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Tax Strategies for Frontier Communications Employees With Concentrated Stock Positions

Healthcare Provider Update: Healthcare Provider for Frontier Communications Frontier Communications typically partners with large insurance companies for their employee healthcare plans. As of 2025, the primary provider for Frontier Communications is UnitedHealth Group, which offers a variety of health insurance plans catering to the organization's workforce. Potential Healthcare Cost Increases in 2026 In 2026, health insurance premiums are projected to soar, with many states experiencing increases that could exceed 60%. The combination of rising medical costs and the potential expiration of enhanced federal premium subsidies is expected to drastically impact consumers. Specifically, over 22 million individuals enrolled in Affordable Care Act (ACA) marketplace plans may see their out-of-pocket premiums rise by more than 75%. As insurers like UnitedHealthcare and Anthem announce substantial rate hikes, the financial strain could leave many families facing unaffordable coverage options, further complicating access to necessary healthcare services. Click here to learn more

For Frontier Communications employees who have experienced significant market appreciation, the thought of rebalancing their portfolio can be daunting. The large embedded capital gains in their holdings often create a powerful disincentive to sell, leading to a 'tax-locked' portfolio. While an investor may have a well-diversified portfolio on the whole, a single, highly appreciated stock can still represent an uncomfortable level of risk. In these situations, the conventional wisdom of simply selling the position is often prohibitively expensive from a tax perspective. However, a little-known but powerful tool—the Section 351 exchange—may offer a strategic and tax-efficient solution.

Consider Michael, a successful professional with a total investment portfolio of $5 million. The majority of his assets are in a broadly diversified mix of mutual funds and exchange traded funds (ETFs). However, his portfolio also includes a single stock position valued at $500,000, which he acquired years ago for $100,000. While this single stock represents only 10% of his total portfolio, its low cost basis and unrealized gain of $400,000 make him hesitant to sell. A sale would trigger a tax bill of roughly $95,200, reducing the capital available for reinvestment and diversification. Michael's situation is common; he understands the importance of diversification, but the tax cost of achieving it feels punitive.

This is precisely the kind of scenario where a Section 351 exchange can provide a strategic advantage. This tax provision, as outlined in the Internal Revenue Code, allows for a tax-deferred transfer of property to a corporation in exchange for its stock, provided certain conditions are met. As Kevin Landis, a finanial advisor with Wealth Enhancement notes, 'A Section 351 exchange could help investors with appreciated assets achieve tax-efficient diversification.'

The core of the strategy is rooted in the tax code itself. IRC Section 351(a) states: “No gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control (as defined in section 368(c)) of the corporation.” The gain is not eliminated, but deferred, as the investor's original cost basis carries over to the new corporate shares. This is a critical distinction from a traditional sale.

For the exchange to be valid, two main requirements must be satisfied:

Diversification: The portfolio being transferred must be diversified according to the IRS's 25/50 test. This means no single holding can represent more than 25% of the total value, and the top five holdings cannot exceed 50%. Since Michael's $500,000 single stock position is only 10% of his total $5 million portfolio, his entire portfolio passes this test.

Control: The investor must have at least 80% control of the newly formed corporation immediately following the exchange. In practice, this is often achieved by multiple 'seeding' investors transferring assets at the same time to establish an ETF, or by an investor with a significant enough portfolio acting as the primary seeder of a new fund.

By working with an ETF sponsor that facilitates these exchanges, Michael can transfer his entire $5 million portfolio into a newly formed ETF. He would receive ETF shares in return, and his $400,000 unrealized gain would not be taxed. Within the ETF wrapper, the fund manager could then sell Michael's single stock and reinvest the proceeds into other securities to align with the fund's mandate. Due to the in-kind creation and redemption process of ETFs, this internal rebalancing does not trigger a taxable event for Michael. He has successfully diversified away from his single-stock risk and preserved the full $500,000 of market value.

Tyson Mavar, a Senior Vice President and Financial Advisor with Wealth Enhancement, emphasizes the importance of a holistic approach to these complex strategies. 'For clients with significant embedded gains, the goal is always to optimize after-tax returns,' Mavar says. 'A Section 351 exchange is a prime example of a strategy that, when executed correctly, can help preserve capital that may otherwise be lost to taxes, allowing it to continue working for the client over the long term.'

While the benefits are clear, it's important to acknowledge the limitations. The number of ETFs currently accepting such exchanges is limited, and these funds may have higher expense ratios than their more established counterparts. There's also the risk of an inadvertent tax treatment failure if the rules are not strictly followed. However, for an investor like Michael, the ability to defer a substantial tax bill and gain immediate diversification makes the strategy compelling. It is a powerful tool for advisors to help their clients escape the 'tax-locked' state and realign their portfolios with their long-term financial goals.

