Net Unrealized Appreciation (NUA) is a tax break for employees who hold appreciated employer stock in their 401(k). Instead of rolling the stock into an IRA, where future distributions are taxed as ordinary income, eligible participants can distribute the stock in-kind after a qualifying event such as retirement, disability, or death. The cost basis gets taxed as ordinary income at distribution, while the appreciation gets taxed at long-term capital gains rates when sold. NUA is generally most beneficial when your stock has a low basis relative to its current value.
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