Healthcare Provider Update: Healthcare Provider for Cummins Inc. Cummins Inc. primarily administers its employee health benefits through major insurance providers, including UnitedHealthcare and Anthem Blue Cross Blue Shield (BCBS), among others. Potential Healthcare Cost Increases in 2026 As Cummins Inc. anticipates significant healthcare cost increases in 2026, employees should prepare for potential spikes in premiums driven by a combination of factors. A projected rise of up to 8.5% in employer-sponsored insurance costs, alongside the potential expiration of enhanced ACA subsidies, may lead many employees to see their out-of-pocket expenses grow considerably. With certain states experiencing premium hikes exceeding 60%, comprehensive financial planning, including the strategic use of Health Savings Accounts (HSAs), will become essential for mitigating the anticipated financial impact on individuals and families. Click here to learn more
As a financial advisor to Cummins Inc employees, I would advise considering a Roth conversion to diversify your sources of income and lower your future tax liabilities, but be mindful of the current tax implications as it can significantly increase your current tax bracket.” – Paul Bergeron, The Retirement Group, a division of Wealth Enhancement Group.
“For Cummins Inc retirees, implementing a Roth conversion strategy can help you control your tax liabilities in retirement, but you should assess your current tax situation and your future retirement goals to make sure it is appropriate.” – Tyson Mavar, The Retirement Group, a division of Wealth Enhancement Group.
In this article, we will discuss:
1. The benefits and process of Roth conversions for Cummins Inc employees and retirees.
2. How Roth conversions can reduce taxes and produce tax free withdrawals in retirement.
3. The potential drawbacks of Roth conversions, including taxes and the five year rule.
Saving dollars is an important part of a successful retirement plan for Cummins Inc employees and retirees. The less money you pay in taxes, the more you’ll have to enjoy the retirement you’ve always wanted. But low taxes are hard to achieve when most of your Cummins Inc retirement savings are in pre-tax accounts like your 401(k) or Traditional IRA. One way to help you keep taxes low in retirement from Cummins Inc is by having multiple sources of money you can withdraw from, including from after-tax accounts such as a Roth IRA.
This would allow you to not withdraw too much from the pre-tax sources that could generate high taxes. However, the challenge, however, is that the IRS has placed restrictions on who can contribute to a Roth IRA. You can’t make a Roth IRA contribution if you have a Modified Adjusted Gross Income (MAGI) above a certain limit unless you use a Roth rollover. A Roth rollover, or conversion, is a way to get around this limit and be able to take advantage of a Roth IRA and its many benefits regardless of your income.
Although this can be a great strategy for your Cummins Inc retirement, it isn’t for everyone. Once a Roth conversion is done it can’t be undone! You should seek advice from your financial advisor before attempting a Roth conversion on your own because you need to know the advantages and disadvantages. We created this eBook to help guide Cummins Inc employees and retirees through the Roth conversion process and help you determine if it is right for you. If you want to learn more, make an appointment for a no cost, no obligation meeting with our financial team. We have many clients within this area and our financial advisors would be happy to meet with you to discuss your situation.
However, if you have any questions you can reach out to your Cummins Inc HR Department. A Roth IRA rollover, also known as a Roth conversion, is the process of transferring money from a pre-tax retirement account, such as a Traditional IRA or 401(k), to a Roth IRA. You pay taxes on the money you convert in the year of the rollover and then you get to keep the money in the Roth IRA where it can grow without being taxed. Since Roth IRAs are not subject to RMDs and Roth distributions aren’t taxable, Roth conversions can help decrease taxes for your Cummins Inc retirement.
They can be especially helpful for people with large Traditional IRA or retirement account balances who don’t want to pay big taxes in retirement. Likewise, if you expect to be in a higher tax bracket in later years, you can use a Roth conversion to pay the taxes on your pre-tax savings now. From our experience with Cummins Inc employees and retirees, we have found that explaining Roth conversions is helpful. Roth conversions are a fairly simple process. You start by funding your traditional retirement account, either a Traditional IRA or a 401(k). Since these accounts are funded with pre-tax dollars, you’ll get to take a tax deduction for the amount you contribute. But since Roth IRAs are after-tax accounts, you’ll have to pay taxes on the money when you roll it into your Roth IRA.