Key Resources:

IRC Section 351(a): https://www.law.cornell.edu/uscode/text/26/351

IRS Treasury Regulation 1.351-1(c)(5): This regulation details the diversification test, often referred to as the 25/50 test, which is crucial for the strategy to be valid.

Kitces.com: 'Using Section 351 Exchanges To Tax-Efficiently Reallocate Portfolios' by Ben Henry-Moreland (March 12, 2025). This article provides a comprehensive overview of the strategy's mechanics and use cases.

Cambria Tax Aware ETF (Ticker: TAX): As one of the first ETFs to publicly announce the use of Section 351 exchanges, its prospectus and fund information offer a real-world example of the strategy in practice.

Longview Advantage ETF (Ticker: EBI): Another example of a new fund launched via Section 351, demonstrating the increasing adoption of this strategy by ETF sponsors.

Other ideas if you own a highly appreciated stock

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Articles you may find interesting:

- Donating highly appreciated stock to a public charity.

- Contributing appreciated stock to a Donor-Advised Fund (DAF).

- Gifting highly appreciated stock to a family member in a lower tax bracket.

- Upstream gifting of appreciated stock to an older family member for a step-up in basis.

- Using tax-loss harvesting to offset capital gains.

- Entering into a variable prepaid forward contract.

- Reinvesting capital gains into a Qualified Opportunity Fund (QOF).

- Holding the stock until death to receive a step-up in basis for heirs.

How does Frontier Communications Corporation determine the eligibility and participation criteria for employees in the pension plan? What are the key components that employees should be aware of in terms of service hours and years of service that can impact their pension benefits?

Frontier Communications Corporation determines pension plan eligibility based on employees' transfer from Verizon, crediting prior service under the Verizon Pension Plan to the Frontier Plan. Employees must meet the eligibility and service requirements, including hours of service and years of service, which are integral to calculating accrued benefits. The pension plan specifies that employees' service prior to the transition is recognized for determining their benefits under the Frontier plan(Frontier_Communications…).

In what ways does Frontier Communications Corporation ensure that employees transitioning from Verizon retain their accrued benefits under the new pension plan? Can you elaborate on how prior service will be accounted for under the Frontier Plan and any potential challenges that may arise in this process?

Employees transitioning from Verizon to Frontier retain their accrued benefits, with prior service credited under the Frontier Pension Plan. This is facilitated by a "Mirror Plan," which ensures that benefits under Verizon’s plan are transferred without reduction. Prior service is critical to the calculation of benefits and will continue under the Frontier Plan. However, challenges may arise regarding understanding the precise terms of service credits post-transition(Frontier_Communications…).

How does the merger of the Verizon pension plans with the Frontier Communications Corporation Pension Plan affect employeesâ€™ future benefits? What measures are put in place to ensure that Former Verizon employees receive benefits that are at least as favorable as those they previously had?

The merger of Verizon pension plans into the Frontier Communications Pension Plan guarantees that former Verizon employees receive benefits that are at least as favorable as those they had under the Verizon plan. The benefits accrued under Verizon are preserved, and future benefits are determined similarly, subject to Frontier’s amendments(Frontier_Communications…).

What resources are available for Frontier Communications Corporation employees to access more detailed information regarding their pension plan benefits? How might these resources assist in understanding the changes post-merger with Verizon?

Frontier provides detailed pension information through resources such as the Milliman Benefits Service Center. Employees can access these resources to better understand the impacts of the merger and ensure their benefits remain intact. The Summary Plan Description (SPD) and Summary of Material Modifications (SMM) provide employees with comprehensive updates post-merger(Frontier_Communications…).

Can you explain the process and implications for employees at Frontier Communications Corporation if they decide to appeal a denied pension claim? What steps must they take, and how does the appeals process ensure compliance with ERISA regulations?

If an employee’s pension claim is denied, they may appeal by submitting a written claim to the Plan Administrator, with additional documentation if requested. The appeals process ensures compliance with ERISA regulations, offering employees multiple review stages to reconsider denied claims(Frontier_Communications…).

How does Frontier Communications Corporation communicate updates to its pension plan practices to employees? Are there specific intervals or methods by which changes are shared, and how can employees keep abreast of these changes?

Frontier communicates pension plan updates to employees through various channels, including formal documents like the SMM and SPD. Updates are typically distributed periodically, with critical changes communicated as needed. Employees should regularly check for updates to stay informed(Frontier_Communications…).

In the context of financial planning for retirement, how do past benefits from the Verizon pension plans get integrated into the existing Frontier Communications Corporation pension framework? What advice can be given to employees regarding their financial health as they approach retirement?

