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Exploring Family Limited Partnerships and Limited Liability Companies: A Guide for Nordson Employees

Healthcare Provider Update: Nordson offers a comprehensive benefits package to its U.S. employees, including medical, dental, vision, and prescription coverage. The company supports employee wellness through HSAs, FSAs, and a wellbeing program. Retirement benefits include both traditional and Roth 401(k) options, life insurance, and disability coverage. Nordson also provides paid time off, adoption reimbursement, and tuition assistance5. Healthcare costs in the United States are projected to continue rising through 2026, with insurers proposing significant premium increases for Affordable Care Act (ACA) plans. A recent analysis found that ACA insurers are seeking a median premium increase of 15% for 2026, marking the largest hike since 2018. This surge is attributed to factors such as the anticipated expiration of enhanced premium tax credits, rising medical costsincluding expensive medications and increased hospital staysand a shift in the risk pool towards higher-cost enrollees. Without the renewal of enhanced subsidies, out-of-pocket premiums for ACA marketplace enrollees could increase by more than 75% on average. Click here to learn more

If you own and operate a family business, a family limited partnership (FLP) or family limited liability company (FLLC) could become a vital component of your estate plan. A properly formed and maintained FLP or FLLC can facilitate the transfer of your business to the next generation, protect assets from potential creditors, and minimize income, gift, and estate taxes.

What is an FLP/FLLC?

Many of our Nordson clients ask about FLPs and FLLCs. An FLP is a special form of limited partnership where members of a family serve as general and limited partners. An FLLC is a corporate entity owned by family members who may or may not serve as managers. With an FLP, general partners run the business. Limited partners have no vote and no say about day-to-day operations, but, they have limited liability; they aren't liable for the debts of the FLP in excess of their contributed capital. With an FLLC, all of the family members, even if they serve as managers, have limited liability (as with any corporate entity).

Note: The rest of this discussion will refer to an FLP; however, the underlying principles apply to FLLCs as well.

With a typical limited partnership, a general partner who has experience will team up with limited partners who have capital. In the family context, however, the senior generation typically starts out as both the general and the limited partners. They then gift the limited partnership interests to the younger generation. The general partners can gift as much as 99% of the business to the limited partners, keeping as little as 1%. This can be an ideal solution for our Nordson clients who want to transfer ownership of their business to their children, but also want to keep control until their children can gain experience and become competent enough to manage the business on their own.

Asset Protection

An FLP can provide some measure of asset protection for the limited partners. It generally takes a court order (called a charging order) for a creditor to reach a limited partnership interest, and even this only requires the FLP to pay income to the creditor instead of the partner until the debt is paid. In this case, the creditor does not become a substitute partner. He or she must wait until the general partner decides to distribute income (which may be a very long time). In addition, FLP assets are likewise protected from loss due to divorce. The general partner, however, does not receive the same protection and is personally responsible for the debts and liabilities of the FLP.

Income Tax Considerations

An FLP is a pass-through entity for income tax purposes. This means that the IRS does not recognize an FLP as a taxpayer (as it does for a corporation), and the income of the FLP passes through to the partners. So, you can shift business income and future appreciation of the business assets to other members of your family who may be in a lower tax bracket. The family as a whole can enjoy tax savings. From 2018 to 2025, subject to various limits, an individual taxpayer can deduct 20% of domestic qualified business income (excludes compensation) from a FLP.

Tip: The partners must report the income earned by the FLP on their personal income tax returns and are responsible for payment of any tax owed. Income is allocated to each partner based on his or her share of the contributed capital (i.e., pro-rata share).

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Gift and Estate Tax Considerations

One of the most powerful advantages of an FLP that we'd like our clients from Nordson to be aware of is that it can help minimize federal gift and estate taxes.

