NUA Distribution at Schwab Workplace Retirement: Step-by-Step Process

Schwab Workplace Retirement administers 401(k) plans for thousands of employers nationwide. If your employer stock is held through Schwab's recordkeeping platform, here's exactly how the NUA election works — how to find your cost basis, what to request when you call, what the in-kind transfer looks like, and what your 1099-R Box 6 must show. This is not investment or tax advice for your specific situation.

Schwab Workplace Retirement and the NUA process

Schwab Workplace Retirement (the institutional recordkeeping arm, distinct from Schwab's brokerage) administers employer-sponsored retirement plans through a participant portal that may be accessed through your employer's benefits portal or directly at Schwab's participant-facing retirement site. This platform handles plan contributions, investment changes, loans, and distributions — but an in-kind employer stock distribution for NUA purposes is not a standard workflow.

Like all major recordkeepers, Schwab's default distribution path is cash or IRA rollover. Requesting an in-kind stock transfer — where shares move to a taxable brokerage account without being sold — requires a specific phone request to Schwab's Workplace Retirement distribution team. Going through the wrong channel, using ambiguous language, or allowing the default process to proceed will result in the stock being liquidated and the NUA election permanently forfeited.

Step 1 — Find your employer stock cost basis in the Schwab participant portal

The cost basis for NUA purposes is the plan's acquisition cost — the price the plan paid when shares were purchased for your account through employer contributions or profit-sharing. This is not the current market value and not your brokerage "average cost." For a position built up over 10–30 years of employer contributions, the plan cost basis is often very low relative to current price — which is exactly what makes NUA valuable.

• Log in to your Schwab Workplace Retirement participant portal (through your employer's benefits portal or Schwab's retirement participant site). Look for your employer stock position under Investments or Account Summary.
• Schwab's portal displays current market value and shares held. Cost basis may or may not be shown prominently. If you see a "cost basis" figure, confirm it represents the plan's acquisition cost per share, not the current price.
• If cost basis is not clearly shown, or if you are uncertain whether the number reflects the plan's actual purchase price: call Schwab's Workplace Retirement participant services line and ask specifically for the "plan cost basis per share of [company name] employer stock for NUA purposes." Request the information in writing — a mailed or emailed statement confirming the lot-level cost basis.
• For TD Ameritrade legacy accounts, specifically ask Schwab whether the cost basis reflects pre-migration data or was reconstructed during the platform transition. A basis discrepancy discovered after distribution can mean an unexpected tax bill.

Step 2 — Open a Schwab One individual brokerage account

For the in-kind stock distribution, you need a taxable brokerage account to receive the shares. Putting the stock into an IRA — even temporarily — permanently destroys the NUA election.

• If you don't already have a Schwab One Individual brokerage account, open one online before calling. The process takes about 10 minutes.
• Using Schwab as both the recordkeeper and the receiving brokerage is strongly preferred. An internal transfer within Schwab (from the 401(k) record to a Schwab taxable account) is processed more reliably and faster than an external DTC transfer to a different broker, and reduces the risk of processing errors.
• If you prefer to receive the shares at a different brokerage (Fidelity, Vanguard, Merrill), that is possible — you'll need that broker's DTC participant number and your account number. Expect the process to take longer and require coordination between two institutions.
• Do not use a Schwab IRA, Schwab rollover IRA, or any tax-advantaged account as the receiving account. The account receiving the in-kind stock must be a regular (taxable) individual or joint brokerage account.

Step 3 — Call Schwab Workplace Retirement participant services

In-kind distributions must be initiated by phone with Schwab's Workplace Retirement team — not through the online portal, and not by calling the general Schwab brokerage line. The Workplace Retirement participant services number is different from Schwab's retail brokerage number. Find it on your plan statement, your employer's benefits site, or the Schwab participant portal under "Contact Us."

When you reach a Workplace Retirement representative, use these exact phrases:

• "I want to take a lump-sum distribution triggered by my separation from service [or age 59½ / disability / death of participant]."
• "I want to distribute the employer stock in-kind — shares transferred to my Schwab Individual brokerage account without being sold."
• "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 per IRC § 402(e)(4)."

Using precise language — "lump-sum distribution," "in-kind," "NUA," "IRC § 402(e)(4)" — routes your request to personnel trained on non-standard distributions and signals that this is not a routine rollover. If the representative seems unfamiliar with NUA, ask to speak with a "distribution specialist" or "complex distribution team" before proceeding.

Step 4 — Address the PCRA brokerage window, if applicable

Some Schwab-administered 401(k) plans offer a Personal Choice Retirement Account (PCRA) — a brokerage window within the plan that lets participants hold individual securities, ETFs, or other non-fund investments alongside their regular plan funds. If your employer stock is held within the PCRA portion of your 401(k), this is an important distinction:

• Shares held in the PCRA are still plan assets. They are inside your 401(k), not in a taxable account. Despite the "brokerage" name, PCRA shares are subject to the same lump-sum distribution and in-kind transfer requirement as any other plan-held employer stock for NUA purposes.
• When you call to initiate the distribution, specify that the employer stock is held in the PCRA portion of the plan. Schwab's retirement team will coordinate the in-kind transfer out of the PCRA to your taxable Schwab One account.
• Employer stock held in the PCRA that you intend to NUA must still be transferred in-kind. Do not sell it within the PCRA first — selling inside the plan converts the gain to ordinary income and permanently eliminates the NUA option.

