § 1014(c) — Basis at Death and IRD Exception. Post-distribution appreciation in NUA stock receives a stepped-up basis at death under § 1014. The NUA amount itself is income in respect of a decedent (IRD) and does not receive a step-up. Estate exemption permanently $15M per OBBBA (July 2025).
6. IRS Rev. Proc. 2025-32 — 2026 Inflation Adjustments. 2026 LTCG thresholds: 0% for taxable income ≤ $98,900 MFJ / $49,450 single; 15% up to $613,700 MFJ / $545,500 single; 20% above. NIIT 3.8% on net investment income above $250,000 MFJ / $200,000 single (not inflation-adjusted). Values verified July 2026.

Tax values verified against IRS Rev. Proc. 2025-32 and IRC current through OBBBA (July 2025). Plan details (recordkeepers, match policies, pension availability, in-kind distribution eligibility) are illustrative of major plan structures as of 2026 but can change; verify your specific plan with the Summary Plan Description or HR benefits portal. Content is for informational purposes only. Values verified July 2026.