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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
Life insurance gives Cummins Inc employees liquidity for estate planning without having to liquidate assets, says Wesley Boudreaux of the Retirement Group, a division of Wealth Enhancement Group. I suggest being proactive in evaluating group and individual policies to determine which best meets their long-term financial goals.
For Cummins Inc employees seeking estate liquidity, knowing the different types of life insurance policies and their benefits is important, says Patrick Ray of the Retirement Group, a division of Wealth Enhancement Group. A good policy will provide for immediate financial needs as well as business operations, allowing families and businesses to transition more easily.
In this article, we will discuss:
1 Life Insurance Basics: Understanding life insurance - the types and their uses in financial and estate planning.
2. The Importance of Estate Liquidity: How life insurance can provide liquidity for estate taxes and expenses so assets can be kept instead of sold to satisfy financial need.
3. Strategic Use of Life Insurance: How to use life insurance in estate planning to reduce taxes and increase financial security for beneficiaries.
What Is Life Insurance?
We get many inquiries from Cummins Inc customers about life insurance over the years. In a liquidity insurance or clean-up fund contract, one party (the insured and/or proprietor) pays premiums to another party (the insurer) for a set period of time. In return, the insurer pays a specified amount to the insured's estate or to a third party, the beneficiary, in the event of death or other covered event. Life insurance serves many different estate planning purposes, but its main benefit is liquidity for the estate.
Liquidity means that the estate can pay possible taxes and other costs in cash or cash alternatives. Your illiquid assets may include real estate and business interests that your estate will have to sell when they mature if they are most of them. This might leave you broke and/or force your loved ones to sell assets you wanted them to keep.
Therefore, liquidity planning should be among your top estate planning objectives. If you anticipated the liquidity needs of your estate with life insurance, the funds will be there when they are needed. Ask four questions about life insurance: (3) Who should be the proprietor and recipients? (4) Can you meet your other insurance policy objectives while keeping the proceeds out of your estate?
Is It Life Insurance?
The Internal Revenue Code defines death benefits as:
Benefits under standard life insurance policies. Endowment policy death benefits paid when the insured dies before the contract matures. Death results from communal existence. Life Insurance Benefits - National Service or U.S. Government Life Insurance Benefits. Paid up and term additions bought with paid dividends on a policy. Proceeds payable under double indemnity provision. Benefits payable through an accident/accident and health insurance policy.
How Does Life Insurance Provide Estate Liquidity?
You Finish Arrangements Before Death.
The owner or insured does all the time consuming tasks in advance. Before you die, you contact your insurance agent, decide, sign paperwork, have the medical exam if necessary and pay the premiums. Your family will not have to deal with excessive bureaucracy after your death - that is trauma enough for them.
Proceeds Available Immediately on Death (or Soon After)
Insurance policy proceeds are paid out immediately or shortly after the insured dies. Probate can take months - insurance proceeds are circumvented. So estate bills are paid on time and your family has money to live on. It means business owners have enough money to continue business as usual.
Just how much do you need?
We suggest our Cummins Inc clients first calculate how much life insurance they need to purchase to meet estate liquidity requirements. Consider your estate's immediate cash needs at death (to pay off bills you owe and costs associated with your death) and your family's long-term need for funds to pay for daily living and other special obligations.
Group or Individual?
Group Life is an Employment Benefit.
Recent growth has been in group life insurance - an employee benefit offered by the employer. Usually, the employer pays the premium. But sometimes the employee pays a portion. The beneficiary can be anyone the employee designates. This is done primarily to help the employee's family. If Cummins Inc provides this benefit, weigh the tax implications before you take advantage of it or buy an individual policy instead.
Proceeds Might Be Included in Employee's Estate for Estate Tax Purposes.
The proceeds from a group life insurance policy may be included in your estate - depending on the year you die - for estate tax purposes. You can remove the proceeds from your estate by assigning absolute title to all 'incidents of ownership' of the policy so long as you do not name your estate or personal representative as the policy's beneficiary directly or indirectly. But Cummins Inc clients should know that this assignment must occur three years before death for the proceeds to be removed from the estate.
