Healthcare Provider Update: FedEx's healthcare provider is primarily Cigna, which partners with the company to offer health insurance solutions to its employees through a range of plans, including High Deductible Health Plans paired with Health Savings Accounts. In 2026, FedEx employees may face significant healthcare cost increases, mirroring a broader trend across the nation. With the expected elimination of enhanced ACA premium subsidies, some workers could see their out-of-pocket premium costs surge by over 75%. Coupled with the anticipated double-digit rate hikes from major insurers and rising medical expenses, the financial burden on employees is poised to escalate sharply, potentially impacting their overall healthcare affordability. Click here to learn more
'Grantor retained annuity trusts can be a powerful way for FedEx employees to transfer future asset growth efficiently, as long as they're structured correctly in coordination with estate planning professionals.' — Wesley Boudreaux, a representative of The Retirement Group, a division of Wealth Enhancement.
'FedEx employees considering a GRAT should view it as a disciplined estate planning approach that allows them to pass future asset growth efficiently, with the help of qualified estate and tax professionals.' — Patrick Ray, a representative of The Retirement Group, a division of Wealth Enhancement.
In this article, we will discuss:
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How a Grantor Retained Annuity Trust (GRAT) can function as part of a comprehensive estate plan.
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Key advantages and potential considerations when using a GRAT strategy.
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Why GRATs may be particularly valuable for FedEx employees with appreciating assets.
Important Takeaways
A Grantor Retained Annuity Trust (GRAT) can play a meaningful role in an estate plan for FedEx employees who hold assets anticipated to increase in value substantially over time.
With a GRAT, the grantor transfers assets to an irrevocable trust while receiving fixed annuity payments for a set period. If the trust’s assets perform better than the IRS Section 7520 rate and the grantor lives through the term, the excess appreciation can pass to beneficiaries without additional gift tax and outside of the estate.
A “zeroed-out” GRAT enables the grantor to minimize or eliminate the use of the lifetime gift and estate tax exclusion, because the present value of the retained annuity nearly equals the value of the transferred assets.
Understanding the GRAT
A GRAT is an irrevocable trust that uses a small portion of the federal gift and estate tax exemption to shift future asset growth to heirs.
After funding the trust, the grantor retains the right to receive fixed annual annuity payments for a specified term. The annuity value is calculated using the IRS Section 7520 rate, which updates monthly and equals 120% of the applicable federal interest rate (AFR).
If the grantor lives through the term and the trust’s assets perform better than the 7520 rate, the appreciation can pass to heirs outside the taxable estate and without additional gift tax. This structure may be useful for FedEx professionals with equity-based compensation or assets that have meaningful growth potential.
How a GRAT Operates
A GRAT effectively “freezes” the taxable value of the transferred assets as of the funding date, allowing beneficiaries to benefit from growth above the Section 7520 rate. For gift tax purposes, the annuity payment is determined using the 7520 rate. If the grantor lives through the trust term, any remaining assets typically pass to heirs outside the estate.
Choosing the GRAT Term
Typical GRAT terms span two to ten years. A longer term may create more time for assets to grow relative to the Section 7520 rate. However, many individuals—including FedEx employees with fluctuating investment portfolios—prefer multiple short-term rolling GRATs, supporting flexibility in various market and interest rate environments.
Advantages of a Flexible GRAT
If a GRAT includes a replacement power under Internal Revenue Code §675(4)(C), the grantor may exchange assets of equal value during the trust term. This gives the grantor the option to substitute assets that may have stronger growth potential, provided proper documentation and compliance procedures are followed.
Transferring High-Growth Assets
Funding a GRAT with assets anticipated to grow significantly—such as marketable securities, private business interests, or pre-IPO shares—can be especially useful. FedEx employees with company stock or equity-based compensation may find GRATs advantageous for shifting growth potential to the next generation.
Structuring Annuity Payments
The IRS permits GRAT annuity payments to rise by as much as 20% annually, which may leave more principal in the trust early in the term, potentially supporting greater growth over time.
Tax Treatment
A GRAT is often treated as a grantor trust for income tax purposes, meaning the grantor reports trust gains, income, and losses on their personal return. The IRS does not treat the grantor’s payment of tax on trust income as an additional gift.
