Granite Construction Employees: Smarter Ways to Manage Taxes on Appreciated Stock
Healthcare Provider Update: Offers PPO and HSA-compatible medical plans through Anthem Blue Cross, with employees paying only 19% of healthcare costswell below industry average 1.
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'Granite Construction 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.
'Granite Construction 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.' Granite Construction 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. Granite Construction 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 Granite Construction 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 Granite Construction 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 Granite Construction 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 Granite Construction 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 Granite Construction 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 Granite Construction 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 Granite Construction offer to its employees?
Granite Construction offers a 401(k) retirement savings plan to help employees save for their future.
How can Granite Construction employees enroll in the 401(k) plan?
Granite Construction employees can enroll in the 401(k) plan through the company's HR portal or by contacting the HR department for assistance.
Does Granite Construction match employee contributions to the 401(k) plan?
Yes, Granite Construction provides a matching contribution to employee 401(k) accounts, subject to certain limits.
What is the maximum contribution limit for the Granite Construction 401(k) plan?
The maximum contribution limit for the Granite Construction 401(k) plan is in line with IRS regulations, which can change annually. Employees should check the latest limits for the current year.
Can Granite Construction employees take loans against their 401(k) savings?
Yes, Granite Construction allows employees to take loans against their 401(k) savings, subject to the plan's terms and conditions.
What investment options are available in the Granite Construction 401(k) plan?
The Granite Construction 401(k) plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles.
How often can Granite Construction employees change their 401(k) contribution amounts?
Granite Construction employees can change their 401(k) contribution amounts at any time, typically during open enrollment or through the HR portal.
Is there a vesting schedule for Granite Construction's 401(k) matching contributions?
Yes, Granite Construction has a vesting schedule for its matching contributions, which means employees must work for the company for a certain period before they fully own those contributions.
What happens to Granite Construction employees' 401(k) accounts if they leave the company?
If Granite Construction employees leave the company, they can choose to roll over their 401(k) funds to another retirement account, cash out, or leave the funds in the Granite Construction plan, subject to plan rules.
Are there any fees associated with the Granite Construction 401(k) plan?
Yes, there may be administrative and investment fees associated with the Granite Construction 401(k) plan. Employees should review the plan documents for specific details.
With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
Granite Construction provides a comprehensive retirement benefits package, which includes the Granite Construction Profit Sharing and 401(k) Plan. This plan is a defined contribution plan, where employees can voluntarily contribute a portion of their pre-tax earnings towards their retirement. Granite Construction offers a 401(k) matching contribution that is 100% of employee contributions up to 6% of compensation, with employees becoming eligible for this match after six months of service (JobzMall) (SEC.gov). In addition to the 401(k) plan, Granite Construction offers a Profit Sharing Plan, which is tied to company profits. The profit-sharing contributions are discretionary and vary depending on the company's earnings (SimpleQDRO).
Employees who work for Granite Construction for 10 years or more may also qualify for a pension plan, which complements their retirement savings (JobzMall). Furthermore, Granite Construction provides an Employee Stock Ownership Plan (ESOP), where the company contributes newly issued stock or cash that is used to purchase shares for the employees. This further enhances the retirement benefits available to employees
Restructuring Layoffs: Granite Construction has undergone a significant restructuring effort across its operations throughout 2023-2024. The company reported adjusting its leadership and operational segments to align with market trends, which resulted in notable workforce reductions and asset divestitures (World Construction Network). The adjustments have been positioned as necessary to navigate economic pressures, supply chain disruptions, and increased labor costs. This news is crucial due to the current economic climate, as companies in the construction sector are especially vulnerable to market volatility and regulatory changes. Addressing these layoffs is vital to understanding the broader trends in construction employment and their ripple effects on communities and the economy.
Granite Construction offers stock options and Restricted Stock Units (RSUs) under their 2012 and 2021 Equity Incentive Plans. These stock options are performance-based and are made available to employees as part of their compensation packages. Granite (GVA) employees are eligible to participate in the company's equity awards based on their role and performance, which align with the company’s strategic financial and non-financial goals (Last10K) (SEC.gov). Stock options and RSUs at Granite Construction are available to both managerial and supervisory personnel, aiming to enhance retention and reward significant contributors to the company's success (SEC.gov) (SEC.gov).
In 2022, 2023, and 2024, Granite Construction (GVA) continued offering RSUs and stock options as part of its performance-based incentive structure. These RSUs vest over a defined period, typically contingent on meeting certain performance criteria or service durations (SEC.gov). Eligible employees include salaried personnel, primarily those in management roles across the company’s diverse sectors (Granite Construction). The incentive programs are designed to align employee interests with shareholders, promoting long-term growth and value creation
Medical Plans:
Granite Construction offers comprehensive healthcare benefits, including options like PPO (Preferred Provider Organization) and HSA (Health Savings Account) plans.
Anthem Blue Cross is a major provider for Granite's medical coverage, offering various plan structures such as HSA plans with high deductibles (e.g., $3,000 deductible).
Employees typically have access to preventive care, primary care, and specialist visits with coverage based on plan selection.
Acronyms and Healthcare-Related Terms:
PPO (Preferred Provider Organization): Employees can choose providers within a network for lower out-of-pocket costs.
HSA (Health Savings Account): Employees may contribute pre-tax dollars to an account for healthcare expenses.
COBRA: Coverage continuation for employees after employment termination or certain life events.
Open Enrollment: The annual period where employees can select or change their benefit elections.
Recent Employee Healthcare News:
Granite Construction has updated its benefit offerings to comply with federal healthcare reform laws, including the Affordable Care Act (ACA).
In 2023 and 2024, employees have been encouraged to use online benefits platforms like Workday for enrollment.
100% company-paid health insurance for some employee categories continues to be a key benefit, particularly for those enrolled in high-deductible health plans (HDHPs) that integrate with HSAs.
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