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Healthcare Provider Update: Healthcare Provider for Caterpillar: Caterpillar Inc. primarily offers its employees healthcare benefits through various providers, including Blue Cross Blue Shield, Cigna, and UnitedHealthcare. These providers typically offer a range of healthcare plans catering to the diverse needs of Caterpillar's workforce. Potential Healthcare Cost Increases in 2026: As healthcare costs rise, Caterpillar may face significant increases in its healthcare expenditures in 2026. The anticipated uptick in Affordable Care Act (ACA) premiums could lead to an inflationary impact on company-sponsored health plans, with reports suggesting that companies like Caterpillar might see costs soar due to a perfect storm of increasing medical expenses and the potential expiration of enhanced federal premium subsidies. Consequently, the company could experience upwards of 8.5% in healthcare cost increases in 2026, reflecting broader industry trends and putting additional pressure on corporate healthcare budgets. Click here to learn more
'Caterpillar employees can benefit from understanding how progressive tax brackets influence long-term income planning,' explains Paul Bergeron, a representative of The Retirement Group, a division of Wealth Enhancement. 'That's why I encourage individuals to review these rules carefully and consult a qualified tax professional for guidance tailored to their situation.'
'Caterpillar employees can gain clarity in their retirement planning by recognizing how federal tax brackets shape income decisions,' says Tyson Mavar, a representative of The Retirement Group, a division of Wealth Enhancement. 'I encourage individuals to work with a qualified tax professional to evaluate how these rules may apply to their circumstances.'
In this article, we will discuss:
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How federal tax brackets work and why they matter.
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How taxable income is calculated for retirement planning.
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Strategies that may help reduce taxable income.
Navigating taxes can feel more manageable when you understand how your income is allocated to various federal tax bands. Income tax is calculated by the IRS using seven brackets that adjust annually for inflation. You do not pay the same rate on every dollar you earn because income is taxed progressively. Instead, your taxable income is divided into ranges, each taxed at its own rate. Caterpillar employees can benefit from understanding how their tax brackets may change as they prepare for retirement income decisions.
Below are the IRS’s official 2025 and 2026 bracket tables, along with an explanation of how federal brackets work. The Retirement Group can help review how these rules may influence your long-term income strategy. You can reach us at (800) 900-5867 .
How Federal Tax Brackets Work
The seven federal income tax brackets in the United States are 10%, 12%, 22%, 24%, 32%, 35%, and 37% .
This progressive structure means that each additional portion of income is taxed according to the next bracket as taxable income increases, which may be important for Caterpillar employees reviewing future retirement income.
Your marginal tax rate applies to the last dollar of taxable income you earn. Your effective tax rate represents the overall percentage of income paid toward federal tax after all brackets are applied.
Your tax brackets also depend on the filing status you choose:
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- Single
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- Married filing jointly
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- Married filing separately
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- Head of household (single with a qualifying dependent)
The IRS adjusts these brackets every year to account for inflation.
How Your Taxable Income Is Calculated
To determine taxable income, start by adding all sources of taxable income, such as interest, qualifying pre-2019 alimony, tips, bonuses, and both employment and freelance earnings.
Next, subtract items already included on your W-2, such as contributions to a health savings account (HSA) or retirement plan contributions through your employer (401(k)).
Then subtract either your itemized deductions or the standard deduction—whichever applies. The remaining amount is your taxable income.
A Federal Effective Tax Rate Example
If a married couple with $150,000 in total income files jointly in 2025 and takes the standard deduction of $31,500 , their taxable income becomes $118,500 . Their federal tax calculation would look like this:
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- 10% on the first $23,850 → $2,385
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- 12% on $23,851 to $96,950 → $8,772
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- 22% on the remaining amount up to $118,500 → $4,741
- Total federal income tax: $15,898
- Effective tax rate: approximately 10.6%
(All bracket values sourced from IRS inflation adjustment notices above.)
Possible Strategies to Lower Taxable Income
These approaches may help reduce taxable income and potentially push you into a lower tax bracket:
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- Contributing to traditional IRAs or employer retirement plans
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- Adding funds to an HSA if enrolled in a qualifying high-deductible health plan
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- Using tax-loss harvesting in taxable brokerage accounts
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- Considering the timing of controlled income, such as bonuses or freelance payments
Starting in 2026, taxpayers who do not itemize may deduct up to $1,000 (single filers) or $2,000 (married filing jointly) for eligible cash charitable contributions.
Do You Have Questions About How Taxes Influence Retirement?
Federal tax brackets play a key role in retirement planning, especially when reviewing withdrawal timing, Social Security decisions, and income sources. Caterpillar employees can explore how tax rules fit into their broader retirement planning with guidance from The Retirement Group .
For personalized retirement discussions, call us at (800) 900-5867 .
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Sources:
1. Internal Revenue Service.
Revenue Procedure 2024-40.
22 Oct. 2024,
https://www.irs.gov/pub/irs-drop/rp-24-40.pdf
. Accessed 8 Dec. 2025.
2. Tax Policy Center.
“How Do Federal Income Tax Rates Work?”
Tax Policy Center Briefing Book
, Jan. 2024,
https://www.taxpolicycenter.org/briefing-book/how-do-federal-income-tax-rates-work
. Accessed 8 Dec. 2025.
3. Financial Industry Regulatory Authority (FINRA).
“Retirement Accounts.”
FINRA for Investors
,
https://www.finra.org/investors/investing/investment-accounts/retirement-accounts
. Accessed 8 Dec. 2025.
4. Adams, Hayden.
“Using Tax Brackets to Manage Your Taxable Income.”
