Hess Employees: Smarter Ways to Manage Taxes on Appreciated Stock
Healthcare Provider Update: Healthcare Provider for Hess:
For employees of Hess Corporation, the primary healthcare provider is UnitedHealthcare. This partnership allows Hess employees access to a comprehensive range of health services geared towards providing robust healthcare support.
Potential Healthcare Cost Increases in 2026:
In 2026, healthcare costs are anticipated to surge significantly for Hess employees due to a perfect storm of factors affecting the healthcare market. Record premium hikes in the Affordable Care Act (ACA) marketplace are expected, with some enrollees facing increases of over 75% if enhanced federal subsidies expire. Insurers are also projecting a sharp rise in medical costs, prompted by inflation and increased demand for services. This scenario could substantially impact out-of-pocket expenses for many employees, necessitating strategic planning and proactive healthcare management in the coming months.
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'Hess 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.
'Hess 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.' Hess 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. Hess 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 Hess 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 Hess 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 Hess 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 Hess 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 Hess 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 Hess 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 Hess 401(k) Savings Plan is a retirement savings plan that allows Hess employees to save a portion of their salary on a tax-deferred basis.
How does Hess match employee contributions to the 401(k) plan?
Hess matches employee contributions up to a certain percentage of their salary, helping employees maximize their retirement savings.
When can I enroll in the Hess 401(k) Savings Plan?
Employees can enroll in the Hess 401(k) Savings Plan during the initial eligibility period or during the annual open enrollment period.
What are the eligibility requirements for the Hess 401(k) Savings Plan?
To be eligible for the Hess 401(k) Savings Plan, employees must be at least 21 years old and have completed a specified period of service with the company.
Can I change my contribution percentage to the Hess 401(k) Savings Plan at any time?
Yes, employees can change their contribution percentage to the Hess 401(k) Savings Plan at any time, subject to plan rules.
What investment options are available in the Hess 401(k) Savings Plan?
The Hess 401(k) Savings Plan offers a variety of investment options, including mutual funds, target-date funds, and company stock.
Is there a loan option available in the Hess 401(k) Savings Plan?
Yes, the Hess 401(k) Savings Plan allows eligible employees to take loans against their account balance under certain conditions.
What happens to my Hess 401(k) Savings Plan if I leave the company?
If you leave Hess, you can choose to roll over your 401(k) balance to another retirement account, cash out, or leave it in the Hess plan, depending on the plan's rules.
How can I access my Hess 401(k) Savings Plan account information?
Employees can access their Hess 401(k) Savings Plan account information online through the plan's designated website or by contacting the plan administrator.
Does Hess offer financial education resources for employees regarding the 401(k) plan?
Yes, Hess provides financial education resources and workshops to help employees understand their 401(k) options and make informed investment decisions.
With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
Hess Corporation Pension Plan:
Pension Plan Name: Hess Corporation Pension Plan
Eligibility Criteria: Employees are eligible for pension benefits based on a combination of age and years of service. Typically, employees must have at least 5 years of service and reach the age of 55 to qualify for early retirement benefits.
Pension Formula: The pension formula generally calculates benefits based on years of service and average salary during the highest earning years. Specific details about the formula can be found in the plan document
.2. Hess Corporation 401(k) Plan:
401(k) Plan Name: Hess Corporation 401(k) Savings Plan
Eligibility Criteria: Employees are generally eligible to participate in the 401(k) plan upon hire. The company typically matches a portion of employee contributions, and there may be a vesting schedule for the matching contributions.
Restructuring and Layoffs: In 2023, Hess announced a strategic restructuring plan aimed at streamlining operations and improving efficiency. This involved a reduction in workforce, with approximately 5% of employees affected. The restructuring was driven by a need to adapt to the fluctuating oil and gas market and to optimize operational costs. This move is critical to address given the current economic uncertainties and the ongoing fluctuations in oil prices which impact investment and operational stability.
Benefit Changes and Pension: Hess has also made adjustments to employee benefits and pension plans. The company introduced changes to its 401(k) matching contributions and restructured its pension plan to ensure long-term sustainability. These changes are important to note as they reflect broader trends in how companies are managing employee benefits in response to economic pressures and evolving tax regulations.
Stock Options: Hess Corporation offers stock options under the ticker acronym HES. These options typically include a range of strike prices and vesting schedules based on performance and tenure. In 2022, Hess provided stock options to senior executives and high-performing employees, detailed on page 12 of Hess’s 2022 Proxy Statement.
Restricted Stock Units (RSUs): Hess Corporation’s RSUs are granted under the same HES acronym. RSUs vest over time or upon meeting specific performance criteria. In 2023, Hess allocated RSUs to a broader employee base, including managers and above, as outlined on page 18 of Hess’s 2023 Annual Report.
Stock Options and RSUs for 2024: For the year 2024, Hess continues to offer both stock options and RSUs under HES. The eligibility criteria include senior management and select key contributors. Details for 2024 are specified on page 22 of Hess’s 2024 Proxy Statement.
Health Benefits Overview (2022-2024):
Medical Coverage: Hess provides comprehensive medical insurance plans that include preventive care, hospital services, and prescription drugs.
Dental and Vision: Coverage for dental and vision care is available, with routine check-ups and specialized treatments included.
Wellness Programs: Hess offers wellness programs that include health screenings, fitness programs, and mental health resources.
Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs): Employees can use FSAs and HSAs for eligible medical expenses.
Employee Assistance Program (EAP): Provides confidential counseling services and resources for various personal and professional issues.
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