Are Honda Motor Company Employees Prepared for Potential Tax Changes Ahead?

Healthcare Provider Update: Healthcare Provider for Honda Motor Company: Honda Motor Company collaborates with various health insurance providers for its employee healthcare needs. While the specific primary provider can vary by region and coverage option, large auto manufacturing companies like Honda typically use national insurers such as UnitedHealthcare, Aetna, or Cigna to manage their employee health plans. Potential Healthcare Cost Increases for Honda Motor Company in 2026: As Honda Motor Company prepares for 2026, it faces a landscape marked by significant increases in healthcare costs. Experts predict that overall healthcare expenses for businesses will rise by 8.5%, largely driven by escalating hospital costs and the trend of employers shifting more financial responsibility onto their workers. Additionally, the anticipated expiration of enhanced federal subsidies under the Affordable Care Act (ACA) could lead to marketplace enrollees experiencing premium hikes exceeding 75%, compelling companies like Honda to reconsider their benefits structures to mitigate impacts on employee coverage and costs. Click here to learn more

As the environment changes with the coming end of the Tax Cuts and Jobs Act, Honda Motor Company employees must navigate these changes strategically,' says Brent Wolf of The Retirement Group, a division of Wealth Enhancement Group. 'It is therefore important to consider Roth conversions, tax-loss harvesting, and estate planning in order to maintain financial health in the changing tax environment.'

The author of this paper agrees that Honda Motor Company employees who are likely to be affected by the possible change in tax laws should make it a point to meet their financial advisors to see how they can be best prepared for the future,' suggests Kevin Landis from The Retirement Group, a division of Wealth Enhancement Group. 'Some of the strategies that may be useful in the current environment and which may become particularly valuable as the tax laws change include Roth conversions and tax-loss harvesting.'

In this article we will discuss:

1. The effects that the upcoming 2024 elections may have on Honda Motor Company employees in relation to the Tax Cuts and Jobs Act.

2. Strategic financial moves such as Roth conversions, tax-loss harvesting, and gifting to minimize tax exposures in wait of possible tax reforms.

3. The role of personal financial planning in the context of potential legislative modifications and their implications for retirement planning.

As the 2024 elections draw near, Honda Motor Company employees need to know that there are certain changes that may happen in the financial system. The Tax Cuts and Jobs Act (TCJA) passed in 2017 and will expire at the end of 2025 is still a debate now. This legislation made a lot of changes to the tax code through increasing the standard deduction, reducing the top tax rate, expanding tax brackets, and restricting the deduction of state and local taxes (SALT) and mortgage interest. It also raised the federal gift and estate tax exemption thresholds.

During the campaign, President Biden has indicated that many of the cuts implemented by the TCJA should not be extended when they expire. On the other hand, former President Trump has proposed to continue some of the provisions of the act, the details of which are still under negotiation. This is because Congress will have a major say in the decisions that will be made.

Honda Motor Company employees who are thinking about tax strategies may want to consider the following strategies in light of possible higher taxes:

Conversions to Roth:

Honda Motor Company employees and retirees face unique opportunities and challenges when planning for potential tax changes. With Honda's retirement benefits structured through specific plans like the Honda Retirement Plan, the Honda 401(k) Savings Plan, and comprehensive retiree health benefits, it's crucial to consider how evolving tax policies may impact these valuable programs.

Roth Conversions: For Honda associates, particularly non-union employees enrolled in the Honda 401(k) Savings Plan, converting traditional 401(k) funds to a Roth 401(k) or Roth IRA may provide significant tax advantages, especially if you anticipate higher taxes in the future. This strategy allows for tax-free growth and withdrawals, effectively mitigating future tax liability. Union members, such as those represented by the United Auto Workers (UAW), should confirm specific plan provisions outlined in their collective bargaining agreements before initiating a conversion. Additionally, the "backdoor" Roth IRA conversion—making nondeductible contributions to a traditional IRA and then converting it—may also be advantageous for high-income Honda employees who exceed direct Roth contribution limits.

Tax Loss Harvesting: Honda employees who hold taxable investment accounts outside their company-sponsored plans can strategically use tax-loss harvesting to reduce capital gains taxes. By selling losing investments and reinvesting in similar but not identical assets, Honda associates can offset gains and reduce taxable income by up to $3,000 annually, carrying forward additional losses for future tax years.

Gifting and Estate Planning: With the estate tax exemption set to significantly decrease in 2024, Honda employees and retirees should prioritize estate planning. Utilizing the increased annual gift tax exclusion amount of $18,000 allows Honda retirees to effectively transfer wealth, reducing the taxable estate while supporting family or charitable goals. Documenting all gifting transactions meticulously remains crucial, particularly for gifts exceeding this limit.

Qualified Longevity Annuity Contracts (QLACs): QLACs offer Honda retirees an attractive option to defer income and associated taxes up to age 85, helping manage tax brackets more effectively in later retirement years. Employees and retirees may use a portion of their Honda Retirement Plan or traditional IRA funds to purchase QLACs, subject to IRS limits of $200,000. This approach can also reduce required minimum distributions (RMDs), thus lowering annual taxable income.

Specific Considerations for Honda Motor Company Employees: Honda offers both lump-sum and annuity payout options within its Honda Retirement Plan, allowing flexibility based on individual tax situations and retirement income goals. Recent updates, effective January 2023, streamlined the lump-sum calculation method, impacting retirement timing decisions, particularly for long-tenured non-union employees. Union employees covered under UAW agreements should consult their latest contract for precise details regarding pension calculations and distribution options.

Health benefits for Honda retirees are robust, providing significant coverage that often includes Medicare supplement plans, prescription drug coverage, and vision and dental care. Recent changes in healthcare legislation, including the Secure Act 2.0 effective December 2022, have impacted retirement planning by adjusting the required minimum distribution (RMD) age, enabling Honda retirees to further delay distributions and allow additional tax-deferred growth.

Given the potential sunset of the 2017 Tax Cuts and Jobs Act, it’s essential for Honda employees and retirees to review their financial strategies, including Roth conversions, estate and gifting plans, and potential use of QLACs. Due to each associate’s unique situation—especially differences between union and non-union status—seeking personalized advice from a qualified financial or tax professional is strongly recommended as we approach the pivotal 2024 election cycle.

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Sources:

1. Investopedia: 'What Is the Tax Cuts and Jobs Act (TCJA)?' Investopedia,  www.investopedia.com . Accessed 4 Feb. 2025.

2. Thrivent: 'TCJA Set to Expire: Tax Moves to Consider if You're Nearing or in Retirement.' Thrivent, 20 Feb. 2024,  www.thrivent.com . Accessed 4 Feb. 2025.

3. Pacific Life Annuities: 'Tax Cuts and Jobs Act Sunset Provisions after 2025.' Pacific Life Annuities,  www.annuities.pacificlife.com . Accessed 4 Feb. 2025.

4. J.P. Morgan Asset Management: Conrath, Michael, and Steve Rubino. '2024 Guide to Retirement.' J.P. Morgan Asset Management, 6 Mar. 2024, am.jpmorgan.com.

5. Waverly Advisors: 'Preparing for the Expiration of the Tax Cuts and Jobs Act (TCJA).' Waverly Advisors, waverly-advisors.com. Accessed 4 Feb. 2025.