Charles Schwab
, 12 Feb. 2025,
https://www.schwab.com/learn/story/using-tax-brackets-to-manage-your-taxable-income
. Accessed 8 Dec. 2025.
5. Vanguard.
“Year-End Tax-Savings Tips.”
Vanguard Investor Resources & Education
, 26 Aug. 2025,
https://investor.vanguard.com/investor-resources-education/article/year-end-tax-tips
. Accessed 8 Dec. 2025.
How does the transition from the Solar Plan to the Caterpillar Inc. Retirement Income Plan impact current or former employees of Caterpillar Inc. in terms of retirement benefits and service credits? Considering both plans' differences, what aspects should employees of Caterpillar Inc. understand to ensure they are maximizing their retirement benefits under this merged structure?
Transition from Solar Plan to Caterpillar Inc. Retirement Income Plan: The transition from the Solar Plan to the Caterpillar Inc. Retirement Income Plan maintained the benefits of those previously covered under the Solar Plan without impact. Both plans allowed the continuation of prior service credits and the incorporation of benefits payable under previous retirement plans. For current or former employees, understanding the nuances of how prior service credits and benefits are integrated can maximize their retirement benefits under the merged structure.
What specific criteria must Caterpillar Inc. employees meet to qualify for early retirement and what implications does this have on their pension benefits? For employees planning early retirement, what calculations or benefit reductions should they be prepared for according to Caterpillar Inc.’s policies?
Criteria for Early Retirement at Caterpillar Inc.: Employees wishing to take early retirement must meet specific age and service requirements detailed in the plan documents. For early retirement, benefits calculations and potential reductions are significant. Employees need to prepare for possible reductions in their pension benefits depending on their age and years of credited service at retirement.
In the context of the Pension Equity Plan (PEP) and the Traditional Pension Plan, how do the benefit calculations differ for employees at Caterpillar Inc., particularly for those who switched from the Traditional Plan to the PEP? What considerations should current Caterpillar Inc. employees take into account when evaluating which plan may offer them more secure benefits?
Differences Between PEP and Traditional Pension Plan: The benefit calculations for the Pension Equity Plan (PEP) and the Traditional Pension Plan differ significantly. PEP calculates a lump sum based on salary and years of service, while the Traditional Plan calculates benefits based on final earnings or credited service formulas. Employees need to consider which plan offers more secure benefits based on their individual career trajectory and earnings history.
What steps must Caterpillar Inc. employees take to ensure that their Credited Service is accurately calculated and maintained throughout their employment, especially in light of the company's policies regarding breaks in service? How might phases of employment, such as parental leave or temporary positions, affect this calculation?
Credited Service Calculation and Maintenance: To ensure accurate credited service calculation, employees must maintain thorough records and communicate any changes in employment status, such as breaks in service or changes in personal information, to the plan administrator. Understanding the rules for service credits during different phases of employment, such as parental leave or temporary positions, is crucial.
How can employees at Caterpillar Inc. file a claim for benefits under the retirement plans, and what are the essential details they need to provide to ensure their claims are processed smoothly? If they encounter issues or denials, what recourse do they have within the Caterpillar Inc. system to appeal these decisions?
Filing a Claim for Benefits: Employees should provide detailed and accurate information when filing a claim for benefits under the retirement plans. If issues or denials occur, they have the right to appeal these decisions. Familiarity with the claims procedure and required documentation can streamline this process.
For employees approaching retirement, what resources are available through Caterpillar Inc. to help them navigate the complexities of their retirement benefits? What steps should an employee take if they wish to understand their benefits better or need assistance with retirement planning?
Resources for Navigating Retirement Benefits: Caterpillar Inc. offers resources to assist employees in navigating the complexities of their retirement benefits. Employees approaching retirement should utilize these resources and may need to engage with the company's human resources or benefits departments for personalized assistance.
What are the implications of the changes to the cash-out limit for de minimis benefits at Caterpillar Inc., which will take effect after December 31, 2023? How does this change affect employees who may have a vested interest in understanding their financial benefit options upon termination or retirement?
Implications of Cash-Out Limit Changes: The increase in the cash-out limit for de minimis benefits affects how small vested benefits are processed upon termination or retirement. Employees with small benefit amounts should understand how these changes may impact their options and tax implications.
How does Caterpillar Inc. ensure that its pension benefits are protected from creditors, and what specific provisions exist to safeguard these benefits? Moreover, how do legal instruments like Qualified Domestic Relations Orders (QDROs) interact with Caterpillar Inc.'s benefits system for employees undergoing divorce?
Protection of Pension Benefits from Creditors: Caterpillar Inc.'s retirement plans are designed with protections to safeguard benefits from creditors, including adherence to Qualified Domestic Relations Orders (QDROs) during instances like divorce. Employees should understand how these legal instruments can affect their retirement savings.
In what ways does the Caterpillar Inc. Retirement Income Plan provide coverage for disability retirement, and how is this benefit calculated for employees? What factors influence eligibility and how do employees initiate claims if they find themselves in need of these benefits?
Disability Retirement Coverage: The plan provides specific provisions for disability retirement, including how benefits are calculated and eligibility criteria. Employees should be aware of how disability affects their benefits and the process for initiating claims if needed.
How can Caterpillar Inc. employees contact the company to learn more about their retirement benefits, and what information should they have ready when making inquiries? Additionally, what specific departments at Caterpillar Inc. should employees reach out to for the most efficient assistance regarding their retirement plan questions?
Contacting the Company for Retirement Benefit Information: Employees can contact the Caterpillar Benefits Center for inquiries about their retirement benefits. Knowing the specific departments to contact for efficient assistance is crucial for addressing concerns and making informed decisions about retirement planning.
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