Which Insurance Policy Should You Get?
Normal level -- Cummins Inc customers will first hear about the standard level. Ordinary level whole life insurance has level premiums - the amount you pay will not increase over time. Your premium payment is based on the assumption that premiums will be paid for the rest of your life. But in most cases, the policy dividends can be used to repay the premiums faster. Ordinary level whole life can be called continuous premium whole life.
Limited compensation -- Now we want Cummins Inc customers to understand limited-pay. Whole life insurance with a low payout is called limited-pay whole life insurance. So the policy contains tax-deferred cash values and a predetermined mortality benefit. It provides the same benefits as any other whole-life insurance policy but the premium payment period is shorter. The number of annual payments (7, 10, 20, or 30) or the age at which the policy is paid up (60, 65, or 70) is used to identify the policy.
Single premium - We want to make sure our Cummins Inc clients understand single premium policies. Like its name suggests, a single premium policy is a limited-pay policy that requires a lump-sum premium payment. Single premium whole life insurance is a lot of money spent on a single policy, and it is based on the assumption that there will be no return on any portion if an early death occurs, so it has limited appeal.
Adjustable life - That's the first variation we want Cummins Inc customers to understand. A variable premium whole-life insurance policy is called adjustable life. The policy provides the same mortality benefit and cash value guarantees as a conventional whole-life policy. Unique to the adjustable life policy is the ability to request premium or death benefit (face amount) or cash value adjustment at specified intervals. Increases in the death benefit above some percentage or dollar amount usually require medical proof of insurability.
Current Whole Life Assumption -- Next up for our Cummins Inc clients is current lifetime assumption. Actual whole life is a variation on traditional whole life that lies somewhere between adjustable and universal life. A redetermination feature changes the premium amount and mortality benefit based on the latest experience or time period. Current assumption whole life insurance is appropriate for those who desire the discipline of a fixed-premium design but want positive investment returns beyond the guaranteed interest rate of the policy.
Other Types
Endowment life -- An endowment life policy pays death benefits and accrues cash values with policy duration so that the cash value at maturity equals the death benefit. And the buyer may specify maturity date. All survivors benefits are payable at a predetermined age or time. During the accumulation period, it also provides a mortality benefit equivalent to the target accumulation amount. As cash value cannot be accumulated tax-free in a flexible premium endowment policy, sales are usually limited.
A variable life policy has no interest rate or minimum value guarantee. The policyholder has a limited number of investment portfolio options whose mortality benefits depend on investment performance. The sales load, mortality charges, and surrender charges of variable life insurance are not suitable for short-term investments as they reduce early gains significantly.
Caution: Want our Cummins Inc clients to know that variable life insurance policies are offered by prospectus - get it from your financial professional or from the insurance company issuing the policy. The prospectus explains investment objectives, risks, charges, and expenses. This is information these Cummins Inc employees should read before buying a variable life insurance policy.
Premium flexibility includes extra premium payments, omitted premium payments, and premiums below the target amount. All payments must equal the cost of maintenance of the policy. Prefunding is determined by the policy owner. Policyholders select between a level death benefit and an increasing death benefit and can withdraw partial withdrawals from the cash value without incurring debt. With an increasing benefit, the total mortality benefit increases with increasing cash value. For higher premiums, payment is either the face value or cash value.
Joint first to die:
coverage for two or more and death benefit on first demise through joint first to die. Coverage may be term, universal, variable, or permanent. Business partners usually use joint first to die to include each partner's life. The surviving partners receive funds to buy the partnership interest of the deceased partner upon the death of the first partner.
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This combined second to die or survivorship policy covers two or more lives under one contract.The benefit is paid on the second passing. Coverage may be term, universal, variable, or permanent.Who Should Be The Owner And Beneficiaries (Or How Do You Keep The Proceeds Out of Your Estate For Federal Gift And Estate Tax Purposes)?
Fonds Used For Taxes Never Reach Your Beneficiaries.
Why understand gift and estate tax implications of life insurance? Because the money used to pay taxes is not distributed to your beneficiaries - your estate may be subject to state death taxes. It is often best to avoid future taxation on your dollar. Proceeds Are Usually Subject to Federal Gift and Estate Tax.