Past benefits from the Verizon pension plan are integrated into Frontier’s pension framework through the transfer of assets and liabilities. Employees should review their benefit statements and consult financial planning resources to ensure a smooth transition and optimize their retirement strategy(Frontier_Communications…).

What roles do the Milliman Benefits Service Center and the Claims Review Committee play in supporting the employees of Frontier Communications Corporation regarding their pension claims? How can employees engage with these entities for assistance?

The Milliman Benefits Service Center supports employees with pension inquiries, while the Claims Review Committee handles appeals. Employees can contact Milliman for questions and submit appeals to the Claims Review Committee if disputes arise over benefits(Frontier_Communications…).

As an employee of Frontier Communications Corporation, what should be understood about the standard forms of pension payments available at retirement? How do these options impact the total benefits an employee may receive over time?

Frontier employees should understand the available pension payment options, including annuities and lump-sum distributions. These options affect the total amount received, and employees should consider their long-term financial needs when selecting a payment method(Frontier_Communications…).

How can employees contact Frontier Communications Corporation for more information about their pension plan? What are the best practices for reaching out and ensuring that their inquiries are handled efficiently?

Employees can contact Frontier regarding pension plans through the Milliman Benefits Service Center by phone or via their online portal. It is recommended to prepare inquiries with relevant documentation to ensure efficient handling(Frontier_Communications…).

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

Frontier Communications offers both a pension plan and a 401(k) savings plan for its employees. The Frontier Communications Pension Plan is designed for veteran employees, particularly those in bargaining units, and is structured to provide retirement benefits based on years of service and compensation. Employees must generally have completed five years of service to become vested. The pension formula involves a standard calculation of a fixed amount per year of service. Frontier allows eligible participants to elect a full lump sum if they retire after March 1, 2022, due to the plan’s improved funded status of 91% as of February 2022 (CWA 1298). In addition to the pension, Frontier offers the Frontier Communications 401(k) Savings Plan, which is available to all employees, with specific vesting and matching rules. The company uses Fidelity to manage this plan and offers a match of up to 6% of the employee’s contributions (CWA 1298). Matching contributions are subject to a vesting schedule that requires several years of employment before the company contributions are fully vested. Employees can contribute on a pre-tax or post-tax basis, depending on their financial strategy.

Restructuring and Layoffs: Frontier Communications has undergone significant restructuring efforts, including layoffs as part of its strategy to streamline operations and reduce costs. In recent reports from 2023-2024, the company has been focusing on reducing its workforce to improve efficiency and focus on core business areas. This restructuring is crucial to understand given the current economic climate, where companies are reassessing their operations to stay competitive. The economic environment and evolving market demands are driving such changes, and it’s important for stakeholders to stay informed about these developments. Benefit and Pension Changes: Frontier has also made adjustments to its employee benefits and pension plans. Recent changes include alterations to retirement benefits and 401(k) contributions as part of its broader cost-cutting measures. These changes reflect broader trends in the industry where companies are re-evaluating their benefit structures in response to economic pressures and shifting regulatory environments. Keeping up with these changes is essential for employees and investors alike, given the current tax and political landscape that influences corporate benefit strategies.

Frontier Communications typically offers stock options to executives and senior management. These options grant employees the right to purchase Frontier Communications' stock at a predetermined price within a specified period. The company usually sets performance targets that must be met for options to vest. RSUs: Frontier Communications provides RSUs to various levels of employees, including senior management and other key contributors. RSUs are granted with specific vesting schedules, often based on tenure or performance milestones. The vesting of RSUs is generally linked to continued employment with the company. Specific Information by Year

Frontier Communications Health Benefits 1. Official Company Website: Frontier Communications Careers: Health benefits are listed on their career page, providing information about the types of insurance, eligibility, and plan details. Company Newsroom: Check for any press releases or news related to changes in health benefits or employee healthcare initiatives. 2. Employee Review Websites: Glassdoor: Employee reviews often include information about health benefits and satisfaction with healthcare coverage. Indeed: Look for company reviews and benefits summaries from current or former employees. 3. Benefits Review Websites: Payscale: Provides detailed reports on employee compensation and benefits, including health insurance. Comparably: Offers insights into company benefits, including health insurance plans and employee satisfaction. 4. News Outlets: Business Insider: Check for any articles or news reports related to changes in employee benefits at Frontier Communications. Reuters: Look for any updates or news stories related to employee health benefits. 5. Industry and Financial News: Forbes: Search for any relevant articles discussing health benefits changes or company policies affecting employees. Bloomberg: Look for reports on Frontier Communications’ employee benefits and any associated financial impacts.