Employer benefits
Chevron pension plan advice
September 2, 2026
By Jamie Hargrave, Cadence Capital Investments
Chevron pension plan advice
Employer benefits
Our guide offers Chevron pension plan advice for employees near retirement. Learn how interest rates can affect your lump sum and evaluate the irreversible a...
Moving your company stock into a traditional IRA might seem like the most logical path for your retirement, but it is not always the most efficient route. Net Unrealized Appreciation is a tax rule that allows the growth in employer stock held inside a qualified plan to be taxed at long-term capital gains rates rather than as ordinary income, provided a strict set of conditions is met.
This article defines the rule, sets out the eligibility requirements, and describes the variables that determine whether it fits a particular situation. It is educational and is not tax or legal advice. Consult your CPA or attorney about your specific circumstances before making any election.
Cadence Capital Investments is not affiliated with, endorsed by, or sponsored by Chevron Corporation or any other employer or plan sponsor.
• NUA is the difference between the cost basis of employer stock in a qualified plan and its value at distribution.
• The election requires a triggering event, a lump sum distribution of the entire balance within one tax year, and an in-kind transfer of the shares.
• The cost basis is taxed as ordinary income in the year of the distribution, whether or not you sell.
• The election is generally irreversible, and it leaves you holding a concentrated position.
• Cadence Capital Investments is fee-based, not fee-only, because an affiliate may earn commissions on certain insurance and annuity products.
• What Net Unrealized Appreciation is
• Qualifying for the election
• How the tax works
• Where it can go wrong
• Fitting it into a wider plan
• Frequently asked questions
NUA is the difference between the original cost of employer stock held in a qualified retirement plan and its market value when the stock is distributed. The rule applies only to employer securities inside a qualified plan such as a 401(k) or profit-sharing plan. It does not apply to mutual funds or other holdings in the same account.
The cost basis is what was paid for the shares when they were purchased by or contributed to the plan, generally measured as an average across years of accumulation. Your plan administrator is the source for this figure, and it is worth requesting in writing before any analysis begins.
When shares are distributed under an NUA election, the cost basis is treated as ordinary income in the year of the distribution and taxed at your applicable rate. For 2026, federal ordinary income tax rates run from 10 percent to 37 percent. These figures are set by statute, indexed annually, and subject to change; IRS.gov publishes current rates.
The appreciation is the growth in value that accumulated while the shares remained inside the plan. Under the NUA rule, that portion is eligible for long-term capital gains treatment when the shares are eventually sold, regardless of how long they are held after distribution.
For 2026, long-term capital gains rates are 0, 15, or 20 percent depending on taxable income. For married couples filing jointly, the 15 percent rate applies to taxable income between $98,900 and $613,700, per IRS Revenue Procedure 2025-32.
The 3.8 percent Net Investment Income Tax may also apply on top of these rates where modified adjusted gross income exceeds $200,000 for single filers or $250,000 for married couples filing jointly. Those thresholds are set by statute and are not indexed for inflation. A large NUA sale can push income above them, so the surtax belongs in any projection rather than being treated as an afterthought.
The requirements are strict, and missing any one of them generally forfeits the treatment.
A qualifying distribution must follow one of these:
with the employer sponsoring the plan.
, as defined for this purpose in the Internal Revenue Code.
of the plan participant, in which case beneficiaries may be eligible.
These are set by statute rather than by IRS discretion and are subject to legislative change.
The entire balance must leave the plan within a single calendar year, running January 1 through December 31 rather than any twelve-month period. Where you participate in more than one plan of the same type with the same employer, those plans are generally aggregated for this purpose, so all of them must be emptied within the same year.
Leaving even a small residual balance in the plan can disqualify the treatment.
The shares themselves must move directly to a taxable brokerage account. Selling the stock inside the plan and transferring cash does not preserve NUA treatment, and rolling the shares into an IRA first forecloses it entirely.
Once the distribution is complete, it generally cannot be undone. There is no correction mechanism if the timing or the method of transfer is handled incorrectly, which is why the sequence is usually confirmed in writing with the plan administrator before anything is initiated.
The rule treats the stock as two components with different treatment.
The cost basis is taxed as ordinary income in the year of distribution, at rates up to 37 percent for 2026. This tax is owed whether or not you sell any shares, which means cash has to be available to pay it from somewhere other than the shares themselves, unless you intend to sell some of them.
The appreciation is taxed at long-term capital gains rates when the shares are sold, plus the Net Investment Income Tax where it applies. Long-term treatment applies to the NUA portion regardless of holding period after distribution, so selling shortly after the transfer does not forfeit it. Any additional growth after the distribution date follows normal holding period rules.
Once shares leave the plan and land in a taxable account, they cannot be returned to the retirement plan. The ordinary income tax on the cost basis is owed for the year the distribution occurs.
There is also market risk to account for. Outside the plan's tax-deferred structure, the value of a single stock can rise or fall. If the price declines after ordinary income tax has been paid on the basis, that tax is not refundable. All investing involves risk, including the possible loss of principal, and past performance is not indicative of future results.