Your life insurance may be included in your gross estate for federal gift and estate tax purposes if: 1) The funds belong to or are derived from your estate; (2) You own the policy when you died or any time during the three years preceding your death; or (3) you sold a policy within three years of your death; and (4) estate taxes are levied in the year of your death. Any life insurance you own on the life of another person at the time of your death may also be taxable as part of your gross estate.
So to avoid federal gift and estate tax, we tell these Cummins Inc clients:
Make all proceeds payable to your estate. Make payments to your executor or personal representative. Ownership of the policy or any component of it. Three years after your death, transfer an existing policy to a new owner (need a crystal ball). Send the proceeds to someone else to pay off a debt. Pay all the proceeds to a beneficiary under an agreement in which the beneficiary is to pay death taxes or other debts or expenses of the estate. Send the proceeds to the beneficiary for alimony or child support payment.
How About Income Taxes?
Proceeds Are Exempt From Income Taxes.
Exceptions aside, proceeds are generally exempt from income taxes and are included in the beneficiary's gross income. Only interest paid by the insurer on proceeds retained after your death is taxable to your beneficiaries unless there has been a transfer for value of the policy. We therefore urge these Cummins Inc employees not to fret about income taxes draining the insurance pots too much.
Transfer-For-Value Rule
The proceeds of selling a life insurance policy are taxed as ordinary income to the new owner minus the amount invested in the contract by the new owner. The following situations are excluded from this rule:
Transfers to an associate Transfers to a partnership (in which you own a stake): Transfers to a corporation where you are a shareholder or officer are deductible. Transfers with base added on.
Technical Note: This is because the transferee takes a carryover basis from you, which is called the tacked-basis exception. It happens often with gift property.
Added Fact:
Life insurance can make your estate planning more advantageous for wealth transfer, research shows. One possible strategy that may benefit our Cummins Inc clients is an irrevocable life insurance trust (ILIT). Placing life insurance policies in an ILIT may exclude the policy proceeds from the insured's taxable estate and reduce estate taxes. Additionally, an ILIT gives more control and protection of the policy so the intended beneficiaries get the money they need. So wealth can be efficiently transferred to future generations while minimizing tax liabilities. Source: Irrevocable Life Insurance Trusts, 'The Balance, 10 March 2023.
Added Analogy:
Life insurance in estate planning is a safety net for your loved ones' financial future. Like the tightrope walker who depends on the safety net below to catch him if he trips, life insurance is a financial safety net for your beneficiaries. And it cushions the blow - so if the worst should happen, your loved ones will be covered and your money will be enough. Like a safety net that is planned and positioned for maximum protection, life insurance in estate planning requires careful consideration and strategic decision making to fit your estate goals. Just as a tightrope walker puts their safety in the net, life insurance in estate planning can give you peace of mind that your family's financial future is secure.
Sources:
1. University of Minnesota Extension :'Uses of Life Insurance in Estate Planning.' University of Minnesota Extension , extension.umn.edu. Accessed 23 Feb. 2025. Link
2. Michigan State University Extension :'Types of Life Insurance.' Michigan State University Extension , www.canr.msu.edu . Accessed 23 Feb. 2025. Link
3. Ohio State University Extension :'Basic Estate Planning: Life Insurance.' Ohioline , Ohio State University Extension, ohioline.osu.edu. Accessed 23 Feb. 2025. Link
4. University of Cincinnati :Hopperton, Kevin T., and John A. O’Brien. 'Life Insurance for Effective Estate Tax Planning.' University of Cincinnati , 10 Dec. 2020, www.uc.edu . Accessed 23 Feb. 2025. Link
5. St. Mary's University, School of Law :Lytton, Lee. '‘Save the Land from Uncle Sam’: Using Life Insurance Premium Financing in Estate Planning.' Estate Planning and Community Property Law Journal , vol. 2, no. 2, 2010, p. 421. St. Mary's University School of Law , commons.stmarytx.edu. Accessed 23 Feb. 2025. Link
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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