Depending on how much you rollover and if you’ve already taken the deduction for your traditional contributions, this could result in a large tax bill for the year. Any amount you roll over from a Traditional IRA or 401(k) to a Roth IRA has to be reported as income on your New Jersey state tax return the year you withdraw it from the Traditional IRA. The easiest way to do a Roth conversion is as a direct rollover from one IRA account to the other. Just let your financial advisor know that you want to move the money from your Traditional IRA to a Roth IRA at the same or different institution. If you don’t already have a Roth IRA, you’ll open one during the conversion process.
We have found this to be a popular option for many of our Cummins Inc clients. You could also do an indirect transfer using the 60 day rollover method. In this case, you’d receive a check distribution from the Traditional IRA and have 60 days to deposit it into your Roth IRA. Converting assets from a 401(k) or another Cummins Inc-sponsored plan can be a little more complicated. Normally, you will have to wait until you leave Cummins Inc to access the money in your Cummins Inc-sponsored plan, although some employers allow “in-service distributions.”
You will need to contact your Cummins Inc plan manager to begin the Roth conversion. Just let Cummins Inc know that you want to roll over the assets directly to the financial institution where your Roth IRA is held. If your company sends you a check, it will deduct 20 percent of the balance to pay for the taxes on the distribution. Then you will have 60 days to put the money plus the 20 percent that was withheld into your Roth IRA. If you fail to do so you may have to pay a penalty of up to 10% of the withdrawal if you are under 59-½ years old. Once the conversion is complete, you generally need to keep the assets in the Roth IRA for five years to keep from paying taxes and penalties.
After the five year requirement has been met, distributions from a Roth IRA are tax and penalty free if you are at least 59-½ years old. If you are younger than this, you can still withdraw your contributions tax and penalty free after the five years are up, but any earnings you withdraw will be taxed and penalized. Note that you must take your RMD before you can do a Roth conversion. You also can’t convert a RMD into a Roth. The IRS usually allows one rollover per 12 months. You also can’t make a rollover from the receiving IRA during this period. But if you have any questions you can reach out to your Cummins Inc HR Department. Real World Example The real value of a Roth conversion is in the ability to compound.
To illustrate this with a numerical example, consider “Linda.” Linda* has a $700,000 Traditional IRA and is in the 22 percent federal tax bracket and 5.525 percent New Jersey state income tax bracket with $50,000 of annual income. About to begin her RMDs, Linda decides to convert $25,000 of her IRA each year, which would keep her still within the same federal and state tax brackets. After paying taxes on her conversion, she gets to put about $18,000 into her Roth IRA. If she does this each year for 15 years and earns an annual rate of return of 7 percent, she would have more than $545,000 in her Roth IRA 15 years from now.
This is money she can now withdraw at any time tax free or leave for her heirs to collect. Doing so also helped her avoid taking RMDs during that time period by more than $136,000.[6-9] Roth conversions can be beneficial for Cummins Inc employees and retirees in the following ways:
TAX FREE DISTRIBUTIONS:
After the five year rule has been met, you can withdraw money from your Roth IRA without paying the government. This makes Roth IRAs powerful, long-term savings vehicles as your investments grow tax free. Traditional retirement account distributions, on the other hand, are taxed at ordinary income rates.
WITHDRAWS AT ANY TIME:
Since you’ve already paid taxes on your Roth contributions, you can withdraw them at any time after the five year rule has been satisfied. However, the longer you keep the money in the account, the more it can benefit from the tax free growth. Also take note that any withdrawal of investment income before age 59-½ will incur ordinary income taxes, as well as a 10% penalty on that amount.
NO RMDS:
Roth IRAs are also exempt from RMDs. This makes the tax free growth of a Roth even more valuable as you can leave the money in the account beyond RMD age.
ESTATE PLANNING TOOLS:
They can therefore be used as valuable estate planning tools since there is no need to withdraw money from a Roth IRA. Your beneficiaries will have to take RMDs, but they will do so without paying federal income taxes on their withdrawals after the five-year period has elapsed.
