Code U represents a cash payment to you of dividends from ESOP shares. Ignoring rollovers (which this cannot be), you are not permitted to put money into the 401(k) unless it's from compensation that otherwise would have been paid to you in your paycheck. Perhaps it is structured as if it is an additional amount (equal to the ESOP dividend distribution) of elective deferral to the 401(k) from the compensation on your paycheck and the ESOP dividend distribution was paid to you on your paycheck, resulting in the net pay to you remaining unchanged. In essence, you've received the ESOP distribution in cash and you've made an offsetting increase in your elective deferrals to the 401(k).
