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Are Avaya Holdings Employees Prepared for Potential Tax Changes Ahead?

Healthcare Provider Update: Avaya Holdings offers health insurance coverage to its U.S. employees through Aetna-administered plans. Benefits include medical, dental, vision, and life insurance, along with access to Health Savings Accounts (HSAs), disability coverage, and preventive care services. Avaya Holdings Healthcare costs in the United States are projected to continue rising through 2026, with insurers proposing significant premium increases for Affordable Care Act (ACA) plans. A recent analysis found that ACA insurers are seeking a median premium increase of 15% for 2026, marking the largest hike since 2018. This surge is attributed to factors such as the anticipated expiration of enhanced premium tax credits, rising medical costsincluding expensive medications and increased hospital staysand a shift in the risk pool towards higher-cost enrollees. Without the renewal of enhanced subsidies, out-of-pocket premiums for ACA marketplace enrollees could increase by more than 75% on average. Click here to learn more

As the environment changes with the coming end of the Tax Cuts and Jobs Act, Avaya Holdings 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 Avaya Holdings 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:

The effects that the upcoming 2024 elections may have on Avaya Holdings employees in relation to the Tax Cuts and Jobs Act.
Strategic financial moves such as Roth conversions, tax-loss harvesting, and gifting to minimize tax exposures in wait of possible tax reforms.
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, Avaya Holdings 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.

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

Conversions to Roth:

Moving your 401(k) or IRA to a Roth 401(k) or Roth IRA may be advantageous if you anticipate higher taxes. This move allows for tax-free growth and distributions, controlling taxes in case of higher future taxes. Unlike other Roth conversions, the “backdoor” Roth entails contributing nondeductible amounts to a traditional IRA and then converting to a Roth IRA.

Tax Losses:

If you expect to pay more in capital gains taxes, you can sell losing investments and replace them with like investments to offset gains and thus reduce your taxes. The balance can be used to reduce taxable income up to $3,000 each year, any remaining loss being carried forward.

Gifting and Estate Planning:

The limits of estate taxes are expected to drop greatly in 2024, thus gifting becomes more important. With the annual gift tax exemption being increased to $18,000, there are now ways to decrease the value of the estate and gift it without incurring any tax. It is crucial to document everything, particularly if the gift is larger than the stated limit.

Qualified Longevity Annuities (QLACs):

QLACs are perfect for deferring income up to the age of 85 that may help to address potential future higher tax brackets. Qualified retirement plans include those that fund the QLAC, which defers taxation until distributions are made and are not reportable as required minimum distributions, with a limitation of $200,000.

In this context, it is crucial for the Avaya Holdings employees to get ready for the possible changes in the tax laws. Some of the current strategies include Roth conversions, tax-loss harvesting, and strategic gifting, which are very useful based on the current laws. This is because the situation is different for every single Avaya Holdings employee, and therefore the advice of a tax or financial expert is crucial as we head into the election season.

The Secure Act 2.0, which took effect in December 2022, also affects those near retirement age. This act increased the age of RMDs from retirement accounts, allowing for more tax deferred growth and possibly assistance in managing taxes in higher brackets. Review tactical financial planning in light of the impending sunset of the 2017 Tax Cuts and Jobs Act.

The opportunities that can be explored based on the understanding of Roth conversions, tax-loss harvesting, estate planning, and the benefits of Qualified Longevity Annuity Contracts (QLACs) are encountered in an attempt to maximize your retirement funds in light of potential tax increases. It is advisable to stay informed and proactive to protect your financial position as the 2024 elections may impact healthcare, taxes, and the overall economy.

IRA traditional account owners should consider certain pros and cons of converting their accounts to Roth IRA. The major ones include paying taxes on the amount being converted at the time of conversion, the rules on withdrawals from a Roth IRA, and the age and annual contribution limits on contributing to a Roth IRA. For instance, if you are required to take a RMD in the year that you convert, you must take it before converting to a Roth IRA. The following is an investment risk statement:

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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.

How can employees at Avaya Inc. ensure they are adequately prepared for retirement, considering the various types of pensions available under the Avaya Inc. Pension Plan? What steps should be taken to understand the key features of the pension plan, and how can they assess their individual needs relative to the benefits offered by Avaya Inc.?

Preparation for Retirement at Avaya Inc.: Employees at Avaya Inc. should first review the company’s Summary Plan Description for the pension plan details, which outline the types of pensions available and the processes for claiming them. It's crucial to understand the different pension types—service, deferred vested, and disability pensions—each with specific eligibility criteria and benefits. To prepare adequately, employees should estimate their pension benefits using tools provided by Avaya Inc., attend financial planning seminars offered by the company, and consider consulting with a financial advisor to assess how the pension fits into their broader retirement strategy.

