Franchise Group Employees: Smarter Ways to Manage Taxes on Appreciated Stock
Healthcare Provider Update: Healthcare Provider for Franchise Group
The Franchise Group, a company operating several retail and service brands, typically partners with major health insurance providers to offer healthcare coverage to its employees. While the exact provider may vary, large national insurers such as UnitedHealthcare, Anthem, and Aetna are commonly chosen by companies in similar industries for their comprehensive plan offerings.
Potential Healthcare Cost Increases in 2026
As we look ahead to 2026, healthcare costs are anticipated to surge significantly, primarily driven by the expiration of enhanced federal premium subsidies associated with the Affordable Care Act (ACA). Many states are bracing for substantial rate hikes, with some insurers proposing increases of over 60%. The Kaiser Family Foundation highlights that without congressional intervention, nearly 92% of marketplace enrollees could face out-of-pocket premiums climbing by as much as 75%. Combined with rising medical costs, these factors are likely to put considerable financial pressure on consumers and companies alike in the coming year.
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'Franchise Group 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.
'Franchise Group 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.' Franchise Group 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. Franchise Group 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 Franchise Group 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 Franchise Group 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 Franchise Group 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 Franchise Group 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 Franchise Group 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 Franchise Group 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 retirement savings options does Franchise Group offer to its employees?
Franchise Group offers a 401(k) savings plan to help employees save for retirement.
How can employees at Franchise Group enroll in the 401(k) plan?
Employees at Franchise Group can enroll in the 401(k) plan by completing the enrollment forms provided during orientation or through the employee portal.
Does Franchise Group match employee contributions to the 401(k) plan?
Yes, Franchise Group offers a matching contribution up to a certain percentage of employee contributions to the 401(k) plan.
What is the vesting schedule for the 401(k) match at Franchise Group?
The vesting schedule for the 401(k) match at Franchise Group typically follows a graded vesting schedule over a period of time, which will be detailed in the plan documents.
Are there any fees associated with the Franchise Group 401(k) plan?
Yes, there may be administrative fees associated with the Franchise Group 401(k) plan, which will be disclosed in the plan documents.
Can employees take loans against their 401(k) balance at Franchise Group?
Yes, Franchise Group allows employees to take loans against their 401(k) balance, subject to the plan's terms and conditions.
What investment options are available in the Franchise Group 401(k) plan?
The Franchise Group 401(k) plan offers a variety of investment options, including mutual funds, target-date funds, and company stock.
How often can employees change their contribution amounts to the Franchise Group 401(k) plan?
Employees at Franchise Group can change their contribution amounts to the 401(k) plan typically on a quarterly basis or as specified in the plan documents.
What is the minimum contribution percentage for the Franchise Group 401(k) plan?
The minimum contribution percentage for the Franchise Group 401(k) plan is usually set at 1% of the employee's salary, but employees are encouraged to contribute more if possible.
Can employees at Franchise Group access their 401(k) funds before retirement?
Employees at Franchise Group may access their 401(k) funds before retirement under certain circumstances, such as financial hardship or termination of employment.
With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
Franchise Group, like many companies, offers retirement plans to its employees, including both pension and 401(k) plans. As of 2022, 2023, and continuing into 2024, Franchise Group aligns its retirement benefits with federal legislation, including the SECURE Act and SECURE 2.0 enhancements (RSM US) (National Law Review).
For its 401(k) plan, employees are automatically enrolled at a contribution rate of 3% of their salary, which escalates annually up to 10%, per changes beginning in 2024. Employees have the option to opt out, but this automatic enrollment is designed to help employees build savings consistently. Franchise Group’s 401(k) plan also offers employer matching contributions (CLA). Part-time employees become eligible to participate after two consecutive years of at least 500 hours of service
Restructuring and Layoffs: In early 2023, Franchise Group announced a significant restructuring plan aimed at streamlining operations and improving efficiency. This move included layoffs affecting approximately 10% of the workforce across various departments. The restructuring was driven by a need to adapt to changing market conditions and enhance financial performance.
Company Benefit Changes: As part of the restructuring, Franchise Group also revised its employee benefits package. Changes included reduced health insurance coverage options and modifications to retirement plan contributions. These adjustments were made to better align with the company's new strategic goals and financial outlook.
Franchise Group provides stock options as part of its employee compensation package. These options allow employees to purchase company stock at a set price within a specific timeframe.
Franchise Group typically grants stock options to senior management and key employees, based on performance and tenure.
Franchise Group options are generally vested over several years, with certain performance metrics required for full vesting.
Franchise Group RSUs (2022-2024):
Franchise Group also offers Restricted Stock Units (RSUs) to its employees. RSUs are granted to employees but are subject to vesting schedules, which are usually tied to continued employment.
Franchise Group grants RSUs to a broader range of employees compared to stock options, including mid-level managers and high performers.
Traditional Group Health Insurance Plans: Franchise Group offers traditional group health insurance plans where the company pays a fixed premium to the insurance carrier. These premiums cover a range of services, including medical, dental, and vision. The insurance carrier assumes the financial risk for claims, offering protection to the company against large, unexpected medical expenses. These plans, however, can become expensive and often require high participation rates from employees (StretchDollar).
Health Savings Accounts (HSAs): Employees have access to HSAs, which allow them to set aside pre-tax dollars for medical expenses. These accounts are beneficial for both employees and employers, offering flexibility and tax advantages. However, HSAs are only available to employees who have high-deductible health plans (HDHPs), which could limit participation (StretchDollar).
Individual Coverage Health Reimbursement Arrangement (ICHRA): Franchise Group also offers an ICHRA, which is a newer health benefit option. This allows employers to provide pre-tax funds that employees can use to purchase their own health insurance. This option is flexible and gives employees the freedom to select a plan that fits their needs. It is particularly useful for franchises with smaller workforces or employees located in various regions (StretchDollar) (Aflac).
Compliance with New Regulations: Franchise Group ensures that their health plans comply with the latest federal requirements, including those related to mental health parity and transparency in pricing. The transparency rules require the disclosure of in-network rates, out-of-network allowances, and prescription drug costs, while the mental health parity rules enforce comparative analysis for mental health and substance use disorder treatments (Aflac).
Recent Developments: The company has also been updating their healthcare offerings to align with new federal mandates regarding surprise billing, transparency in coverage, and parity in mental health services. These changes are designed to enhance employee protections, streamline claims, and provide clarity in pricing, which benefits employees seeking affordable care options
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