Consolidated Edison Employees: Smarter Ways to Manage Taxes on Appreciated Stock
Healthcare Provider Update: Healthcare Provider for Consolidated Edison:
Consolidated Edison (Con Edison) primarily utilizes Empire BlueCross BlueShield as its healthcare provider for employee health insurance plans. This offers a range of services including medical, pharmaceutical, and behavioral health benefits for its employees and their families.
Potential Healthcare Cost Increases for Consolidated Edison in 2026:
As the healthcare landscape changes, Consolidated Edison faces potential challenges with rising health insurance premiums expected in 2026. Experts predict that without the continuation of enhanced federal subsidies, individuals enrolled in ACA marketplace plans may see premium increases exceeding 75%. This surge is driven by escalating medical costs, including hospital and drug prices, which are increasing faster than overall inflation. With major insurers seeking double-digit rate hikes and a significant number of enrollees expected to face higher out-of-pocket costs, Consolidated Edison employees may need to prepare for heightened financial pressures related to their healthcare coverage in the upcoming year.
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'Consolidated Edison 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.
'Consolidated Edison 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.' Consolidated Edison 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. Consolidated Edison 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 Consolidated Edison 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 Consolidated Edison 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 Consolidated Edison 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 Consolidated Edison 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 Consolidated Edison 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 Consolidated Edison 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.
What is the 401(k) plan offered by Consolidated Edison?
The 401(k) plan offered by Consolidated Edison is a retirement savings plan that allows employees to save a portion of their salary on a tax-deferred basis.
How can employees enroll in the Consolidated Edison 401(k) plan?
Employees can enroll in the Consolidated Edison 401(k) plan by completing the enrollment process through the company’s HR portal or by contacting the HR department for assistance.
Does Consolidated Edison offer a matching contribution to the 401(k) plan?
Yes, Consolidated Edison offers a matching contribution to the 401(k) plan, which helps employees increase their retirement savings.
What is the maximum contribution limit for the Consolidated Edison 401(k) plan?
The maximum contribution limit for the Consolidated Edison 401(k) plan is in line with IRS guidelines, which are updated annually. Employees should check the current limits for the year.
Can employees take loans against their 401(k) savings at Consolidated Edison?
Yes, Consolidated Edison allows employees to take loans against their 401(k) savings, subject to certain terms and conditions.
What investment options are available in the Consolidated Edison 401(k) plan?
The Consolidated Edison 401(k) plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles, allowing employees to choose based on their risk tolerance.
Is there a vesting schedule for the employer match in the Consolidated Edison 401(k) plan?
Yes, there is a vesting schedule for the employer match in the Consolidated Edison 401(k) plan, which determines how much of the employer contributions employees are entitled to based on their years of service.
How can employees check their 401(k) balance with Consolidated Edison?
Employees can check their 401(k) balance with Consolidated Edison by logging into the retirement plan portal or by contacting the plan administrator.
What happens to the 401(k) savings if an employee leaves Consolidated Edison?
If an employee leaves Consolidated Edison, they have several options for their 401(k) savings, including rolling it over to another retirement account, cashing it out, or leaving it in the Consolidated Edison plan if eligible.
Are there any fees associated with the Consolidated Edison 401(k) plan?
Yes, there may be fees associated with the Consolidated Edison 401(k) plan, which can include administrative fees and investment-related fees. Employees should review the plan documents for detailed information.
With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
Consolidated Edison offers a traditional pension plan under the Final Average Pay and CECONY Career Average formulas, which include a Cost-of-Living Adjustment (COLA) to help protect retirement income against inflation. Employees who retired under these formulas receive an automatic COLA, but this does not apply to those under the cash balance formula or hired after June 26, 2005, in certain unions. The pension plan details, including service years and age qualifications, are outlined in the company’s retirement plan documents.
Consolidated Edison’s 401(k) plan is managed by Vanguard, offering various investment options. The plan includes employer contributions and is available to all eligible employees. For detailed specifics, refer to the company's 2023 retirement plan documents
Restructuring Layoffs and Company Changes: Consolidated Edison has been actively managing its workforce and financial strategies in response to the evolving energy market. In early 2024, the company announced various structural adjustments, including potential layoffs, to streamline operations and adapt to clean energy initiatives. These actions are critical to address due to the current economic conditions, political pressures to shift towards sustainable energy, and the necessity of maintaining investor confidence amidst market fluctuations. Addressing these workforce adjustments is essential in the current investment climate.
Stock Options: Con Edison provides its employees with stock options, allowing them to purchase shares at a predetermined price. This option becomes valuable if the company's stock price increases over time. The acronym commonly used for these options within the company is ESO (Employee Stock Options).
Restricted Stock Units (RSUs): RSUs are awarded to employees as a form of compensation. These units represent a promise to deliver company shares to employees upon meeting certain conditions, such as continued employment over a specific period. The RSUs granted by Con Edison typically vest over a few years, ensuring long-term employee commitment. The RSUs are denoted internally with the acronym RSU.
Healthcare Plans: Con Edison offers comprehensive health benefits through providers like Cigna and CVS Health. For 2024, the Cigna Open Access Plus Copay Plan is a prominent option for retirees under 65 and those who are Medicare-eligible. This plan includes coverage for hospital stays, outpatient services, routine preventive care, and emergency room visits. The benefits also extend to vision care, with coverage for routine eye exams and glasses every 24 months.
Cost Management: To manage increasing healthcare costs, especially under Medicare, Con Edison has emphasized the importance of selecting appropriate coverage during open enrollment periods. The company has adjusted its offerings over the years, such as discontinuing the Aetna Non-Medicare plan after 2023 and limiting new enrollments in certain HMOs.
Healthcare-Related Acronyms: Specific terms used by Con Edison include "HMO" (Health Maintenance Organization), "PPO" (Preferred Provider Organization), and "FSA" (Flexible Spending Account), which are essential for understanding the various health plan options and associated benefits.
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For more information you can reach the plan administrator for Consolidated Edison at 4 Irving Place New York, NY 10003; or by calling them at (212) 460-4600.
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