Step 5 — Confirm the distribution instructions in writing

Before ending the call, ask Schwab to confirm the distribution instructions via a written summary — mailed or emailed. This document should specify:

• That the employer stock is being transferred in-kind (shares, not cash) to your taxable Schwab One brokerage account
• The receiving account number
• That the remaining plan balance is being rolled over to your IRA (specify the receiving IRA custodian and account number)
• The triggering qualifying event (separation from service / age 59½ / disability / etc.)
• The expected completion timeline

Written confirmation protects you if either leg of the distribution is processed incorrectly — stock sold instead of transferred, balance rolled to the wrong account, or the December 31 same-year deadline missed. A paper trail gives you grounds to dispute a processing error before the tax year closes.

Step 6 — 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 settle before December 31:

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

Internal Schwab-to-Schwab transfers typically settle in 1–3 business days. Rollovers to external IRA custodians typically take 3–10 business days. If you initiate in November or December, explicitly flag the December 31 same-year deadline with the distribution representative and ask for confirmation that both legs will settle before year-end.

After initiating, verify in both your Schwab Workplace Retirement portal (the 401(k) balance should reach $0) and your Schwab taxable brokerage account (the shares should appear) that both legs settled. Do not assume the process was completed correctly — check.

Step 7 — Review your 1099-R from Schwab Workplace Retirement

Schwab will issue a Form 1099-R in January of the year after the distribution. For an NUA election, the following boxes must be populated correctly:¹

If Box 6 is missing, or if Box 2a equals Box 1 (meaning the full market value appears as taxable ordinary income), Schwab has processed the distribution without recognizing the NUA amount. Do not file your return with an incorrect 1099-R. Contact Schwab's Workplace Retirement team to request a corrected form — and if necessary, escalate through their formal tax document correction process.

Common Schwab-specific pitfalls

Calling the retail brokerage line instead of Workplace Retirement

Schwab's brokerage phone number and its Workplace Retirement participant number are different systems. A retail brokerage representative cannot initiate or modify a 401(k) distribution. If you reach the wrong team and they attempt to help anyway — transferring shares, initiating a rollover — the result may be a misdirected or incorrectly reported transaction. Always use the Workplace Retirement number printed on your plan statement or shown in the plan participant portal.

TD Ameritrade migration: incomplete or estimated cost basis

For participants whose plans migrated from TD Ameritrade Retirement Plan Services to Schwab, cost basis data was transferred during the migration — but not all historical lot-level data was preserved at full fidelity. If your employer has been public for 20+ years and you accumulated stock through employer contributions over that period, the per-share cost basis shown in the Schwab portal may reflect estimates, averages, or post-migration reconstructions. Request a written, lot-level cost basis confirmation from Schwab before initiating, and compare it to any contribution history records you have. A higher-than-actual cost basis reduces your NUA benefit; a lower-than-actual one understates your tax bill.

Employer stock sold within the PCRA before distribution

If your plan includes a PCRA brokerage window, do not sell employer stock within the PCRA thinking it's already in a "brokerage account." Shares inside the PCRA are still plan assets. Selling them inside the PCRA closes the NUA opportunity for those shares permanently and converts the gain to ordinary income when eventually distributed. Keep the shares as shares until the in-kind distribution is complete.

Stock sold automatically on distribution initiation

Some plan configurations default to liquidating holdings to cash at the time a distribution is initiated. If this happens to the employer stock before you can specify "in-kind," the NUA election is lost. When you call, confirm before the request is processed that the employer stock will be transferred as shares, and verify by checking the receiving account within 1–3 business days to confirm shares — not cash — arrived.

Employer stock accidentally included in the IRA rollover

When Schwab processes a partial IRA rollover of your remaining non-stock balance, there is a risk that employer stock gets included in the rollover accidentally — especially if the distribution instructions are not precisely specified or if a processing error occurs. If any employer stock ends up in an IRA (even a dollar's worth), the NUA on those shares is permanently forfeited.² Verify the in-kind transfer and the IRA rollover amounts explicitly after settlement.

Missing the December 31 same-year deadline

If the IRA rollover leg does not settle before December 31, your lump-sum distribution spans two calendar years — a technical disqualification of the NUA election. If you're initiating in November or December, build in a 2–3 week buffer and flag the year-end deadline explicitly when calling Schwab. Do not wait until December 20 to initiate.

After the transfer: next steps

Once the employer stock appears as shares in your Schwab One taxable brokerage account:

• The NUA amount automatically qualifies as long-term capital gains when sold, regardless of hold period — no additional waiting required. Post-distribution appreciation on top of the NUA amount will be short-term if you sell within one year of the distribution date; long-term after one year. Most situations favor holding at least one year to convert post-distribution gains to long-term rates.
• Review your post-NUA diversification strategy — tranche selling, charitable donations, holding for estate step-up, and 0% LTCG bracket harvesting are all worth modeling.
• The 1099-R Box 6 amount is reported on Schedule D as a deemed long-term capital gain in the year of sale, not the year of distribution. Most tax software handles this correctly if you enter the 1099-R data accurately, but an NUA-specialist tax advisor or CPA should review the return for the distribution year and the sale year. See the tax reporting guide for the mechanics.