NUA treatment requires holding the specific stock in a taxable account to preserve the benefit on the appreciation. That means the strategy and concentration risk are linked: the tax advantage exists only while you hold a position in one company.
Where a large share of household net worth sits in a single stock, that exposure is present regardless of how favorably the shares are taxed. Reducing a concentrated position is generally handled across multiple tax years rather than in one trade. The tax analysis and the concentration analysis are separate questions, and both belong in the decision.
Because the distribution must happen in a single tax year, it interacts with everything else in that year. Taking it in a year with high other income can push the ordinary income due on the cost basis into a higher bracket and can push investment income above the NIIT thresholds.
Where a separation date is flexible, the tax year the distribution falls into is one of the more controllable variables in the analysis.
Where the cost basis is high relative to current market value, the amount eligible for capital gains treatment is small and the up-front tax may outweigh it. In that situation a direct rollover to an IRA is frequently the more straightforward path: growth is taxed as ordinary income on later withdrawal, but there is no immediate tax and the position can be diversified right away.
There is no threshold ratio that settles this. It depends on the size of the appreciation, your brackets in the relevant years, how long you expect to hold the shares, and how much concentration you are willing to carry.
An NUA election is one decision inside a retirement transition, and it interacts with the others: a pension payment election in the same year, the start of Social Security, the withdrawal sequence across account types, and eventually Required Minimum Distributions.
Investment advisory services at Cadence Capital Investments are offered through Prosperity Financial, a Registered Investment Advisor, which acts in a fiduciary capacity with respect to the advisory services it provides. Securities are offered through Fortune Financial Services, LLC, a Registered Broker/Dealer and member FINRA and SIPC; brokerage recommendations are subject to Regulation Best Interest. Insurance and annuity products are offered through licensed affiliates and agents, which means the firm is fee-based rather than fee-only. Because an affiliate may earn commissions on certain products, that is a conflict of interest, and it is disclosed in our Form CRS.
We meet quarterly to review the plan and adjust as circumstances change.
Because this election is irreversible, a second opinion is worth the time it costs. We encourage a conversation that includes your spouse and, where appropriate, your adult children, and we work alongside your CPA rather than around them. The tax analysis belongs with the professional who prepares your return.
It can. Where a distribution occurs before age 59 and a half and no exception applies, the additional 10 percent tax generally applies to the cost basis portion, which is the amount treated as ordinary income. It does not apply to the appreciation. Whether an exception is available depends on your circumstances. This is not tax advice; confirm with your CPA.
Generally not, because the election requires a lump sum distribution of the entire balance within one tax year, and that normally follows a triggering event such as separation from service. Reaching age 59 and a half is also a triggering event, and some plans permit in-service distributions at that point. Whether yours does is a question for the plan administrator.
The NUA portion is treated as income in respect of a decedent and does not receive a step-up in basis, so heirs generally owe capital gains tax on that growth when they sell. Any appreciation occurring after the distribution date is treated differently and may receive a step-up. This is an area where the details matter considerably; work it through with your CPA and your estate attorney.
Shares moved to a taxable brokerage account are no longer inside a retirement account, so they are not subject to RMDs. Moving them out reduces the balance on which future RMDs are calculated. Under current law RMDs generally begin at age 73, rising to 75 for later birth years; these ages are set by statute and subject to change.
No. The election can be applied to some shares, typically the most highly appreciated, with the remainder rolled to an IRA. The lump sum requirement still applies: the entire plan balance must leave the plan within the same tax year, even though the pieces can go to different destinations. Consult your CPA before making the election.
The rule is designed for pre-tax balances, where distributions would otherwise be taxed as ordinary income. Qualified distributions from a Roth account are already tax-free, so there is nothing for the election to improve. NUA is relevant where pre-tax employer shares have grown substantially in value.
This article is for general informational and educational purposes only. It is not individualized investment, tax, or legal advice, is not a recommendation to buy, sell, or hold any security, and does not account for your specific circumstances. Consult your CPA or attorney regarding your individual tax and legal situation. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.
Tax rates, thresholds, and age triggers are stated as of the publication date, are set by statute, are indexed annually where applicable, and are subject to legislative and regulatory change; IRS.gov publishes current figures. Descriptions of employer benefit plans are general; confirm all plan provisions, including cost basis figures and available distribution options, with your plan administrator and your summary plan description before making any election.
Advisory services offered through Prosperity Financial, a Registered Investment Advisor. Securities offered through Fortune Financial Services, LLC, a Registered Broker/Dealer, member FINRA / SIPC. Insurance and annuity products are offered through licensed affiliates and agents; product guarantees are subject to the claims-paying ability of the issuing company. Because an affiliate may earn commissions on certain products, Cadence Capital Investments is fee-based rather than fee-only.
Cadence Capital Investments is not affiliated with, endorsed by, or sponsored by Chevron Corporation or any other employer, plan sponsor, plan administrator, or government agency named in this article. All company, plan, and product names are the property of their respective owners and are used for identification purposes only. Nothing in this article is a comparison to, or an assessment of, any other advisory firm.
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