PG&E Employees: Smarter Ways to Manage Taxes on Appreciated Stock
Healthcare Provider Update: Healthcare Provider for Pacific Gas & Electric
The primary healthcare provider for employees of Pacific Gas and Electric (PG&E) is often covered under large insurance carriers that offer comprehensive plans, including offerings from Blue Cross Blue Shield and UnitedHealthcare; the exact provider may vary depending on the employee's specific plan and regional options available.
Projected Healthcare Cost Increases in 2026
As we look ahead to 2026, healthcare costs are anticipated to rise significantly due to a combination of factors. Insurers are reporting average premium increases that could exceed 20%, driven largely by ongoing inflation in healthcare services and the potential expiration of enhanced subsidies provided under the Affordable Care Act. This perfect storm of rising medical costs and diminished financial support could shock many consumers, with estimates suggesting that out-of-pocket premiums might surge by as much as 75% for individuals reliant on marketplace plans. As such, both employees and employers within PG&E should prepare for heightened expenses, taking proactive steps now to mitigate potential financial impacts.
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'PG&E 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.
'PG&E 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.' PG&E 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. PG&E 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 PG&E 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 PG&E 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 PG&E 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 PG&E 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 PG&E 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 PG&E 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.
With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
PG&E offers two types of pension plans: the Final Pay Pension for employees hired before 2013 and the Cash Balance Pension for those hired after 2012. The Cash Balance Pension Plan credits a percentage of the employee's salary annually to an account that grows with interest. Additionally, PG&E contributes to a 401(k) plan with matching contributions, enhancing the retirement savings of its employees.
Wildfire Mitigation and Safety: PG&E is implementing a comprehensive wildfire mitigation plan, which includes laying off about 2,500 employees to improve operational efficiency (Source: Wall Street Journal). Strategic Focus: The company is focusing on grid safety and reliability. Financial Performance: PG&E reported a 7% increase in net income for Q2 2023, reflecting the success of its safety initiatives (Source: PG&E).
PG&E offers RSUs that vest over time, providing shares upon vesting. Stock options are also available, allowing employees to purchase shares at a fixed price.
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