A WORK- AROUND FOR INCOME RESTRICTIONS:
A Roth conversion allows you to take advantage of all the above benefits of a Roth IRA even if you are above the IRS’s Roth IRA contribution limits. By first placing the money into a Traditional IRA, which has no income limits, and then transferring it into your Roth IRA, you can use this backdoor approach to contribute to a Roth. Of course, there is always the question of why anyone would not want to do one given the many advantages of a Roth rollover. But there are drawbacks to the strategy as well. The main disadvantage of Roth conversions is the cost. You will have to pay taxes on any amount you convert. If you make a big rollover or are in a high tax bracket at the time of the conversion, this could lead to a large tax bill. If you convert a large amount, you also run the risk of being kicked out of a lower tax bracket, which would increase your bill even more. Some people use part of the converted balance to pay the tax bill, like when you are taking money from your 401(k) to pay your San Diego Gas & Electric bill.
This strategy means you’ll have less money invested in the Roth to benefit from the tax free growth. It is not recommended to do conversion before the age of 59½ as this may attract the early withdrawal penalty of 10% in addition to the taxes that you will already be paying. Another drawback of Roth conversions is the five-year rule. You cannot withdraw money from a Roth IRA after conversion before at least five years to avoid taxes and possibly a penalty. So, if you think you’ll need the money before your conversion’s five-year mark, you might not want to put it into a new Roth. But if you have any questions you can reach out to your San Diego Gas & Electric HR Department. The Roth conversion option is not available to all Cummins Inc employees and retirees.Here are some instances in which you should not transfer over your Roth IRA:
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YOU’LL BE IN A LOWER TAX BRACKET IN RETIREMENT:
The point of a Roth conversion is often to minimize taxes, so it doesn’t make a lot of sense to do a conversion if you think you’ll be in a lower tax bracket later on. New Jersey is not a good tax environment, but if you plan to retire and leave New Jersey for a state like Florida or Virginia, it may be better to delay your conversion until then.
YOU CAN’T PAY THE CONVERSION TAXES:
Roth conversions will increase your tax bill in the year you make the conversion. If you don’t have the money to pay that bill now, you should probably stay away from the conversion. As discussed above, using a portion of the rollover to pay your tax bill only counteracts the tax savings of the rollover.
THE ROLLOVER WILL RAISE YOUR TAX BRACKET:
Since Roth conversions are reported as income on your New Jersey and federal tax return, you may be bumped into a higher marginal tax bracket. If this is the case, you might want to consider spreading out your conversion over several years.
YOU’LL NEED THE MONEY IN LESS THAN FIVE YEARS:
If you think you’ll need the money you’re planning to convert in less than five years, there’s no point in converting it as you’ll end up paying taxes anyway. It’s worth noting that Roth conversions are a personal decision. Because everyone’s situation is unique, any decision about whether to convert or not must be made on an individual basis. If you are still in doubt as to whether you should do a Roth rollover, seek the advice of a financial advisor. At TRG, we can analyze the tax consequences of a Roth conversion, this year and in future years. If the numbers don’t add up this year, there is always next year. The Retirement Group is a nationwide group of financial advisors who work together as a team.
We specialize exclusively in retirement planning and designing retirement portfolios for transitioning corporate employees. Each representative of the group has been picked out by The Retirement Group in selected cities of the United States. Each advisor was chosen for their pension expertise, financial planning experience, and portfolio construction knowledge. TRG operates on a teamwork principle to provide the best possible solutions to the concerns of our clients. The Team has a conservative investment strategy and diversifies client’s portfolios with laddered bonds, CDs, mutual funds, ETFs, Annuities, Stocks and other investments in order to achieve their goals. The team deals with Retirement, Pension, Tax, Asset Allocation, Estate, and Elder Care concerns.
It uses various research tools and techniques in the document. Any attempt to estimate future results necessarily incorporates a number of assumptions and judgmental elements, which are inevitably inherent in the process. Therefore, any results obtained should be considered as being tentative in nature. Changes in the law, investment climate, interest rates, and personal circumstances will significantly impact the accuracy of our estimations and the appropriateness of our recommendations. Therefore, there is a clear need to be sensitive to change and to regularly review and modify the plan. Therefore, it is recommended that you have your plan revised a few months before your potential retirement date and every year.
It should be understood that neither The Retirement Group, LLC, nor any of its employees can practice law or accounting and that nothing in this document should be taken as an attempt to do so. We look forward to working with your tax and/or legal professionals of your choice to discuss the implications of our recommendations. We shall keep you informed on matters affecting your retirement through our complimentary and proprietary newsletters, workshops and regular updates throughout your retirement years. You can always reach us at (800) 900-5867.
