Encompass Health Employees: Smarter Ways to Manage Taxes on Appreciated Stock
Healthcare Provider Update: Healthcare Provider for Encompass Health
Encompass Health Corporation operates as a leader in post-acute healthcare services, particularly offering rehabilitation services through a network of inpatient rehabilitation hospitals, outpatient rehabilitation clinics, and home health agencies. Their integrated care model emphasizes rehabilitation for patients recovering from illness or injury, including stroke recovery, brain injury rehabilitation, and orthopedic recovery.
Potential Healthcare Cost Increases in 2026
In 2026, healthcare costs are anticipated to rise significantly, particularly for those enrolled in Affordable Care Act (ACA) marketplace plans. Factors such as the potential expiration of enhanced federal premium subsidies and escalating medical costs could result in premium hikes of over 60% in some states. Reports indicate that nearly 92% of ACA enrollees may face out-of-pocket premium increases exceeding 75%, driven by high utilization of medical services and significant drug costs. Consequently, consumers will need to navigate these changes carefully to manage their healthcare expenses effectively.
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'Encompass Health 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.
'Encompass Health 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.' Encompass Health 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. Encompass Health 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 Encompass Health 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 Encompass Health 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 Encompass Health 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 Encompass Health 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 Encompass Health 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 Encompass Health 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 Encompass Health?
The 401(k) plan offered by Encompass Health is a retirement savings plan that allows employees to save a portion of their salary on a tax-deferred basis.
Does Encompass Health offer a matching contribution for the 401(k) plan?
Yes, Encompass Health offers a matching contribution to help employees maximize their retirement savings.
How can employees enroll in the Encompass Health 401(k) plan?
Employees can enroll in the Encompass Health 401(k) plan through the company's benefits portal during the enrollment period or after they become eligible.
What are the eligibility requirements for the Encompass Health 401(k) plan?
To be eligible for the Encompass Health 401(k) plan, employees typically need to meet certain criteria, such as completing a specified period of service.
Can employees make changes to their contributions in the Encompass Health 401(k) plan?
Yes, employees can make changes to their contribution amounts in the Encompass Health 401(k) plan at any time, subject to plan rules.
What investment options are available in the Encompass Health 401(k) plan?
The Encompass Health 401(k) plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles.
When can employees start withdrawing funds from their Encompass Health 401(k) plan?
Employees can start withdrawing funds from their Encompass Health 401(k) plan upon reaching the age of 59½, or under certain circumstances such as financial hardship.
Are there penalties for early withdrawal from the Encompass Health 401(k) plan?
Yes, there are typically penalties for early withdrawal from the Encompass Health 401(k) plan unless specific exceptions apply, such as disability or financial hardship.
What happens to an employee's Encompass Health 401(k) plan if they leave the company?
If an employee leaves Encompass Health, they can roll over their 401(k) balance into another retirement account, cash out, or leave the funds in the plan if allowed.
How often does Encompass Health provide statements for the 401(k) plan?
Encompass Health provides regular statements for the 401(k) plan, typically on a quarterly basis, detailing account balances and investment performance.
With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
Encompass Health offers a comprehensive benefits package that includes both a 401(k) plan and other retirement options. In 2022, 2023, and 2024, Encompass Health continued to provide the Encompass Health Retirement Investment Plan, which allows employees to contribute up to 100% of their pay on a pre-tax basis, subject to IRS limits. The company matches 50% of the first 6% of employee contributions to the 401(k). There is also a Roth option available for those preferring post-tax contributions. Employees aged 50 or older are eligible for additional catch-up contributions (Encompass Health).
In terms of eligibility for the 401(k) plan, all full-time and part-time benefit-eligible employees of Encompass Health can participate. The plan is administered by Charles Schwab Investments and offers a variety of mutual funds for investment. This is an employer-sponsored defined contribution plan (Encompass Health) (Encompass Health).
Encompass Health employees also have access to an Employee Stock Purchase Plan (ESPP), which allows them to purchase company stock at discounted rates through payroll deductions. Although this is a voluntary program, it provides a supplementary method for employees to invest in the company
Restructuring and Layoffs: Encompass Health has recently undergone significant restructuring aimed at streamlining operations and reducing costs. In 2023, the company announced a series of layoffs affecting several departments to align with its strategic goals. This move is part of a broader trend in the healthcare sector to enhance operational efficiency amid economic pressures and rising costs.
Importance: Given the current economic and investment climate, understanding these changes is crucial. The healthcare industry is adapting to economic uncertainties, and such restructuring efforts can have widespread impacts on employees and the overall market. Additionally, changes in company operations can influence investment decisions and tax implications.
Encompass Health offers stock options and RSUs to executives and key employees as part of their compensation package. These benefits are designed to align employee interests with the company's performance. Stock options allow employees to buy shares at a set price, while RSUs provide shares after certain conditions are met.
Encompass Health Careers: Check the company’s official careers page for specific details on health benefits.
Encompass Health Benefits Information: Look for detailed benefits descriptions, plan options, and any recent updates in their employee benefits section.
Glassdoor: Review employee reviews for insights on health benefits and any recent changes or updates.
Indeed: Explore employee reviews and salary data, focusing on health benefits.
LinkedIn: Look at company updates and posts that may include information on health benefits.
Business Insider: Search for any articles related to employee benefits at Encompass Health.
HR News Sites: Check specialized HR and benefits news websites for articles or reports on Encompass Health's employee health benefits.
Healthcare-Related Terms and Acronyms:
Health Savings Account (HSA): A tax-advantaged savings account used to pay for qualified medical expenses.
Flexible Spending Account (FSA): An account that allows employees to use pre-tax dollars for eligible healthcare expenses.
Co-Pay: A fixed amount paid by the insured for covered services.
Deductible: The amount an employee pays out-of-pocket before insurance coverage begins.
Premium: The amount paid for insurance coverage, typically monthly.
Out-of-Pocket Maximum: The maximum amount an employee has to pay for covered services in a plan year.
For more information you can reach the plan administrator for Encompass Health at 9001 Liberty Parkway Birmingham, AL 35242; or by calling them at (205) 967-7116.
Further Information for Encompass Health* Employees
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