Can I use company stock to pay back a 401(k) COVID withdrawal?


Q. I took a hardship withdrawal from my 401(k) because of the coronavirus. Can I roll company stock back into the account so that it’s as if I’ve paid back the withdrawal within the allowed timeframe?
— Wanting to stay invested

A. We’re glad you think you’re able to pay back some of your COVID withdrawal.

COVID withdrawals are penalty-free. You actually have three years to pay back the funds you removed from the 401(k), and then you won’t owe taxes on the money. Otherwise you need to pay the tax within three years.

Generally, you may not use company stock to pay back the hardship withdrawal from your 401(k), said Ken Van Leeuwen, a certified financial planner with Van Leeuwen & Company in Princeton.

“As it is understood, the 401(k) plan will only accept cash as a repayment for the withdrawal,” he said. “This means to pay back the plan with company stock, you would have to sell the stock — potentially incurring capital gains tax — and pay the plan back with the proceeds.”

An IRA may have different repayment rules, so you would have to check with the custodian of that account, he said.

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This story was originally published on Feb. 23, 2021. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.