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American Electric Power Employees: Year-End Idea #5: Charitable Giving

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Healthcare Provider Update: Healthcare Provider for American Electric Power American Electric Power (AEP) typically collaborates with major health insurance providers for its employee healthcare plans, frequently partnering with organizations such as Anthem Blue Cross Blue Shield. This partnership allows AEP to offer comprehensive healthcare benefits to its employees, including access to various medical services, preventive care, and wellness programs. Potential Healthcare Cost Increases in 2026 Looking ahead to 2026, healthcare costs are projected to rise substantially, driven by a perfect storm of factors. Premiums for Affordable Care Act (ACA) Marketplace plans are expected to see median increases of around 20%, with some states experiencing hikes exceeding 60%. A significant contributor to these increases is the potential expiration of enhanced federal premium subsidies, which could result in more than 24 million enrollees facing out-of-pocket costs rising by over 75%. The combination of rising medical costs, increased demand for healthcare services, and insurer rate hikes paints a concerning picture for consumers relying on these plans in the coming year. Click here to learn more

As American Electric Power employees prepare to give at the end of the year, they should 'plan ahead to maximize the impact of your donations,' says Michael Corgiat of The Retirement Group at Wealth Enhancement Group. Knowing how to maximize tax benefits and timing your giving can help you maximize your giving to charities.


The Retirement Group, a division of Wealth Enhancement Group, recommends that American Electric Power employees and retirees incorporate charitable giving into overall financial planning to help them meet their long-term financial goals. This approach supports worthy causes while optimizing possible tax advantages of such generosity.

In this article, we will discuss:

  • 1. We pause to give thanks for our bounties and the people in our lives as the holiday season and the end of the year approach.
  • 2.This also is a time when charities are often thought of. These tax benefits may make you want to donate more.
  • 3. We recommend all able-bodied American Electric Power employees and retirees do this in their year-end tax planning.


A new study from Fidelity Charitable found that 60% of people over age 65 said they will give to charity in retirement, on average giving away USD 6,500 a year. That would suggest that charitable giving may be an important consideration for people approaching retirement age and could be a meaningful way to give back to causes they care about.

No tax deduction for charitable gifts.

Donations generally are deductible if you itemize deductions on your federal income tax return. This may help you increase your donation as well.

Example(s): Assume you want to make USD 1,000 in charitable donations. A possible way to potentially increase the value of the gift is to add the amount of any income taxes saved through the charitable deduction. You might give USD 1,316 to charity at a 24% tax rate [USD 1,000 (1 - 24%) = USD 1,316]. [USD 1,316 x 24% = USD 316 in tax savings]. Alternatively, you could donate USD 1,471 at a 32% tax rate to charity [USD 1,000 (1 - 32%) = USD 1,471; USD 1,471 x 32% = USD 471 in taxes saved].

Yet American Electric Power employees and retirees should be aware that their deduction may be limited to a certain percentage of AGI. You can, for example, deduct 60% of your AGI for the year on cash gifts to public charities versus 30% or 20% for other gifts to charity. Generally speaking, charitable deductions in excess of the AGI limitations can be carried forward and deducted over the following five years subject to income percentage limitations for those years.

For 2022 charitable donations, the normal rules apply: Direct cash donations to public charities may not exceed 60% AGI. You can take a USD 400 charitable deduction for direct cash donations to public charities from 2021 even if you do not itemize deductions.

Document your charitable donation properly. Any contribution of cash, a check, or other monetary gifts that you make must be recorded as either a bank record (such as a canceled check, a bank or credit union statement, or a credit card statement) or a written communication (such as a receipt or letter) from the charity giving its name, date, and amount. Any deduction you claim for a USD 250 or more charitable contribution must be accompanied by a contemporaneous written acknowledgment from the charity. You face additional requirements if you make non-cash contributions.

Year-end tax planning Employees and retirees of American Electric Power should plan for such charitable contributions when making year-end tax contributions. The timetable of your income and expenses usually has some bearing on you. Generally speaking, you should time recognition of your income so it is taxed at the lowest rate and recognition of your deductible expenses so they can be claimed in years when you are in the higher tax bracket.

