BorgWarner Employees: Smarter Ways to Manage Taxes on Appreciated Stock
Healthcare Provider Update: Healthcare Provider for BorgWarner
BorgWarner offers health insurance coverage to its employees, but specific provider details can vary by location and plan. Typically, they provide options that may include large health insurance networks like Blue Cross Blue Shield or Cigna, as well as other regional insurers depending on the geographic area. Employees should check with their HR department for the precise providers available to them under BorgWarner's health plans.
Projected Healthcare Cost Increases for BorgWarner Employees in 2026
In 2026, BorgWarner employees are likely to face significant healthcare cost increases as many factors converge to drive premiums higher. A report indicates that with the anticipated expiration of enhanced ACA federal subsidies, rising medical expenses-especially around specialty medications-and insurer rate hikes could see out-of-pocket premium costs soaring by as much as 75% for many individuals. Coupled with employers' plans to raise deductibles and out-of-pocket maximums to manage rising expenses, this could leave employees grappling with the financial implications of their healthcare coverage. Therefore, it is essential for BorgWarner employees to carefully review their health benefits and strategize to mitigate these rising costs.
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'BorgWarner 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.
'BorgWarner 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.
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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.' BorgWarner 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. BorgWarner 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 BorgWarner 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.
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This could create a challenge for investors who require liquidity. Additionally, these funds are often exclusively accessible to wealthy, accredited investors—something BorgWarner 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.
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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 BorgWarner 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 BorgWarner 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 BorgWarner 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 BorgWarner 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 401(k) plan at BorgWarner is a retirement savings plan that allows employees to save a portion of their paycheck before taxes are taken out.
How does BorgWarner match employee contributions to the 401(k) plan?
BorgWarner offers a matching contribution to the 401(k) plan, which means they will match a percentage of the employee's contributions up to a certain limit.
Can employees at BorgWarner contribute to their 401(k) plan through payroll deductions?
Yes, employees at BorgWarner can contribute to their 401(k) plan through automatic payroll deductions, making it easy to save for retirement.
What is the eligibility requirement for BorgWarner's 401(k) plan?
Employees become eligible to participate in BorgWarner's 401(k) plan after completing a specified period of service, which is typically outlined in the plan documents.
Does BorgWarner offer a Roth 401(k) option?
Yes, BorgWarner provides a Roth 401(k) option that allows employees to contribute after-tax dollars, with the potential for tax-free withdrawals in retirement.
How can employees at BorgWarner access their 401(k) account information?
Employees can access their 401(k) account information through the designated online portal provided by BorgWarner's plan administrator.
What investment options are available in BorgWarner's 401(k) plan?
BorgWarner's 401(k) plan typically offers a range of investment options, including mutual funds, target-date funds, and possibly company stock.
Can employees at BorgWarner take loans against their 401(k) savings?
Yes, BorgWarner allows employees to take loans against their 401(k) savings, subject to certain conditions and limits set by the plan.
What happens to my BorgWarner 401(k) if I leave the company?
If you leave BorgWarner, you have several options for your 401(k), including rolling it over to another retirement account, cashing it out, or leaving it in the BorgWarner plan if permitted.
Is there a vesting schedule for BorgWarner's 401(k) matching contributions?
Yes, BorgWarner has a vesting schedule for matching contributions, meaning employees must work for the company for a certain period to fully own those contributions.
With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
BorgWarner announced a major restructuring initiative in Q2 2024, including significant layoffs affecting approximately 10% of their workforce. The company is also modifying its pension plan, shifting from defined benefit to defined contribution schemes for new employees. Additionally, changes are being made to their 401(k) matching contributions.
For more information you can reach the plan administrator for BorgWarner at 3850 Hamlin Rd Auburn Hills, MI 48326; or by calling them at +1 248-754-9200.
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