Sources:
1. Wells Fargo. 'Roth IRA Conversion Rules and FAQ.' Wells Fargo , www.wellsfargo.com/investing/retirement/ira/roth-ira-conversion/?utm_source=chatgpt.com . Accessed 17 Feb. 2025.
2. Kiplinger. 'Benefits of Doing Roth IRA Conversions Early in Retirement.' Kiplinger , www.kiplinger.com/retirement/benefits-of-roth-ira-conversions-early-in-retirement?utm_source=chatgpt.com . Accessed 17 Feb. 2025.
3. Charles Schwab. 'Why Should You Consider a Roth IRA Conversion?' Charles Schwab , www.schwab.com/learn/story/why-consider-roth-ira-conversion-and-how-to-do-it?utm_source=chatgpt.com . Accessed 17 Feb. 2025.
4. T. Rowe Price. 'Comparing IRAs: Could Converting to a Roth IRA Benefit You?' T. Rowe Price , www.troweprice.com/personal-investing/resources/insights/roth-conversion-is-it-right-for-you.html?utm_source=chatgpt.com . Accessed 17 Feb. 2025.
5. Forbes. 'Are Roth IRA Conversions A Good Idea In Retirement?' Forbes , www.forbes.com/sites/financialfinesse/2023/09/11/are-roth-ira-conversions-a-good-idea-in-retirement/?utm_source=chatgpt.com . Accessed 17 Feb. 2025.
How does Cummins determine eligibility for participation in the Cummins Pension Plan, and what are the implications for employees who temporarily leave the workforce? This inquiry should delve into the specific criteria that define an eligible employee, such as citizenship requirements and exclusions, as well as the continuation of benefits and service credit during approved leaves or breaks in service at Cummins. It would also explore the complexities surrounding vesting and how service prior to a break is credited upon re-employment at Cummins.
Eligibility and Participation in the Cummins Pension Plan: Eligibility for the Cummins Pension Plan requires being an active employee, not participating in another Cummins defined benefit pension plan, and meeting certain citizenship or residency criteria. During approved leaves of absence, employees continue to accrue service credits, ensuring continuous growth in their pension benefits. Notably, vesting occurs after three years of service, securing the employee's entitlement to pension benefits upon leaving the company. The plan handles breaks in service by allowing reemployment within 12 months to count towards vesting and benefit calculations, safeguarding employee benefits against temporary disruptions in their career with Cummins.
What are the potential benefits and limitations of the forms of distribution available under the Cummins Pension Plan, and how should employees prepare for their pension benefit election? This question requires an analysis of various forms of distributions, such as lump sums versus annuities, highlighting the financial implications of each choice, particularly in relation to the IRS rules for 2024 regarding tax treatment. Employees should also consider how their family structure (e.g., marital status, dependents) may influence their decisions when electing a distribution method.
Distribution Forms and Tax Considerations: The Cummins Pension Plan offers various distribution forms, including lump sums and annuities, each with distinct tax implications under IRS rules for 2024. Employees must consider their family structure and tax status when choosing a distribution form, as these factors influence the tax treatment and financial outcome of their pension benefits. The plan provides clear guidelines on these options, ensuring employees can make informed decisions that align with their personal and financial circumstances.
In what ways do pay credits and interest credits accrue within the Cummins Pension Plan, and how can employees gauge their potential retirement benefits over time? This question will focus on the specifics of how pay credits are calculated based on an employee's compensation and service at Cummins, as well as the impact of interest credits on the total account balance and long-term retirement planning. It will also examine how employees can track these credits through the Cummins retirement resources.
Accrual of Pay and Interest Credits: The pension benefits at Cummins accrue through pay credits based on compensation and service, along with interest credits. Employees can monitor their accumulating benefits through the Cummins retirement resources, offering transparency and planning advantages. This structured accrual method supports employees in projecting their future pension benefits and making informed decisions about their retirement timing and financial needs.
How does Cummins ensure compliance with ERISA and other regulatory standards in the management of the Cummins Pension Plan, and what rights do employees have under these regulations? This query should explore Cummins' obligations as a fiduciary in managing employee benefits and highlight the key rights of plan participants. The discussion should include access to plan documents, the process for filing claims, and the significance of ERISA protections for employees retired from Cummins.