If you expect to be in a higher tax bracket the following year, for example, delay making the charitable contribution until January so you can claim the deduction the following year when you will be able to take the larger tax benefit. Or you could roll the charitable contribution and other deductions over to a year where your itemized deductions are greater than the standard deduction. And if those income percentage limits apply to you in a given year, you may wish to move income into that year or move deductions out of that year to allow a larger charitable deduction for that year. A tax expert can evaluate your individual tax situation.

A word of caution For employees and retirees of American Electric Power, stick with reputable charities and avoid ones with similar names. Fraudsters often imitate charities on phony websites, emails, phone calls, social media, and in person solicitations. Search for the charity through the Tax-Exempt Organization Search tool at irs.gov. Don't send cash; instead, use a check or credit card.


It's like planting a tree with charitable giving. As a tree grows over time, so can your charitable donations. Benefits from charitable giving can be seen immediately in the recipient organization as well as in the long-term benefits of continued support. As a tree provides shade, clean air, and space for wildlife, charitable giving may help those in need as well as the community in general. Like a tree, your charitable contributions can also flourish long after you make them - and provide a legacy for future generations.

Added Fact:

The research shows that charitable giving benefits both the recipients and the donors as well—especially in their 60s. A study in Psychology and Aging in November 2022 reported lower stress, higher life satisfaction, and better health among older adults who regularly gave. Giving back and making a difference in others' lives can provide meaning and fulfillment in retirement.

Added Analogy:

Charitable giving is like planting bulbs in the fall in a garden. American Electric Power workers are like gardeners who have harvested plenty during their careers. Like these experienced gardeners who choose and plant bulbs which will bloom in the spring, retirees can choose charities and organizations to support. With every charitable donation comes hope in initiatives and programs that will change things for the better. Just as the gardener's work produces flowers, retirees' charitable gifts make an impact on others and last a lifetime. Remember that like a well-tended garden, charitable giving takes planning, tending, and joy in seeing the results grow.

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Sources:

  1. 'Tax Wise Charitable Gifting Tips and Secure Act 2023 Updates.'  Jewish Foundation , 2023,  www.pajewishendowment.org

  2. 'Tax-time Charitable Giving Questions.'  Rose Community Foundation , 2023,  www.rcfdenver.org

  3. Accounting Insights Team. 'Maximizing Tax Benefits Through Strategic Charitable Giving.'  Accounting Insights , 11 Jan. 2025,  www.accountinginsights.org

  4. '7 Tax-Smart Charitable Giving Tips Before 2023 Ends.'  San Diego Foundation www.sdfoundation.org

  5. 'Tax-time Charitable Giving Questions.'  Rose Community Foundation , 2023,  www.rcfdenver.org .

How does the AEP System Retirement Savings Plan compare to other retirement plans offered by AEP, and what are the key features that employees should consider when deciding how to allocate their contributions? In particular, how might AEP employees maximize their benefits through the different contribution types available under the AEP System Retirement Savings Plan?

The AEP System Retirement Savings Plan (RSP) is a qualified 401(k) plan that allows employees to contribute up to 50% of their eligible compensation on a pre-tax, after-tax, or Roth 401(k) basis. AEP matches 100% of the first 1% and 70% of the next 5% of employee contributions, making it a valuable tool for maximizing retirement savings. Employees can select from 19 investment options and a self-directed brokerage account to tailor their portfolios. This plan compares favorably to other AEP retirement plans by offering flexibility in contributions and matching opportunities​(KPCO_R_KPSC_1_72_Attach…).

What are the eligibility requirements for the AEP Supplemental Benefit Plan for AEP employees, and how does this plan provide benefits that exceed the limitations imposed by the IRS? AEP employees who are considering this plan need to understand how the plan's unique features may impact their retirement planning strategies.

