Donaldson Employees: Smarter Ways to Manage Taxes on Appreciated Stock
Healthcare Provider Update: Healthcare Provider for Donaldson
Donaldson Company, a renowned global manufacturer of filtration systems, primarily relies on UnitedHealthcare as their healthcare provider.
Potential Healthcare Cost Increases in 2026
As we look ahead to 2026, healthcare costs are anticipated to rise significantly, particularly in the context of the Affordable Care Act (ACA). Factors contributing to these increases include the potential expiration of enhanced federal premium subsidies and the overall surge in medical costs, with some states experiencing hikes exceeding 60%. A striking analysis indicates that more than 22 million marketplace enrollees could face an eye-popping 75% rise in out-of-pocket premiums if these subsidies are not renewed. The combination of higher medical expenses and aggressive rate increases from major insurers paints a concerning picture for consumers navigating their healthcare coverage decisions in the near future.
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'Donaldson 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.
'Donaldson 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.' Donaldson 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. Donaldson 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 Donaldson 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 Donaldson 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 Donaldson 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 Donaldson 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 Donaldson 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 Donaldson 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 offered by Donaldson is a retirement savings plan that allows employees to save a portion of their paycheck before taxes are taken out.
How does Donaldson match employee contributions to the 401(k) plan?
Donaldson matches employee contributions to the 401(k) plan up to a certain percentage, which helps employees grow their retirement savings.
When can employees at Donaldson start participating in the 401(k) plan?
Employees at Donaldson can start participating in the 401(k) plan after completing a specified period of employment, typically within the first year.
What investment options are available in Donaldson's 401(k) plan?
Donaldson's 401(k) plan offers a variety of investment options, including mutual funds, stocks, and bonds, allowing employees to choose based on their risk tolerance.
Can employees at Donaldson take loans against their 401(k) savings?
Yes, employees at Donaldson may have the option to take loans against their 401(k) savings, subject to specific terms and conditions outlined in the plan.
How often can employees change their contributions to the Donaldson 401(k) plan?
Employees can change their contributions to the Donaldson 401(k) plan at designated times throughout the year, typically during open enrollment periods.
Does Donaldson offer financial education resources for employees regarding the 401(k) plan?
Yes, Donaldson provides financial education resources and tools to help employees understand their 401(k) options and make informed investment decisions.
What happens to my 401(k) savings if I leave Donaldson?
If you leave Donaldson, you have several options for your 401(k) savings, including rolling it over to another retirement account, cashing out, or leaving it in the plan, depending on the plan's rules.
Is there a vesting schedule for employer contributions in Donaldson's 401(k) plan?
Yes, Donaldson's 401(k) plan includes a vesting schedule for employer contributions, meaning employees must work for a certain period before they fully own those contributions.
Can employees at Donaldson contribute to the 401(k) plan if they are part-time workers?
Yes, part-time employees at Donaldson may be eligible to contribute to the 401(k) plan, depending on the specific eligibility criteria set by the company.
With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
Identify Relevant Documents: Search for official documents such as the Annual Report, Form 10-K, Form 10-Q, and the Summary Plan Description (SPD) on Donaldson's official website and other reliable sources.
Review Multiple Sources: Examine at least four credible websites or documents to ensure accuracy and comprehensiveness. This will include financial filings, company reports, and regulatory filings.
Restructuring and Layoffs: In 2023, Donaldson Company announced a major restructuring plan to streamline operations and reduce costs. This included a reduction in workforce by approximately 5%, primarily affecting its manufacturing and administrative departments. The restructuring is aimed at improving efficiency and competitiveness in a challenging economic environment. The move comes as companies across various sectors are adjusting their strategies to navigate inflationary pressures and supply chain disruptions. Addressing these changes is crucial due to their impact on employment and operational stability, which can affect investment strategies and market confidence.
Company Benefit Changes: In early 2024, Donaldson implemented changes to its employee benefits program, including modifications to health insurance coverage and adjustments to retirement plan contributions. The company reduced its matching contributions to 401(k) plans as part of its cost-cutting measures. This shift is significant for employees planning their retirement, as changes in benefits and pension plans can have substantial long-term financial implications. Understanding these adjustments is important for financial planning and retirement preparation, especially given the current economic uncertainties and evolving tax policies.
Specific Company Information on Stock Options and RSUs
Donaldson:
Donaldson's stock options and RSUs are outlined in their annual reports and proxy statements. For 2022, Donaldson offered stock options and RSUs to senior management and key employees. The stock options were vested over four years, while RSUs had performance-based vesting criteria.
Donaldson:
In 2023, Donaldson continued its practice of granting stock options and RSUs to senior staff and executives. The grants were tied to performance metrics and included revised vesting schedules based on company performance.
Donaldson:
For 2024, Donaldson updated its stock option and RSU plans, expanding eligibility to include more mid-level managers. The changes aimed to align compensation with company performance and retention goals.
Donaldson has made updates to its health benefits offerings, including enhancements to their wellness programs and adjustments to coverage options in response to employee feedback.
Telemedicine Integration:
Recent news indicates Donaldson has increased its focus on telemedicine services as part of its health benefits, allowing employees more access to remote healthcare options.
Mental Health Support:
Donaldson has expanded its mental health support services, including better access to counseling and mental health resources through its EAP.
Cost Adjustments:
For more information you can reach the plan administrator for Donaldson at 1400 West 94th St Bloomington, MN 55431; or by calling them at (952) 887-3131.
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