Humana Employees: Exploring Exchange Funds and Tax-Efficient Strategies for Deferred Gains

Healthcare Provider Update: Humana is one of the largest health insurance companies in the United States, primarily offering a range of Medicare Advantage plans, individual and family health insurance, and group health plans for employers. As we look towards 2026, healthcare costs are expected to rise significantly, with many experts forecasting increases in health insurance premiums across various states. For Humana, the pressure stems from a confluence of factors including the anticipated expiration of enhanced federal premium subsidies under the Affordable Care Act (ACA) and rising medical costs. The Kaiser Family Foundation projects that without renewed subsidies, a staggering 92% of ACA policyholders could face premium hikes of over 75%, making 2026 one of the most challenging years for consumers navigating their healthcare finances. Factors like escalating hospital and drug costs, aggressive rate increases by insurers, and overall economic conditions contribute to this inflationary trend. Click here to learn more

'Humana employees should view capital gains management as part of a broader retirement strategy as flexible, tax-efficient planning tailored to individual circumstances can help preserve wealth over the long term.' – Paul Bergeron, a representative of The Retirement Group, a division of Wealth Enhancement.

'Humana employees may benefit from retirement planning strategies that incorporate adaptable approaches. Flexibility in planning can better align financial decisions with evolving personal and economic circumstances.' – Tyson Mavar, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article we will discuss:

Personalized and adaptable tax-efficient planning for Humana employees.
Deferred gains and tax-free diversification strategies, including §721 Exchange Funds and §351 ETF conversions.
Additional methods such as charitable donations, remainder trusts, and collars for managing capital gains.

Patrick Ray, a Wealth Enhancement financial advisor, highlights the importance of personalized tax-efficient planning when determining the best way to mitigate capital gains taxes on a highly valued position. 'Retirement planning is not a one-size-fits-all approach,' he notes. 'It requires tailored strategies that address unique factors such as tax-efficient withdrawals.' For Humana employees, effective planning—which can include using tax-efficient tools like donor-advised funds or donating appreciated shares to charity selectively—means taking a customized approach based on your unique tax bracket, liquidity requirements, and long-term objectives, particularly when it comes to managing significant capital gains.

For his part, Wealth Enhancement advisor Tyson Mavar emphasizes the necessity of adaptable planning tools, pointing out that traditional guidance could be misaligned. 'Retirement planning is particularly complex for investors juggling estate considerations and significant capital gains,' he says. For Humana professionals, this viewpoint encourages investigating tactics that provide customization, timing flexibility, and tax efficiency based on your financial needs, such as charitable remainder trusts, tax-loss harvesting, or conversions into exchange traded funds (ETFs).

1. Deferred Gains Partnership §721 Exchange Funds (Swap Funds)

Mechanism and Advantages

Tax-deferred diversification : Allows you to receive shares in a diversified portfolio without paying capital gains tax immediately by contributing a concentrated stock position to a pooled exchange fund.
Deferred gain : Your initial cost basis carries over pro rata, and taxes are postponed until you sell the shares of the diversified portfolio.
Accessibility : Usually restricted to qualified or accredited buyers, frequently requiring sizeable minimum deposits (between $100,000 and $1 million or more).
Hold period : Prior to redemption, funds typically impose a seven year lock-up.
Diversification structure : To prevent being classified as an “investment company,” which would otherwise result in immediate taxation, exchange funds are frequently structured with about 20% in non-stock assets, such as real estate.

For Humana employees holding concentrated stock, this can provide a structured way to defer taxes while broadening exposure.

Restrictions

Limited liquidity—capital remains locked in for the time being.
High-net-worth investors are generally the only ones able to meet the fees and entry requirements.
You still retain diluted exposure to your original position following the exchange, known as residual exposure.

2. Tax-Free Seeding Into Tax-Efficient Vehicles via Section 351 ETF Conversions

Mechanism and Advantages

Tax-free transfer : If IRS regulations are followed, you can trade shares of an ETF for a diversified portfolio (such as separately managed account holdings) without recognizing a gain.
Diversification guidelines : The portfolio must satisfy §368(a)(2)(F)'s 25/50 diversification test, which states that no single holding may account for more than 25% of the portfolio’s value and that the top five holdings cannot exceed 50%.
Control requirement : Immediately after the exchange, contributors must jointly own at least 80% of voting power and 80% of all share classes.
Continuous in-kind rebalancing : The ETF structure allows for tax-efficient rebalancing through in-kind transactions, postponing future gains until ETF shares are sold.

For Humana investors, these mechanisms can be especially valuable if they are already well diversified and seeking long-term tax efficiency.

Restrictions

Eligibility : Only well-diversified portfolios qualify; concentrated single-stock holders may not benefit unless already diversified.
Cost and complexity : Requires operational, fund-structuring, and legal setup, often used by institutions or wealthy investors.

3. Collars and Charitable Giving Strategies

High-income investors often use strategies like charitable giving, donor-advised funds, charitable remainder trusts, and collars with borrowing to manage capital gains taxes.

Giving to charity : Donating appreciated stock directly or through a donor-advised fund can result in a charitable deduction and reduce exposure to capital gains tax.
Charitable remainder trusts (CRTs) : These generate income while deferring capital gains taxes, with the remainder eventually donated to charity.
Borrowing and collars : Borrowing against stock provides liquidity without a taxable sale, while collars set boundaries on downside risk. These tactics must be properly structured to prevent constructive sale treatment under §1259.