This is accomplished in three ways:

Leveraging the annual gift tax exclusion and gift and estate tax applicable exclusion amount: Gifts of interest in an FLP are subject to federal gift tax (and possibly state gift tax). However, you can minimize or eliminate your actual gift tax liability by transferring FLP interests in increments that are free from gift tax under the annual gift tax exclusion ($15,000 per recipient in 2019 and 2020). Further, every taxpayer has a federal gift and estate tax applicable exclusion amount equal to the basic exclusion amount of $11,580,000 (in 2020, $11,400,000 in 2019) plus any deceased spousal unused exclusion amount, so transfers that do not fall under the annual gift tax exclusion will be free from gift tax to the extent of your available applicable exclusion amount. Both the annual exclusion and the basic exclusion amount are indexed for inflation and may increase in future years.
Taking valuation discounts: You may be able to discount the value of the FLP interests given away. That's because the limited partners have very restricted rights, such as:(a) the inability to transfer an interest, (b) the inability to withdraw from the FLP, and (c) the inability to participate in management. These restrictions can result in a business value that is significantly less than the value of the underlying assets. These discounts can be considerable, totaling as much as 35%. The discounts available include the minority interest (lack of control) discount and the lack of marketability discount.
Removing future appreciation from your estate: Business assets generally appreciate (increase in value) over time. Distributing your assets among family members (through the FLP) freezes the current value and keeps any growth in value out of your estate later. You may have to pay gift tax now, but it will be less than if tax is calculated on a higher future value.

FLPs Must Comply With State Law and IRS Requirements

An FLP is subject to more restrictive rules than other forms of business entities. Care must be taken to create a valid FLP in the eyes of the state and the IRS. An FLP will be recognized only if it is formed for a valid business purpose. The FLP form will be disregarded if the IRS or the state finds that it was formed solely to avoid taxes.

Some specific purposes for creating an FLP include:

To adopt a family succession plan
To simplify annual gifting by the senior generation
To minimize income, gift, and estate taxes
To protect assets from potential creditors
To protect assets from waste by heirs
To consolidate assets into a single entity
To keep the business in the family
To decrease estate and probate costs

Additionally, an FLP may own a closely held business (other than a corporation that has made an election to be taxed as an 'S' corporation), real estate, marketable securities, or almost any other investment asset. Homes, cottages, or other personal use assets are normally not suitable for an FLP.

Tips For Forming And Maintaining A Valid FLP:

Have one or more substantial nontax purposes for creating the FLP, such as asset protection
Keep good records
Create the FLP while you're still in good health
Observe all legal formalities when creating the FLP and while operating the business
Hire an independent appraiser to value assets going into the FLP
Transfer legal title of assets going into the FLP
Put only business assets into the FLP — don't put any personal assets into the FLP
If you do put personal assets into the FLP, such as your home, pay fair market rent for their use
Don't commingle FLP assets and personal assets — keep them separate
Never use FLP assets for personal purposes
Keep enough assets outside the FLP to pay for personal expenses
Distribute income to partners pro rata

How does the Nordson Corporation Salaried Employees Pension Plan calculate an employee's Accrued Benefit, and what factors need to be considered to ensure accurate pension benefits at retirement? Understanding the components that contribute to the calculation is crucial for employees planning their retirement through Nordson Corporation.

Accrued Benefit Calculation: Nordson Corporation calculates an employee’s Accrued Benefit based on the Final Average Monthly Pay, the number of Years of Benefit Service, and an estimate of the employee’s Social Security benefit. The formula used includes a reduction if an employee has less than 30 Years of Benefit Service(Nordson Corporation_Feb…).

What are the eligibility criteria for joining the Nordson Corporation Salaried Employees Pension Plan, and how can employees determine their vesting status as they approach retirement? It is essential for employees to be aware of the timelines and requirements necessary to fully benefit from the retirement plan offered by Nordson Corporation.

Eligibility Criteria: Employees become eligible for the Nordson Corporation Salaried Employees Pension Plan after completing a Year of Eligibility Service, which requires at least 1,000 hours of work annually. Vesting occurs after completing 5 Years of Vesting Service, ensuring full entitlement to benefits(Nordson Corporation_Feb…).

In what ways can employees at Nordson Corporation access information about their pension plan benefits, and what steps should they follow if they believe their claims for benefits were denied? Knowing the appropriate channels for receiving information can help employees navigate any discrepancies with their pension benefits.

Accessing Pension Information and Claiming: Employees can access their pension plan details through John Hancock’s website or phone service. If a benefit claim is denied, employees can follow the claims procedure outlined by Nordson, which includes submitting a written request and appealing decisions(Nordson Corporation_Feb…).

What options does Nordson Corporation provide for early retirement, and how can employees assess whether an early retirement is financially feasible for them? Understanding the implications of early retirement can significantly impact an employee's long-term financial security.

Early Retirement Options: Nordson Corporation offers early retirement options starting at age 55, with at least 5 years of vesting service. Benefits are reduced by 6% per year for each year that early retirement is taken before the Normal Retirement Date(Nordson Corporation_Feb…).