Risks and Considerations
If the grantor passes away during the GRAT term, the remaining trust assets—along with appreciation—are generally included in the taxable estate. In addition, if trust assets do not grow beyond the Section 7520 rate, the benefit to heirs may be limited because only annuity payments would return to the grantor.
Legislative updates have been introduced periodically to limit GRAT use, such as requiring minimum terms or a minimum remainder value, although no such changes have become law as of 2025.
Generation-Skipping Transfer Tax (GSTT)
A GRAT does not automatically bypass generation-skipping transfer tax. Due to Estate Tax Inclusion Period (ETIP) rules, GSTT exemption typically is applied after the trust term concludes. Working with estate planning counsel may help align timing and exemption decisions.
Should FedEx Employees Consider a GRAT?
For those interested in transferring wealth efficiently while managing gift tax exposure, a GRAT may be an effective planning tool. Results depend on the grantor’s lifespan, asset performance, and proper legal structuring. FedEx employees evaluating this strategy should seek guidance from an estate planning attorney or tax professional.
Need Guidance Tailored to Your Situation?
The Retirement Group assists individuals in understanding and improving estate and retirement planning strategies.
Call (800) 900-5867 to speak with a knowledgeable professional who can help determine whether a GRAT—or another approach—suits your long-term goals.
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Sources:
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1. U.S. Department of the Treasury, Internal Revenue Service. “26 CFR §25.2702-3: Requirements for Qualified Interests (GRATs).” Code of Federal Regulations , 2012 ed., Title 26, vol. 14, Government Publishing Office, Apr. 1 2012, pp. 1-2.
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2. Badgley v. United States. No. 18-16053, U.S. Court of Appeals for the Ninth Circuit, 28 Apr. 2020. pp. 6-7, 16-18.
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3. Internal Revenue Service. Notice 2003-72: Qualified Interests (Acquiescence to Walton). 3 Nov. 2003. IRS Bulletin 2003-44, pp. 964. Scott S. Landes, principal author.
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4. Cornell Law School, Legal Information Institute. “26 U.S.C. § 7520 – Valuation Tables.” LII/USCode, Cornell University, updated 2025, law.cornell.edu/uscode/text/26/7520.
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5. Impert, Walter M., and Mark G. Riedy. “A Review of Grantor Trusts.” Real Property, Probate & Trust Journal , vol. 49, no. 1, Fall 2014, Dorsey & Whitney LLP, pp. 1-3.
What are the implications of the Funding Target Attainment Percentage for FedEx Corporation employees, and how does it impact the security of the pension benefits offered by FedEx Corporation? This question seeks to explore the nuances of the funding target attainment percentage as reported in the annual funding notice, examining how this metric not only reflects the financial health of FedEx Corporation's pension plan but also how it affects employee confidence in future benefit payments and retirement planning.
Funding Target Attainment Percentage: The Funding Target Attainment Percentage for FedEx Corporation indicates the degree to which the pension plan is funded. A percentage of 101.33% for 2022 suggests that the plan has sufficient assets to cover its liabilities, providing security for employees' pension benefits. This high percentage likely increases employee confidence in the stability and reliability of their future pension payouts, essential for long-term retirement planning.
How does the merger of the FedEx Freight Pension Plan into the FedEx Corporate Employees’ Pension Plan influence the benefits currently available to FedEx Corporation employees? This question aims to delve into the practical changes that may arise due to this merger, assessing whether it aligns with employee expectations regarding their pension benefits and how the transition process is managed by FedEx Corporation.
Merger of Pension Plans: The merger of the FedEx Freight Pension Plan into the FedEx Corporate Employees’ Pension Plan appears to have been strategically managed to maintain benefit stability. Despite increasing liabilities by 5.3%, the merger was structured to ensure no negative impact on the benefit amounts payable to participants from either plan, preserving the expected pension benefits for all affected FedEx Corporation employees.
In terms of investment strategies, what measures does FedEx Corporation implement to ensure that its pension plan investments align with the long-term liabilities expected to be paid out to retirees? This question encourages an exploration of the investment policies in place, examining the asset allocations and risk management strategies that FedEx Corporation employs to ensure sustainable funding for its pension obligations, which could potentially include detailed analyses of stocks, debts, and alternative investments.
