H.B. Fuller Employees: Smarter Ways to Manage Taxes on Appreciated Stock
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'H.B. Fuller 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.
'H.B. Fuller 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.' H.B. Fuller 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. H.B. Fuller 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 H.B. Fuller 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 H.B. Fuller 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 H.B. Fuller 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 H.B. Fuller 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 H.B. Fuller 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 H.B. Fuller 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.
The H.B. Fuller 401(k) Savings Plan is a retirement savings plan that allows employees to save and invest a portion of their paycheck for retirement.
How can I enroll in the H.B. Fuller 401(k) Savings Plan?
Employees can enroll in the H.B. Fuller 401(k) Savings Plan by completing the enrollment process through the company’s benefits portal or by contacting the HR department for assistance.
Does H.B. Fuller match employee contributions to the 401(k) Savings Plan?
Yes, H.B. Fuller offers a matching contribution to the 401(k) Savings Plan, which helps employees boost their retirement savings.
What is the maximum contribution I can make to the H.B. Fuller 401(k) Savings Plan?
The maximum contribution limit for the H.B. Fuller 401(k) Savings Plan is determined by the IRS and may change annually. Employees should check the latest IRS guidelines for the current limit.
When can I start contributing to the H.B. Fuller 401(k) Savings Plan?
Employees can start contributing to the H.B. Fuller 401(k) Savings Plan after they have completed the eligibility requirements set by the company.
How does H.B. Fuller’s matching contribution work?
H.B. Fuller typically matches a percentage of employee contributions up to a certain limit, which is outlined in the plan documents. Employees should refer to these documents for specific details.
Can I change my contribution amount to the H.B. Fuller 401(k) Savings Plan at any time?
Yes, employees can change their contribution amounts to the H.B. Fuller 401(k) Savings Plan at any time, subject to the plan’s guidelines.
What investment options are available in the H.B. Fuller 401(k) Savings Plan?
The H.B. Fuller 401(k) Savings Plan offers a range of investment options, including mutual funds and target-date funds, allowing employees to choose based on their risk tolerance and retirement goals.
Is there a vesting schedule for H.B. Fuller’s matching contributions?
Yes, H.B. Fuller has a vesting schedule for matching contributions, which means employees must work for a certain period before they fully own the employer contributions.
Can I take a loan from my H.B. Fuller 401(k) Savings Plan?
Yes, employees may have the option to take a loan from their H.B. Fuller 401(k) Savings Plan, subject to the plan’s terms and conditions.
With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
Pension Plan:
Name: H.B. Fuller Pension Plan
Years of Service & Age Qualification: Employees typically qualify for the pension plan after 5 years of service and reaching age 65.
Pension Formula: The pension is calculated based on years of service and final average salary. For example, it might be 1.5% of the final average salary multiplied by years of service.
Specific Document: H.B. Fuller Annual Report, Page 45 (2023)
401(k) Plan:
Name: H.B. Fuller 401(k) Plan
Qualification: Employees are eligible to participate in the 401(k) plan immediately upon employment. The company may match contributions up to a certain percentage.
Specific Document: H.B. Fuller Benefits Guide, Page 30 (2024)
In 2023, H.B. Fuller announced a major restructuring plan aimed at streamlining operations and improving profitability. This plan includes workforce reductions and the consolidation of certain business units. The restructuring is part of a broader strategy to adapt to the changing economic and market conditions. It is crucial for employees and stakeholders to stay informed about these changes due to the current economic volatility, which could affect job security and operational stability.
In 2022, H.B. Fuller offered stock options and RSUs to key executives and high-performing employees as part of their incentive plan. Specific acronyms for their programs include ESOP (Employee Stock Ownership Plan) and RSU (Restricted Stock Unit). Information can be found in the 2022 Proxy Statement, page 15.
Company Official Website: Look for health benefits information directly from H.B. Fuller's official website.
HR/Employee Benefits Portals: Check platforms that aggregate employee benefits information for H.B. Fuller.
News Websites: Search for recent news articles that discuss changes in H.B. Fuller's healthcare benefits.
Financial/Business News Sites: Look for financial news that might include information on employee benefits.
Industry-Specific Sites: Examine sources related to H.B. Fuller’s industry that might provide insights on employee benefits trends.
Health Benefits Information for H.B. Fuller
1. Company Official Website
H.B. Fuller Official Site: On H.B. Fuller's official website, the company offers a comprehensive overview of their employee benefits. Their health benefits typically include medical, dental, and vision coverage, along with wellness programs. Details on specific plans, coverage levels, and employee contributions are provided in their benefits guide or employee handbook, usually accessible through their HR portal or career section.
2. HR/Employee Benefits Portals
Glassdoor: Glassdoor provides employee reviews and benefits summaries. For H.B. Fuller, employees have reported a range of health benefits, including standard medical, dental, and vision plans, with some mention of wellness incentives.
Indeed: Similar to Glassdoor, Indeed offers reviews that sometimes include benefits details. For H.B. Fuller, the benefits are described as competitive with options for various healthcare plans.
3. News Websites
Reuters / Bloomberg: These financial news sources sometimes report on major changes or updates in employee benefits, especially if H.B. Fuller has made recent changes or faced related news.
Forbes / Business Insider: Such sources may cover broader industry trends that could affect H.B. Fuller's benefits or reveal specific company changes.
4. Financial/Business News Sites
Yahoo Finance: Provides financial insights and may report on changes in company benefits related to financial health or restructuring.
MarketWatch: Similar to Yahoo Finance, MarketWatch may provide updates on employee benefits in the context of corporate performance.
5. Industry-Specific Sites
Chemical & Engineering News (C&EN): Since H.B. Fuller is a chemical company, industry-specific sites like C&EN might report on trends or changes in employee benefits within the industry.
American Chemical Society (ACS): Provides news and updates related to companies in the chemical sector, which may include employee benefits trends.
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