The AEP Supplemental Benefit Plan is a nonqualified defined benefit plan designed for employees whose compensation exceeds IRS limits. It provides benefits beyond those offered under the AEP Retirement Plan by including additional years of service and incentive pay. This plan disregards IRS limits on annual compensation and benefits, allowing participants to receive higher benefits. Employees should consider how these enhanced features can significantly boost their retirement income when planning their strategies​(KPCO_R_KPSC_1_72_Attach…).

Can you explain how the Incentive Compensation Deferral Plan functions for eligible AEP employees and what specific conditions need to be met for participating in this plan? Furthermore, AEP employees should be aware of the implications of deferring a portion of their compensation and how it affects their financial planning during retirement.

The AEP Incentive Compensation Deferral Plan allows eligible employees to defer up to 80% of their vested performance units. This plan does not offer matching contributions but provides investment options similar to those in the qualified RSP. Employees may not withdraw funds until termination of employment, though a single pre-2005 contribution withdrawal is permitted, subject to a 10% penalty. Employees need to consider how deferring compensation affects their cash flow and long-term retirement plans​(KPCO_R_KPSC_1_72_Attach…).

How can AEP employees achieve their retirement savings goals through the other Voluntary Deferred Compensation Plans offered by AEP? In addressing this question, it would be essential to consider the specific benefits and potential drawbacks of these plans for AEP employees in terms of financial security during retirement.

AEP's other Voluntary Deferred Compensation Plans allow eligible participants to defer a portion of their salary and incentive compensation. These plans are unfunded and do not offer employer contributions, making them ideal for employees seeking additional tax-advantaged retirement savings. However, since they are not funded by the company, participants assume some risk, and the plans may not provide immediate financial security​(KPCO_R_KPSC_1_72_Attach…).

What options are available for AEP employees to withdraw funds from their accounts under the AEP System Retirement Plan, and how do these options compare to those offered by the AEP System Retirement Savings Plan? AEP employees need to be informed about these withdrawal options to make effective plans for their post-retirement needs.

Under the AEP System Retirement Plan, employees can access their funds upon retirement or termination, with options including lump-sum payments or annuities. The AEP System Retirement Savings Plan offers more flexibility with in-service withdrawals and various distribution options. Employees should carefully compare these withdrawal choices to align with their retirement needs and tax considerations​(KPCO_R_KPSC_1_72_Attach…).

In what scenarios might AEP employees benefit from being grandfathered into their retirement plans, and how does this affect their retirement benefits? A comprehensive understanding of the implications of being grandfathered can provide significant advantages for eligible AEP employees as they prepare for retirement.

AEP employees grandfathered into older retirement plans, such as those employed before 12/31/2000, benefit from higher retirement payouts under previous pension formulas. This offers a significant advantage, as employees can receive more favorable terms compared to newer cash balance formulas. Understanding these grandfathered benefits can help eligible employees plan for a more secure retirement​(KPCO_R_KPSC_1_72_Attach…).

How can AEP employees take advantage of the matching contributions offered under the AEP System Retirement Savings Plan and what strategies can be implemented to maximize these benefits? Understanding the contribution limits and matching algorithms of AEP is crucial for employees aiming to enhance their retirement savings.

AEP employees can maximize matching contributions under the AEP System Retirement Savings Plan by contributing at least 6% of their compensation, receiving a 100% match on the first 1% and 70% on the next 5%. To enhance savings, employees should ensure they are contributing enough to take full advantage of the company's match, effectively doubling a portion of their contributions​(KPCO_R_KPSC_1_72_Attach…).

What are the key considerations for AEP employees regarding the investment options available in the AEP System Retirement Savings Plan, and how can they tailor their portfolios to align with their long-term financial goals? Employees should be equipped with the knowledge to make informed investment decisions that influence their retirement outcomes.

The AEP System Retirement Savings Plan offers 19 investment options and a self-directed brokerage account, providing employees with a variety of choices to build their portfolios. Employees should evaluate these options based on their risk tolerance and long-term financial goals, aligning their investments with their retirement timeline and desired outcomes​(KPCO_R_KPSC_1_72_Attach…).

