ASGN Employees: Smarter Ways to Manage Taxes on Appreciated Stock
Healthcare Provider Update: Offers medical, dental, vision, mental health, and disability coverage, along with HSAs, FSAs, and wellness programs 8.
With ACA subsidies expiring, ASGNs flexible benefits and mental health resources help employees manage rising healthcare expenses.
Click here to learn more
'ASGN employees with concentrated stock positions may benefit from thoughtful tax planning that allows for tax deferral while balancing liquidity, compliance, and long-term compounding,' Wesley Boudreaux, a representative of The Retirement Group, a division of Wealth Enhancement.
'ASGN employees who hold highly-appreciated stock may want to consider tax-efficient strategies that help mitigate their liabilities while aligning with their overall retirement goals,' Patrick Ray, a representative of The Retirement Group, a division of Wealth Enhancement.
In this article, we will discuss:
How taxes can affect investment returns, particularly on concentrated stock positions.
Exchange funds and options-based strategies as methods for tax deferral and diversification.
Alternative planning techniques outside ETFs, including charitable trusts and gifting strategies.
By Carlos Hernandez, Wealth Enhancement advisor
When it comes to driving portfolio returns, many investors aim to keep management fees low by investing in low-cost index funds and exchange-traded funds (ETFs). While fees matter, however, the real culprit for lower-than-anticipated performance is taxes.
1
Wealth Enhancement advisor Carlos Hernandez explains: 'By losing less to taxes each year, investors have access to more capital that can continue to compound over time. This makes tax deferral an important part of an effective financial plan.' ASGN employees looking for long-term growth strategies could benefit by understanding how to better manage their investment tax burdens.
Trade Money
One area where taxes can take a toll is on the sale of company stock or other concentrated investment positions. ASGN professionals looking to diversify could face significant capital gains taxes on an outright sale. One way to diversify without triggering immediate capital gains is through exchange funds. By contributing their highy-appreciated stock to a pooled fund, investors can trade their concentrated holdings for shares in a diverse basket of securities. This method can be used by ASGN employees who want to diversify while postponing taxable events.
Although this method allows for tax deferral, it also requires investors to hold the exchange fund for a period of time, typically seven years.
2
This could create a challenge for investors who require liquidity. Additionally, these funds are often exclusively accessible to wealthy, accredited investors—something ASGN executives should carefully evaluate.
Funds Based on Options
Another way to mitigate taxes on the sale of highly-appreciated stock is by using options contracts. The idea is to hedge risk with put options while covering the cost of those puts by selling call options—a strategy called 'collaring'. From there, the strategy reverses, with investors selling put options and using the proceeds to buy call option on an equity or bond index.
3
If managed effectively, this helps to diversify a concentrated portfolio while still maintaining liquidity.
Given the complexity of this strategy, meticulous planning is necessary. It's generally recommended that investors work with an experienced financial advisor before pursuing this approach.
Things to Be Aware of
Although these strategies can be beneficial for ASGN employees who hold highly-appreciated stock, caution is recommended. There are costs associated with these approaches, and potential liquidity risks. Additionally, the IRS may eventually contest such arrangements because their tax status has not been thoroughly examined—something ASGN retirees should keep top of mind.
'Tax drag reduction strategies can be effective, but they must be assessed through the lens of risk, liquidity, cost, and compliance,' warns Carlos Hernandez. What is appealing in theory must hold up to inspection in the real world.
Alternative Strategies
Although they show promise, investors with highly-appreciated stock or those looking to postpone gains have other alternatives besides exchange funds or options. Other tactics could include:
- Prepaid variable forwards (subject to IRS regulations, contracts to sell at predetermined terms in the future).
- Charitable remainder trusts (CRTs), which allow investors to donate appreciated stock to a charitable trust and receive a stream of regular income in return.
- Donor-advised funds (DAFs), which provide investors with a tax deduction for the fair market value of the appreciated stock they donate.
- Other gifting techniques, such as direct donations to charity or family.
Each has its own set of guidelines, advantages, and disadvantages. To limit unnecessary taxes or violating the constructive sale regulations, careful planning is necessary for ASGN professionals managing complex portfolios.
The Bottom Line
Although the movement to mitigate the tax burden on investments is not new, the instruments are changing. Both exchange funds and options-based structures offer investors a way to manage tax liabilities, especially for ASGN employees who hold highly-appreciated stock.
In the end, taxes are unavoidable. However, with the correct set of instruments, they can be controlled and postponed. 'The real value comes from aligning tax strategy with investment strategy,' summarizes Carlos Hernandez.
The ASGN 401(k) plan is a retirement savings plan that allows employees to save for retirement on a tax-advantaged basis.
How can I enroll in the ASGN 401(k) plan?
You can enroll in the ASGN 401(k) plan by completing the enrollment process through the company’s HR portal or by contacting the HR department for assistance.
What types of contributions can I make to the ASGN 401(k) plan?
Employees can make pre-tax contributions, Roth (after-tax) contributions, and, in some cases, catch-up contributions if they are age 50 or older.
Is there a company match for contributions to the ASGN 401(k) plan?
Yes, ASGN offers a company match for employee contributions, which helps enhance your retirement savings.
What is the vesting schedule for the ASGN 401(k) plan?
The vesting schedule for the ASGN 401(k) plan typically depends on the length of service and the specific terms outlined in the plan documents.
Can I take a loan against my ASGN 401(k) plan?
Yes, ASGN allows participants to take loans against their 401(k) balance, subject to the terms and conditions of the plan.
What investment options are available in the ASGN 401(k) plan?
The ASGN 401(k) plan offers a variety of investment options, including mutual funds, target date funds, and other investment vehicles.
How often can I change my contribution amount to the ASGN 401(k) plan?
Employees can typically change their contribution amounts to the ASGN 401(k) plan at any time, subject to the plan's rules.
When can I start withdrawing funds from my ASGN 401(k) plan?
You can begin withdrawing funds from your ASGN 401(k) plan without penalties after reaching age 59½, or in the event of a qualifying hardship.
Does ASGN provide educational resources for managing my 401(k) plan?
Yes, ASGN provides educational resources and tools to help employees understand and manage their 401(k) plan effectively.
With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
ASGN announced a restructuring plan to streamline operations and focus on core business areas. This includes potential layoffs and reorganization within the company to improve efficiency and profitability.
For more information you can reach the plan administrator for ASGN at 26745 Malibu Hills Rd Calabasas, CA 91301; or by calling them at +1 818-878-7900.
/General/General%206.png?width=1280&height=853&name=General%206.png)
-2.png?width=300&height=200&name=office-builing-main-lobby%20(52)-2.png)
.webp?width=300&height=200&name=office-builing-main-lobby%20(27).webp)
-2.png)
.webp)