Flowserve Employees: Smarter Ways to Manage Taxes on Appreciated Stock
Healthcare Provider Update: Healthcare Provider for Flowserve
Flowserve Corporation partners with Anthem Blue Cross Blue Shield to provide healthcare plans and services for its employees. Anthem is noted for its extensive provider network and range of health insurance options, which includes access to various plans tailored to meet the diverse needs of Flowserve's workforce.
Potential Healthcare Cost Increases in 2026
As we approach 2026, healthcare costs are poised to escalate significantly, driven by expected record premium hikes in the Affordable Care Act (ACA) marketplace. With premium increases averaging 18% and some states experiencing hikes exceeding 60%, the impact on Flowserve employees could be notable. The expiration of enhanced federal premium subsidies adds to the financial burden, potentially resulting in out-of-pocket premium increases of over 75% for many workers, raising concerns about accessibility and affordability of essential healthcare services as we move into the next year.
Click here to learn more
'Flowserve 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.
'Flowserve 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.
1
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.' Flowserve 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. Flowserve 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 Flowserve 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.
2
This could create a challenge for investors who require liquidity. Additionally, these funds are often exclusively accessible to wealthy, accredited investors—something Flowserve 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.
3
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 Flowserve 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 Flowserve 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 Flowserve 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 Flowserve 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 type of retirement savings plan does Flowserve offer to its employees?
Flowserve offers a 401(k) retirement savings plan to help employees save for their future.
How can Flowserve employees enroll in the 401(k) plan?
Flowserve employees can enroll in the 401(k) plan through the company’s HR portal or by contacting the HR department for assistance.
Does Flowserve match employee contributions to the 401(k) plan?
Yes, Flowserve offers a matching contribution to the 401(k) plan, which helps employees maximize their retirement savings.
What is the maximum contribution percentage that Flowserve employees can contribute to their 401(k)?
Flowserve employees can contribute up to the IRS limit, which is adjusted annually. Employees should check the latest guidelines for the current limit.
Are there any eligibility requirements for Flowserve employees to participate in the 401(k) plan?
Yes, Flowserve employees must meet certain eligibility requirements, such as a minimum length of service, to participate in the 401(k) plan.
Can Flowserve employees take loans against their 401(k) savings?
Yes, Flowserve allows employees to take loans against their 401(k) savings, subject to specific terms and conditions outlined in the plan.
What investment options are available in Flowserve's 401(k) plan?
Flowserve offers a variety of investment options in its 401(k) plan, including mutual funds, target-date funds, and other investment vehicles.
How often can Flowserve employees change their 401(k) contribution amounts?
Flowserve employees can change their 401(k) contribution amounts at designated times throughout the year, typically during open enrollment periods.
Is there a vesting schedule for Flowserve's 401(k) matching contributions?
Yes, Flowserve has a vesting schedule for its matching contributions, which determines when employees fully own those contributions.
Can Flowserve employees access their 401(k) funds before retirement?
Flowserve employees may access their 401(k) funds before retirement under certain circumstances, such as hardship withdrawals or loans.
With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
Flowserve Corporation offers a Defined Benefit Pension Plan known as the Flowserve Corporation Pension Plan, which is a traditional pension plan. This plan provides a monthly retirement benefit to participants based on a formula that takes into account years of service and compensation. The normal retirement age is typically the time when these benefits begin, and the plan follows a "cash balance" formula. This means that the benefits are calculated similarly to those in a defined contribution plan, with the accrued benefit expressed in terms like a single sum distribution amount (QDRO.com).
The Flowserve 401(k) plan is another retirement benefit available to employees. The plan includes matching contributions, with Flowserve matching 75% of the employee's contributions up to 6% of their salary. Employees can contribute both pre-tax and Roth contributions to the 401(k). Catch-up contributions are available for employees over the age of 50. In 2023, the contribution limit for individuals under 50 was $22,500, while those over 50 could contribute an additional $7,500
Restructuring: In February 2023, Flowserve announced significant management changes as part of its ongoing restructuring efforts. This restructuring is aligned with its strategy to diversify, decarbonize, and digitize operations. The restructuring included executive shifts and operational changes aimed at improving efficiency and meeting the company's long-term sustainability goals.
Benefits and 401(k) Changes: Flowserve continues to offer comprehensive benefits, including retirement planning options such as 401(k) plans. While no major changes have been announced for 2024, the company maintains a robust benefits package designed to support its employees' financial well-being.
Flowserve Corporation provides stock options and Restricted Stock Units (RSUs) to its employees as part of its equity compensation program. The specific stock options and RSUs available to Flowserve employees are designed to incentivize long-term commitment and align employee interests with company performance.
For stock options, Flowserve typically grants options that allow employees to purchase company stock at a predetermined price, usually set at the market price on the grant date. These options generally vest over several years, meaning employees must remain with the company for a specific period before they can exercise the options. The company uses the acronym "ESOs" (Employee Stock Options) to refer to this program.
Regarding RSUs, Flowserve awards these units as a form of deferred compensation. RSUs do not require employees to purchase the stock; instead, the units are converted into actual shares once they vest, which occurs over a set period or upon meeting specific performance targets. These RSUs are often part of a broader performance-based incentive structure, ensuring that employees contribute to the company’s growth and success over the long term. The acronym "RSU" is used for Restricted Stock Units in Flowserve's compensation documents.
Flowserve provides a comprehensive range of health benefits designed to support the physical, mental, and financial well-being of its employees. The health benefits package includes medical, dental, and vision insurance, along with flexible spending accounts (FSA) and health savings accounts (HSA). The company also offers short- and long-term disability coverage, life insurance, and parental leave. Some of the healthcare-related terms associated with Flowserve include FSA, HSA, and AD&D (Accidental Death & Dismemberment) insurance. Benefits may vary depending on location and collective bargaining agreements
/General/General%209.png?width=1280&height=853&name=General%209.png)
-2.png?width=300&height=200&name=office-builing-main-lobby%20(52)-2.png)
.webp?width=300&height=200&name=office-builing-main-lobby%20(27).webp)
-2.png)
.webp)