Investment Strategies: FedEx Corporation employs a diversified investment strategy across equities, fixed income, and alternative investments, aiming to meet long-term pension liabilities. This approach, which includes both active management strategies and the limited use of derivatives, is designed to generate returns that exceed market indices, thus ensuring adequate funding of pension obligations.
What options do employees of FedEx Corporation have for accessing their pension plan statements, and how frequently are these statements generated? The focus here is to understand the communication strategies employed by FedEx Corporation regarding pension benefit statements, including technological access points and the importance of these documents for employee financial planning.
Pension Plan Statements: FedEx Corporation provides annual pension plan statements through their Retirement Service Center, available electronically each fall. Employees can access their statements online or request them if notifications are not received, ensuring transparency and aiding in personal financial planning.
How are contributions to the FedEx Corporation Employees’ Pension Plan determined, and what role do excess contributions play in the plan's overall funding strategy? This question aims to educate employees about how the company balances mandatory contribution levels with potential excess contributions, exploring how these factors interact to influence the plan's solvency and employee benefits.
Contributions to the Pension Plan: Contributions to the FedEx Corporation Employees' Pension Plan are calculated to meet at least the minimum legal requirement and potentially include voluntary excess contributions. These excess contributions can help manage the plan's funding level and ensure its solvency, benefiting overall pension security for employees.
What types of benefits are guaranteed under the Pension Benefit Guaranty Corporation (PBGC) for FedEx Corporation employees, and what limitations exist that employees should be aware of? By focusing on the guaranteed benefits, this question prompts a discussion on the security of specific benefits provided by FedEx Corporation and highlights limitations, allowing employees to understand their rights fully.
PBGC Guarantee: The Pension Benefit Guaranty Corporation guarantees certain types of benefits for FedEx Corporation employees, such as pension benefits at normal retirement age and most early retirement benefits. However, there are limitations, such as exclusions for benefits without vested rights and recently increased benefits, which employees should be aware of to fully understand their pension security.
In what ways does the FedEx Corporation plan to adjust its pension funding strategy in light of changing federal laws that impact pension obligations? Employees are encouraged to consider how legislative changes influence corporate policies surrounding retirement benefits and the proactive strategies FedEx Corporation might take to remain compliant while ensuring the security of employee pensions.
Adjustments to Funding Strategy: FedEx Corporation is likely to adjust its pension funding strategy in response to legislative changes affecting pension obligations, such as those introduced by recent acts adjusting how pension liabilities are calculated. This proactive approach aims to ensure compliance with new laws while continuing to secure the financial health of the pension plan.
What are the steps that FedEx Corporation employees must take if they are considering retirement, particularly in how to navigate the pension plan and gain access to their benefits? This question aims to provide clarity on the retirement process, ensuring that employees are equipped with the necessary information regarding required documentation, timelines, and points of contact within FedEx Corporation.
Steps for Retirement Planning: Employees considering retirement should contact the FedEx Retirement Service Center to navigate their pension plan benefits. This process involves understanding necessary documentation, timelines, and available support, facilitating a smooth transition into retirement.
How does FedEx Corporation plan to manage potential funding shortfalls in the pension plan, and what mechanisms are in place for notifying plan participants should such an event occur? Employees would need to understand the proactive measures put in place by FedEx Corporation to address funding-related challenges while also knowing what this means for their benefits.
Managing Funding Shortfalls: In the event of potential funding shortfalls, FedEx Corporation has policies in place to manage such situations, including strategic contributions to mitigate shortfalls. The company maintains transparency with plan participants about funding levels and any significant changes affecting the pension plan.
For those seeking more information about their pensions and retirement options, how can FedEx Corporation employees contact relevant departments, and what resources are available for assistance? This question provides an opportunity for employees to familiarize themselves with contact points such as the FedEx Retirement Service Center, emphasizing the importance of open communication channels for addressing inquiries related to their pensions. Feel free to consult the provided document for more in-depth exploration of these topics.
Contacting for Pension Information: FedEx Corporation employees seeking more information about their pensions or retirement options can contact the FedEx Retirement Service Center. This center provides essential resources and support, ensuring employees have access to all necessary information regarding their retirement planning.
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