How does Nordson Corporation's pension plan ensure that employees receive monthly benefits post-retirement, and what are the different forms of payment available to retirees? Grasping the payment structures may help employees make informed decisions regarding their retirement income.

Monthly Benefit Payments: Employees retiring from Nordson Corporation can choose various payment methods, including a Life Annuity or a 50% Joint & Survivor Annuity for married participants. Payments start after the Normal Retirement Date or early retirement, depending on the selected option(Nordson Corporation_Feb…).

What rights do participants have under the Employee Retirement Income Security Act (ERISA) concerning their Nordson Corporation pension plan, and what should they do to enforce these rights effectively? Employees should be aware of their rights to protect themselves during the benefit claiming process.

ERISA Rights: Under ERISA, participants have the right to receive information about their benefits, file claims, and sue if benefits are denied. Plan fiduciaries must act in the best interest of employees, and participants are protected from retaliation for asserting their rights(Nordson Corporation_Feb…).

How does the termination or amendment of the Nordson Corporation Salaried Employees Pension Plan affect employees' accrued benefits, and what protections are in place? Awareness of these scenarios can help employees better plan their financial futures in relation to their pensions.

Plan Termination or Amendment: If the plan is terminated or amended, accrued benefits cannot be reduced, and employees’ benefits become 100% vested. This ensures that employees retain the benefits they have earned up to the point of the change(Nordson Corporation_Feb…).

In what situations might employees at Nordson Corporation lose their pension benefits, and what preventative actions can they take to ensure they remain eligible for these benefits? Understanding the risks involved in pension plans can aid employees in maintaining their retirement security.

Loss of Pension Benefits: Employees may lose pension benefits if they leave Nordson Corporation before vesting or fail to select appropriate survivor options. Keeping the Plan Administrator informed of current contact information is crucial to avoid losing benefits(Nordson Corporation_Feb…).

How can employees at Nordson Corporation address questions or concerns related to their retirement planning, and what resources are available for personalized assistance? Access to proper resources is vital for employees needing guidance throughout their retirement journey.

Retirement Planning Resources: Employees can contact the Plan Administrator or use John Hancock’s automated services to address questions about retirement planning. Personalized assistance is available for any specific pension-related inquiries(Nordson Corporation_Feb…).

What steps should employees take to contact Nordson Corporation or the Plan Administrator to get detailed information about their pension plan, and what should they include in their inquiries to ensure a comprehensive response? Effective communication techniques can significantly enhance employees' understanding of their benefits. These questions have been designed to help employees of Nordson Corporation navigate their pension plan and retirement effectively.

Contacting the Plan Administrator: Employees can contact Nordson Corporation or the Plan Administrator by calling the number listed in the Summary Plan Description. It’s advisable to provide detailed questions regarding benefit amounts, vesting status, or payment options to receive a thorough response(Nordson Corporation_Feb…).

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: Nordson Corporation Retirement Plan Qualification Criteria: Years of Service: Generally requires a minimum of 5 years. Age Qualification: Typically eligible at age 65. Pension Formula: Formula is based on a percentage of final average salary and years of service. 401(k) Plan Name: Nordson Corporation 401(k) Savings Plan Qualification Criteria: Employees are eligible to participate after completing 30 days of service. Company Contribution: Nordson matches employee contributions up to a certain percentage.

News: In early 2024, Nordson Corporation announced a significant restructuring plan, including a reduction of approximately 5% of its global workforce. This move was part of a broader strategy to streamline operations and improve overall efficiency. The company also updated its employee benefits package, including modifications to its pension and 401k plans. Specific changes included adjusting the company’s matching contributions and modifying pension benefit accrual rates.

Nordson Corporation (NDSN) provides stock options and RSUs to employees as part of their compensation packages. Stock options at Nordson Corporation (NDSN) are generally granted to senior executives and key employees based on performance and tenure. RSUs are also awarded to employees as a form of long-term incentive, typically vesting over a period of time.

Benefits Overview: Nordson's official site provides information on various health benefits including medical, dental, and vision insurance plans. Employees have access to comprehensive health coverage, which typically includes options for health savings accounts (HSAs) and flexible spending accounts (FSAs). Recent Updates: The company has updated its benefits plans over the years. Specific changes for 2022, 2023, and 2024 can be found in their annual benefits summaries or employee communications.