Hal_Al
Level 15

Investors & landlords

As far as the IRS cares, it can be taken in stock. But, it is still treated as ordinary income cash.  You cannot sell the shares after distribution and  treat the distribution as a capital gain.   Your cost basis in the shares becomes the cash value on distribution, not what the shares were originally purchased for in the plan. 

As others have indicated, you have to ask the plan administrator if they can do this.  Many (most?) will not.