Devon Energy Employees: Smarter Ways to Manage Taxes on Appreciated Stock
Healthcare Provider Update: Healthcare Provider for Devon Energy:
Devon Energy Corporation partners with Aetna as its healthcare provider. Aetna offers a range of health plans and services to support the wellness needs of Devon Energy employees and their families.
Potential Healthcare Cost Increases in 2026:
As healthcare costs continue to rise, Devon Energy could see significant increases in employee healthcare expenses in 2026, attributed in part to anticipated premium hikes associated with the Affordable Care Act (ACA). With some states preparing for rate increases of up to 66% and the expiration of enhanced federal premium subsidies, employees may face out-of-pocket premium escalations of over 75%. The confluence of rising medical costs and changes in healthcare policy may necessitate adjustments in how both employers and employees plan for their health coverage, prompting a careful re-evaluation of benefit strategies in the coming year.
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'Devon Energy 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.
'Devon Energy 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.' Devon Energy 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. Devon Energy 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 Devon Energy 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 Devon Energy 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 Devon Energy 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 Devon Energy 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 Devon Energy 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 Devon Energy 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 primary purpose of the 401(k) Savings Plan at Devon Energy?
The primary purpose of the 401(k) Savings Plan at Devon Energy is to help employees save for retirement by allowing them to contribute a portion of their salary on a pre-tax or after-tax basis.
How can employees at Devon Energy enroll in the 401(k) Savings Plan?
Employees at Devon Energy can enroll in the 401(k) Savings Plan by logging into the employee portal and completing the online enrollment process during the designated enrollment period.
What types of contributions can employees make to the Devon Energy 401(k) Savings Plan?
Employees at Devon Energy can make pre-tax contributions, Roth (after-tax) contributions, and, if eligible, catch-up contributions to the 401(k) Savings Plan.
Does Devon Energy offer any matching contributions to the 401(k) Savings Plan?
Yes, Devon Energy offers a matching contribution to the 401(k) Savings Plan, which is designed to encourage employees to save for retirement.
What is the vesting schedule for employer contributions in the Devon Energy 401(k) Savings Plan?
The vesting schedule for employer contributions in the Devon Energy 401(k) Savings Plan typically follows a graded vesting schedule, meaning employees gradually earn ownership of the company's contributions over time.
Are there any fees associated with the Devon Energy 401(k) Savings Plan?
Yes, there may be administrative fees associated with the Devon Energy 401(k) Savings Plan, which are disclosed in the plan documents provided to employees.
Can employees at Devon Energy take loans against their 401(k) Savings Plan balance?
Yes, employees at Devon Energy may be able to take loans against their 401(k) Savings Plan balance, subject to the plan's terms and conditions.
What investment options are available in the Devon Energy 401(k) Savings Plan?
The Devon Energy 401(k) Savings Plan offers a variety of investment options, including mutual funds, target-date funds, and company stock, allowing employees to diversify their retirement savings.
How often can employees change their contribution amounts to the Devon Energy 401(k) Savings Plan?
Employees at Devon Energy can change their contribution amounts to the 401(k) Savings Plan at any time, subject to the plan's guidelines.
What is the minimum age requirement to participate in the Devon Energy 401(k) Savings Plan?
The minimum age requirement to participate in the Devon Energy 401(k) Savings Plan is typically 21 years old, but employees should refer to the plan documents for specific details.
With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
Devon Energy Pension Plan
Devon Energy does not specifically offer a traditional defined benefit pension plan but provides retirement benefits through their 401(k) plan, which includes additional company contributions. The company contributes a percentage of the employee's eligible compensation to their 401(k) account each quarter, regardless of whether the employee contributes. This contribution is designed to supplement the employees' savings, ensuring they have a robust retirement fund.
Devon Energy 401(k) Plan
The Devon Energy 401(k) Incentive Savings Plan allows employees to contribute 1% to 50% of their eligible pay on a pre-tax basis, Roth after-tax basis, or a combination of both, up to the IRS limits. Employees aged 50 or older can make additional catch-up contributions. Devon Energy matches 100% of the employee contributions up to 6%, based on years of service, making it a significant part of the retirement savings strategy for employees.
Devon Energy announced the layoff of approximately 300 employees, representing around 9% of its workforce, as part of a broader effort to reduce general and administrative costs by $150 million to $200 million by 2024. This restructuring follows a challenging period for the energy sector, despite recent increases in oil prices. The layoffs are part of a strategy to streamline operations, focus on core assets, and enhance the company's financial stability. Additionally, Devon Energy has continued its disciplined cash-return business model, focusing on generating free cash flow and returning capital to shareholders. They have also announced preliminary plans for 2024, including the continuation of their fixed-plus-variable dividend strategy, which has been a key component of their financial approach since their merger with WPX Energy.
Stock Options and RSUs:
Devon Energy offers a combination of stock options and RSUs to its employees under the Long-Term Incentive Plan (LTIP). This plan has been in place and was amended as of 2024. Employees eligible for these awards typically include executive officers, directors, and other key employees within the company. The awards are designed to vest over a period, usually tied to continued employment and performance metrics.
RSUs (Restricted Stock Units) at Devon Energy are granted as part of the LTIP and typically vest over a multi-year period. The RSUs represent a promise to deliver shares of Devon Energy stock to employees upon meeting specific vesting conditions. For example, RSUs granted in 2022, 2023, and 2024 usually vest after three years, encouraging employees to stay with the company long-term. These RSUs do not require employees to purchase the shares; instead, they are given shares once the units vest.
Devon Energy offers a comprehensive set of health benefits to its employees, focusing on ensuring both physical and mental well-being. For the years 2022, 2023, and 2024, the company's health benefits package includes medical, dental, and vision coverage, all starting from the first day of employment for regular full-time, part-time employees, and interns.
Healthcare-Related Terms and Acronyms:
PPO (Preferred Provider Organization): Employees can choose between PPO and Premier plans, with differences in deductible amounts and coverage percentages for services like preventive care and major services.
UBreathe Program: A tobacco cessation program that helps employees avoid a tobacco surcharge on their medical insurance if they meet specific requirements.
VSP (Vision Service Plan): Administers the vision coverage, offering annual exams and allowances for lenses and frames.
Recent Employee Healthcare News:
Devon Energy has placed significant emphasis on wellness through various programs and facilities. For example, "The Well," a wellness center at their Oklahoma City headquarters, provides access to state-of-the-art fitness equipment, group classes, and wellness resources. The company also offers a near-site primary care clinic, "The Doc," which provides advanced medical care, behavioral health services, and physical therapy.
Additionally, Devon Energy's commitment to employee wellness is evident in their support for flexible spending accounts and comprehensive dental and vision coverage options, designed to cater to a wide range of employee needs
For more information you can reach the plan administrator for Devon Energy at 333 W Sheridan Ave Oklahoma City, OK 73102; or by calling them at (405) 235-3611.
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