Evercore Employees: Smarter Ways to Manage Taxes on Appreciated Stock
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'Evercore 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.
'Evercore 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.' Evercore 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. Evercore 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 Evercore 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 Evercore 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 Evercore 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 Evercore 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 Evercore 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 Evercore 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 Evercore's 401(k) plan?
The primary purpose of Evercore's 401(k) plan is to provide employees with a tax-advantaged way to save for retirement.
Who is eligible to participate in Evercore's 401(k) plan?
All full-time employees of Evercore are eligible to participate in the 401(k) plan after completing the required waiting period.
Does Evercore offer matching contributions in its 401(k) plan?
Yes, Evercore offers a matching contribution to employees who participate in the 401(k) plan, subject to specific terms and conditions.
How can I enroll in Evercore's 401(k) plan?
Employees can enroll in Evercore's 401(k) plan by completing the online enrollment process through the company’s benefits portal.
What types of investment options are available in Evercore's 401(k) plan?
Evercore's 401(k) plan offers a variety of investment options, including mutual funds, target-date funds, and other diversified investment vehicles.
Can I change my contribution percentage in Evercore's 401(k) plan?
Yes, employees can change their contribution percentage at any time by accessing their account through the benefits portal.
What is the vesting schedule for Evercore's 401(k) matching contributions?
The vesting schedule for Evercore's 401(k) matching contributions typically follows a graded vesting schedule over a period of years.
How often can I make changes to my investment allocations in Evercore's 401(k) plan?
Employees can make changes to their investment allocations in Evercore's 401(k) plan on a quarterly basis or as specified in the plan documents.
Does Evercore provide educational resources for employees regarding the 401(k) plan?
Yes, Evercore provides educational resources and tools to help employees understand their 401(k) options and make informed investment decisions.
What happens to my 401(k) balance if I leave Evercore?
If you leave Evercore, you have several options for your 401(k) balance, including rolling it over to an IRA or another employer’s plan, or cashing it out.
With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
Evercore offers its employees both pension plans and 401(k) plans, designed to ensure financial stability during retirement. As of 2023, Evercore's retirement benefits include a defined contribution 401(k) plan, which is managed through ADP and allows employees to contribute a portion of their salary. Employees become eligible for the Evercore 401(k) plan after meeting specific tenure and age requirements, though these are determined by the plan sponsor and can vary based on employment status and tenure.
Evercore matches a percentage of employee contributions, though details on the exact match percentage are tied to tenure and specific employment agreements. The Evercore 401(k) plan includes features like automatic payroll deductions, potential Roth 401(k) options, and automatic enrollment, making it a flexible and tax-advantageous option for employees. In terms of a pension plan, Evercore utilizes a cash balance pension formula, where contributions are calculated based on years of service and salary. Employees typically need several years of service to fully vest in the plan.
Restructuring and Layoffs: In early 2024, Evercore announced a restructuring plan that included a reduction of approximately 5% of its workforce across various departments. The firm cited the need to streamline operations and reduce costs in response to changing market conditions and a slowdown in advisory transactions. The decision was part of a broader strategy to enhance operational efficiency.
Evercore offers stock options and Restricted Stock Units (RSUs) as part of its employee compensation package. Stock options at Evercore are typically granted to senior employees and executives, while RSUs are often given to employees at various levels as part of performance-based incentives. The specific terms and conditions for stock options and RSUs, including vesting schedules, can vary based on the employee’s role and performance.
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Benefits Aggregators: Use benefits-focused sites or forums that might provide comparisons or additional details on Evercore's offerings.
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1. Evercore Official Website
Health Benefits Information: Often includes details about health insurance plans, wellness programs, and any updates or changes.
Key Terms: Coverage levels, deductibles, co-payments, out-of-pocket maximums, Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs).
2. Company Reports (Annual Reports/SEC Filings)
Key Terms: Total compensation packages, benefits overview, healthcare costs, changes in benefit structures.
Recent Changes: If there are significant changes or cost adjustments, they will be noted here.
3. Industry News
Recent Updates: Look for articles on any changes to health benefits due to industry-wide shifts or specific to Evercore.
Healthcare Trends: Innovations or shifts in benefits plans, such as increased telehealth services or mental health support.
4. Employee Reviews (Glassdoor, Indeed)
Employee Feedback: Employees often share their experiences with health benefits, which might highlight recent changes or issues.
Healthcare Terms: Look for mentions of specific programs or benefits that employees find notable or problematic.
5. Benefits Aggregators
Comparisons and Details: Sites like Benefits.gov or benefits-focused forums may offer comparisons of Evercore’s benefits with industry standards.
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