Regulatory Compliance and Employee Rights: Cummins diligently adheres to ERISA standards in managing the pension plan, emphasizing fiduciary responsibility and ensuring participants' rights are upheld. Employees have rights to access plan documents, participate in claims and appeals processes, and are protected under ERISA from any plan-related discrimination. This regulatory compliance not only secures the integrity of their pension benefits but also reinforces the legal framework protecting participant rights.
What role does the Pension Benefit Guaranty Corporation (PBGC) play in safeguarding the retirement benefits of Cummins employees, and how does this affect the perception of the plan's reliability? This question would examine the insurance coverage provided by the PBGC, what types of benefits are guaranteed, and under what circumstances benefits may not be fully covered. Employees might analyze how this federal insurance impacts their confidence in the plan, especially in light of changing economic conditions.
Role of the Pension Benefit Guaranty Corporation (PBGC): The PBGC insures the pension benefits under the Cummins Plan, providing a safety net that enhances the reliability of these benefits. Employees covered by the plan can gain confidence in the security of their pensions, knowing that even in the face of potential plan termination, the PBGC guarantees the core benefits, subject to certain legal limits and conditions.
How does the Cummins Pension Plan interface with employees' Social Security benefits, and what should retirees consider when planning for a sustainable retirement income? This inquiry will look at the coordination of benefits under the Cummins plan with Social Security, examining how pension income might influence Social Security calculations. It would require discussions on the timing of retirement elections and how they align with Social Security claims.
Interaction with Social Security Benefits: The Cummins Pension Plan is designed to integrate smoothly with Social Security benefits, offering provisions that help plan participants optimize their total retirement income. Understanding this interaction allows employees to strategically plan their retirement age and benefit commencement, maximizing their financial stability in later life.
What are the specific procedures and deadlines that Cummins employees should follow to successfully elect a distribution from the Cummins Pension Plan upon retirement? This question will necessitate a detailed look at the steps involved in initiating a benefit distribution, including the importance of spousal consent, the timing of application submissions, and any documentation that may be required. Understanding these processes can significantly affect the financial outcomes for retirees.
Procedures and Deadlines for Electing Pension Distribution: The Cummins Pension Plan outlines specific procedures and deadlines for electing a distribution upon retirement, emphasizing the importance of timely and informed decision-making. By understanding these processes, employees can avoid delays and ensure that they receive their pension benefits in the manner that best suits their post-retirement financial plans.
What are the implications of choosing to defer pension benefits and how does the Cummins Plan accommodate employees who opt not to start their benefits at the normal retirement date? This inquiry could address the potential financial consequences of deferring benefits, including eligibility requirements for such deferral and how it aligns with IRS regulations. Employees should critically evaluate their financial situations and retirement goals, weighing the allure of continued employment against starting their retirement benefits sooner.
Deferring Pension Benefits: Employees at Cummins have the option to defer their pension benefits beyond the normal retirement date, which can influence the financial value of their benefits. The plan provides guidelines on how deferral impacts benefit calculations and distributions, assisting employees in making decisions that align with their long-term financial goals.
How can Cummins employees designating beneficiaries ensure that their wishes are respected concerning death benefits, particularly in light of recent changes in the pension landscape? This question focuses on the options available to employees for designating beneficiaries, the process for updating these designations over time, and the specific forms that need to be completed to ensure compliance with the Cummins Pension Plan. It will also discuss the impact of state and federal laws on these designations.
Designating Beneficiaries and Ensuring Compliance: The plan stipulates clear processes for designating beneficiaries for pension benefits, ensuring that employees' wishes are respected and legally documented. This is crucial for planning and securing financial provisions for survivors, reflecting the plan's comprehensive approach to retirement benefits.
How can Cummins employees contact the Cummins Retirement Benefits Service Center to obtain more information about the Cummins Pension Plan and related retirement processes? This question emphasizes the various channels through which employees can reach out to the service center, the types of queries they can address regarding the Cummins Pension Plan, and the resources available online to assist with pension-related inquiries. Employees are encouraged to take advantage of these resources to make informed decisions regarding their retirement planning.
Accessing Information and Assistance: Cummins provides multiple channels for employees to access information and assistance regarding their pension plan, including online resources and a dedicated service center. This accessibility ensures that employees can obtain detailed information and personalized support, enabling them to navigate their pension benefits effectively.
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