NUA Eligibility Checker: Do You Qualify?

The NUA election has five hard requirements under IRC §402(e)(4). Miss any one and the election is permanently disqualified. Answer five questions below to see whether your situation qualifies — and get a rough estimate of the tax savings at stake. Takes under 2 minutes.

The five NUA requirements explained

1. Qualifying employer plan (IRC §401(a))

Only employer plans described in IRC §401(a) qualify — including 401(k), profit-sharing, money-purchase, and ESOP plans. 403(b) plans, 457(b) plans, the federal TSP, SIMPLE IRAs, and SEP IRAs are explicitly excluded. If you have a 401(k) with employer stock and a 403(b) with other assets, the 401(k) portion can still use NUA; the 403(b) cannot. If employer stock was ever rolled into an IRA, the NUA election is permanently lost for those shares.

2. Qualifying triggering event (IRC §402(e)(4))

Four events qualify: (a) separation from service — retirement, layoff, job change, or early retirement buyout, (b) reaching age 59½ while still employed (for in-service distributions, if your plan allows them), (c) disability as defined by your plan/IRS, and (d) death, which makes the NUA election available to a beneficiary. The lump-sum distribution must occur after the triggering event — pre-event distributions do not count toward the lump-sum requirement.

3. Lump-sum distribution in one tax year

This is the most frequently violated requirement. Under IRC §402(e)(4)(D)(i), the distribution must equal the employee's entire accrued benefit in all qualified plans maintained by the employer, distributed within a single tax year. Common disqualifiers: rolling some assets to an IRA before taking the in-kind stock distribution, taking a loan that reduces the balance before the qualifying event, or having multiple plans with the same employer that don't all distribute together. If you have two plans with the same employer — say, a 401(k) and a profit-sharing plan — both must distribute in the same year.¹

4. Actual employer securities

NUA applies to employer securities as defined in IRC §402(e)(4)(E) — common or preferred stock of your employer, or bonds, debentures, notes, or certificates. A company stock fund in a 401(k) often holds actual shares and qualifies for in-kind distribution, but this requires verification with your plan recordkeeper. Ask specifically: "Can the company stock fund be distributed in-kind as actual shares?" Mutual funds and ETFs do not qualify.

5. Unrealized appreciation (cost basis below FMV)

While not a statutory disqualification, NUA only produces a tax benefit when the plan's cost basis is lower than the stock's current fair market value. The plan's cost basis — the employer's actual cost when shares were contributed — determines the NUA amount. If the stock has declined since purchase, the NUA strategy is not beneficial, and an IRA rollover is generally preferable. Knowing your cost basis before executing is essential; contact your recordkeeper to request lot-level cost basis data.

1. IRC §402(e)(4)(D)(i) — lump-sum distribution definition. law.cornell.edu/uscode/text/26/402
2. IRS Publication 575, Pension and Annuity Income — NUA from employer's plan. irs.gov/publications/p575
3. IRS Notice 2002-3 — guidance on qualifying employer securities. irs.gov/irb/2002-02_irb
4. 2026 LTCG rate thresholds: IRS Rev. Proc. 2025-32. NIIT rate: IRC §1411 (statutory, 3.8%). irs.gov/pub/irs-drop/rp-25-32.pdf

Eligibility rules verified against IRC §402(e)(4) and IRS Publication 575. Tax rate estimates use 2026 federal rates (IRS Rev. Proc. 2025-32). State taxes not included in savings estimates.