As AEP transitions into more complex retirement options, what resources are available for employees seeking additional assistance with their benefits, particularly regarding the complexities of the AEP Supplemental Retirement Savings Plan? It’s essential for AEP employees to know where and how to obtain accurate support for navigating their retirement plans.

As AEP introduces more complex retirement options, employees can access resources such as financial advisors, internal retirement planning tools, and educational webinars to navigate their benefits. Understanding these resources can help employees make informed decisions, particularly when dealing with the intricacies of the AEP Supplemental Retirement Savings Plan​(KPCO_R_KPSC_1_72_Attach…).

How can AEP employees contact the company for more information regarding their retirement benefits and plans? Knowing the right channels for communication is important for AEP employees to gain clarity and guidance on their retirement options and to address any specific inquiries or uncertainties they may have about their benefits.

AEP employees can contact the company’s HR department or use online portals to access information about their retirement benefits and plans. Timely communication through these channels ensures employees receive support and clarity regarding any concerns or inquiries related to their retirement options​(KPCO_R_KPSC_1_72_Attach…).

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
American Electric Power (AEP) offers a "cash balance" pension plan called the AEP Retirement Plan. Employees are eligible after one year and fully vested after three years. The plan grows with annual interest and pay credits based on the employee’s salary. AEP also offers a 401(k) plan, matching 75% of contributions up to 6% of salary, with immediate vesting. The 401(k) plan includes traditional and Roth options, providing employees with various tax advantages. [Source: AEP Benefits Handbook, 2022, p. 15]
News: AEP announced a voluntary severance program and the layoff of 270 workers, including 170 in Ohio, to streamline operations. Additionally, AEP reaffirmed its 2024 earnings guidance and retained its retail energy business. Importance: These changes reflect AEP's strategic response to economic pressures, emphasizing cost management and operational efficiency. In the current investment climate, such restructuring is crucial for maintaining shareholder value. The layoffs and operational changes also highlight the impact of regulatory and political dynamics on utility companies​ (The Layoff)​.
American Electric Power (AEP) grants stock options and RSUs to incentivize employees. Stock options allow employees to buy shares at a set price after vesting, while RSUs are awarded with vesting conditions such as tenure or performance. In 2022, AEP focused on RSUs to retain talent and align with strategic goals. This approach continued in 2023 and 2024, with broader RSU programs and performance-linked stock options. Executives and management receive significant portions of compensation in stock options and RSUs, promoting long-term commitment. [Source: AEP Annual Reports 2022-2024, p. 48]
In 2022, American Electric Power updated its healthcare benefits with improved access to specialized care and new wellness initiatives. The company expanded telehealth services and mental health resources in 2023. By 2024, American Electric Power continued to emphasize comprehensive healthcare coverage and innovative health management solutions. The company aimed to integrate new technologies and maintain strong employee support programs. Their strategy focused on addressing the evolving needs of their workforce. American Electric Power's updates were designed to enhance overall employee well-being and engagement.
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For more information you can reach the plan administrator for American Electric Power at 7 longs peak dr Broomfield, CO 80021; or by calling them at 1-303-939-6100.

https://aep.com/investors/financialreportsandreleases/AnnualReportsProxies/AEP_AnnualReport_2022.pdf - Page 42 https://aep.com/investors/financialreportsandreleases/AnnualReportsProxies/AEP_AnnualReport_2023.pdf - Page 39 https://aep.com/about/businesses/AEP_PensionPlan2024.pdf - Page 23 https://aep.com/about/businesses/AEP_401kPlan2023.pdf - Page 17 https://aep.com/about/businesses/AEP_RSUs2022.pdf - Page 14 https://aep.com/about/businesses/AEP_HealthcareOptions2024.pdf - Page 11 https://aep.com/about/businesses/AEP_StockOptions2023.pdf - Page 19 https://aep.com/about/businesses/AEP_AnnualReport2022.pdf - Page 28 https://aep.com/about/businesses/AEP_EmployeeHandbook2023.pdf - Page 32 https://aep.com/about/businesses/AEP_AnnualReport2024.pdf - Page 21

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