Healthcare Provider Update: Healthcare Provider for HP Hewlett-Packard, commonly known as HP, offers a variety of health insurance plans through large national insurers including UnitedHealthcare, Aetna, and Anthem. The choice of provider may depend on the region and specific employee benefits plan that HP provides to its workforce. Potential Healthcare Cost Increases in 2026 In 2026, healthcare costs are projected to rise significantly for consumers, particularly those enrolled in Affordable Care Act (ACA) marketplace plans. With some states expecting premium hikes exceeding 60%, many consumers may find their out-of-pocket costs increasing by over 75% due to the expiration of enhanced federal premium subsidies and rising medical costs. Insurers have cited a combination of escalating healthcare expenses and the need for aggressive rate adjustments to maintain profitability as key factors behind these anticipated increases. As this scenario unfolds, it will be crucial for individuals to carefully assess their healthcare options for the coming year. Click here to learn more
'Grantor retained annuity trusts can be a powerful way for HP 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.
'HP 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 HP employees with appreciating assets.
Important Takeaways
A Grantor Retained Annuity Trust (GRAT) can play a meaningful role in an estate plan for HP 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 HP 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 HP 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. HP 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 HP 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. HP 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.
How does HP Inc. ensure that the pension plan benefits will remain stable and secure for employees in the future, and what measures are being implemented to mitigate financial volatility associated with these benefits? Employees of HP Inc. should be particularly aware of how the transition of their pension payments to Prudential will affect their financial security and what protections are in place to ensure that these payments are maintained without disruption.
HP Inc. ensures pension plan benefits remain stable and secure by transferring the payment obligations to Prudential, a highly-rated insurance company selected through a careful review by an Independent Fiduciary. This move is aimed at reducing financial volatility associated with HP's pension obligations while maintaining the same benefit amount for retirees. Prudential's established financial stability provides additional security to employees(HP Inc_November 1 2021_…).
What specific details can HP Inc. employees expect to learn in the Welcome Kit from Prudential, and how will these details help them understand their new payment system? HP Inc. pension participants will need to familiarize themselves with the information outlined in the Welcome Kit to make informed decisions regarding their pension benefits going forward.
The Welcome Kit from Prudential will provide HP Inc. employees with instructions to set up an online account, along with details on managing payments, tax withholdings, and other resources. This information will allow employees to familiarize themselves with Prudential’s system and ensure a seamless transition without disruptions(HP Inc_November 1 2021_…).
In what ways does the selection process for Prudential as the insurance provider reflect the commitment of HP Inc. to the well-being of its employees? Understanding the rationale behind this decision will give HP Inc. employees insights into the fiduciary responsibilities and governance processes that protect their retirement benefits.
The selection of Prudential reflects HP Inc.'s commitment to employee well-being, as it involved the Independent Fiduciary conducting an extensive review of insurance providers. Prudential was chosen based on its financial strength and ability to manage pension payments securely, showing HP's focus on protecting retirement benefits(HP Inc_November 1 2021_…).
How will the annuity payments from Prudential differ from the previous pension payments in terms of tax implications and reporting for HP Inc. employees? It is crucial for employees of HP Inc. to comprehend the tax treatment of their new annuity payments to avoid any potential pitfalls in their personal financial planning.
The annuity payments from Prudential will be taxed similarly to the previous pension payments, though employees will receive two separate 1099-R forms for 2021 (one from Fidelity and one from Prudential). For future years, only a single form will be issued. This ensures employees are aware of how to manage tax reporting(HP Inc_November 1 2021_…).
What resources are available to HP Inc. employees seeking assistance regarding their pension benefits, and how can they effectively utilize these resources to address their concerns? Knowing how to access support and guidance will empower HP Inc. employees to manage their retirement benefits proactively.
HP Inc. employees seeking assistance can access live customer support through Fidelity or contact Prudential directly after the transition. Additionally, the Welcome Kit will include important contact information for managing their benefits, making it easy for employees to address concerns(HP Inc_November 1 2021_…).
How can HP Inc. employees verify the financial health and stability of Prudential, and why is this factor important in the context of their pension benefits? Employees must ask how Prudential's financial standing influences their view of long-term pension security and what metrics or ratings they should consider.
HP Inc. employees can verify Prudential’s financial health by reviewing Prudential's annual financial reports, which are publicly available. Prudential’s strong financial ratings were a key factor in its selection, assuring employees of long-term pension security(HP Inc_November 1 2021_…).
What steps should HP Inc. employees take to update their personal information, such as banking details and tax withholding preferences, following the transition to Prudential? Understanding these processes will ensure a smooth continuation of benefits for HP Inc. employees as they adapt to the new system.
Employees do not need to re-submit their personal information to Prudential, as HP will securely transfer all necessary data, including banking and tax withholding preferences. This ensures the continuation of pension payments without the need for employee intervention(HP Inc_November 1 2021_…).
How does HP Inc. plan to address potential changes in the financial landscape that may affect pension benefits, and what role does the insurance contract with Prudential play in this context? HP Inc. employees should be informed about the company's strategic outlook and how it aims to safeguard pension assets against economic uncertainties.
HP Inc. plans to address potential financial changes through its contract with Prudential, which guarantees pension payments will remain the same. Prudential manages these risks as part of its core business, providing added security against economic volatility(HP Inc_November 1 2021_…).
In what circumstances might HP Inc. employees see changes in their net pension payments following the transition to Prudential, despite assurances that payment amounts will remain unchanged? This understanding will help employees manage their expectations regarding future payments and any adjustments they may need to make.
Employees might see changes in their net pension payments due to tax adjustments or changes in withholding instructions, but the gross payment amount will remain unchanged. Any garnishments or other deductions will continue as before, ensuring consistency in payment structure(HP Inc_November 1 2021_…).
How can HP Inc. employees contact the company directly to learn more about the pension transition process, and what channels are available for them to have their questions addressed? Clear communication lines are essential for HP Inc. employees to ensure they receive timely and relevant information regarding their pension situations.
HP Inc. employees can contact the company through the Fidelity support line or directly through Prudential for any questions about the pension transition. The Welcome Kit and other resources will provide contact details, ensuring employees have access to timely support(HP Inc_November 1 2021_…).
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