Can you elaborate on the service pension eligibility criteria set by Avaya Inc.? How does age and credited service interact with this criterion, and what unique circumstances should employees at Avaya Inc. be aware of that may affect their eligibility for a service pension?

Service Pension Eligibility Criteria at Avaya Inc.: Eligibility for a service pension at Avaya Inc. is determined by age and credited service. Employees qualify at any age with 30 years of service, at age 50 with 25 years, at 55 with 20 years, and at 65 with 10 years. It’s essential for employees to understand that these criteria are strict; for instance, an employee aged 51 with 24 years of service does not qualify. Employees should plan their retirement age accordingly and consult with HR to confirm their credited service years.

What are the implications of early retirement under the Avaya Inc. Pension Plan? Employees at Avaya Inc. who are considering early retirement should understand both the benefits and potential losses associated with taking retirement benefits before the age of 55.

Implications of Early Retirement: Opting for early retirement at Avaya Inc. can lead to reduced pension benefits, especially if retirement occurs before age 55 with less than 30 years of service. The plan applies an early commencement discount, reducing the pension by 1/2% for each month before age 55. Employees considering early retirement should carefully evaluate how the reduction impacts their financial stability and may want to strategize with HR or a financial advisor to mitigate the reduction's effect.

What is the process for employees at Avaya Inc. to claim a deferred vested pension, and what specific conditions must be met for them to initiate this process? Employees must be informed about the timeline required for claims as well as the potential impact of their age and service duration on their pension amounts.

Claiming a Deferred Vested Pension: To claim a deferred vested pension at Avaya Inc., employees must meet certain conditions, such as being vested and having terminated employment. The pension commencement generally aligns with reaching age 65 or upon earlier termination. Employees must contact the Avaya Pension Service Center to initiate the process, providing necessary documentation and adhering to specified timelines, ensuring they understand the impact of early commencement on their pension amounts.

In what ways does Avaya Inc. support employees returning to work after retirement? Specifically, how does reemployment affect the pension benefits that retirees receive? Employees should consider how their decisions to return to work may minimize or suspend their pension benefits.

Returning to Work Post-Retirement: If an employee at Avaya Inc. returns to work after retirement, their pension benefits might be suspended or reduced, depending on the terms outlined in the pension plan. This policy is intended to adjust benefits when retirees re-enter the workforce, potentially affecting their financial planning. Employees should verify the specific rules with the pension service center and consider the financial implications before deciding to return to work.

How does the Mandatory Portability Agreement (MPA) influence the retirement benefits of Avaya Inc. employees transitioning between positions in affiliated companies? Employees should understand how service credit is recognized and transferred under the MPA and its impact on their retirement planning.

Impact of the Mandatory Portability Agreement (MPA): The MPA affects Avaya Inc. employees transitioning between positions within affiliated companies, allowing for the transfer of service credits. This agreement is crucial for employees moving within the company structure, as it ensures that their pension benefits are maintained and accurately calculated based on cumulative service, fostering seamless transitions and sustained benefit accrual.

What key information should employees at Avaya Inc. know regarding their rights under the Employee Retirement Income Security Act (ERISA) as they navigate the pension benefit process? Understanding ERISA rights is crucial for employees to effectively advocate for their benefits and understand their protections.

Understanding ERISA Rights at Avaya Inc.: Employees at Avaya Inc. should be aware of their rights under the Employee Retirement Income Security Act (ERISA), which safeguards employees' benefits. Understanding these rights is essential for effectively managing their pension plans and ensuring they receive all entitled benefits. Employees should familiarize themselves with the claim and appeal procedures provided in the plan documents to advocate effectively for their rights.

How do survivor benefits work under the Avaya Inc. Pension Plan? Employees and their beneficiaries should be aware of the conditions under which these benefits are paid and how they can designate beneficiaries to ensure compliance with Avaya Inc. policies.

Survivor Benefits under Avaya Inc. Pension Plan: Avaya Inc.'s pension plan provides survivor benefits, which are crucial for employees to arrange financial security for their beneficiaries. Understanding the conditions under which these benefits are paid and how to designate beneficiaries properly ensures that the employees' families are protected in case of the employee's death.

Can you explain the significance of the Pension Benefit Guaranty Corporation (PBGC) in relation to the retirement benefits that employees of Avaya Inc. may expect? Understanding the role of the PBGC could help clarify what protections are in place for employees in the case of plan termination.

Role of the Pension Benefit Guaranty Corporation (PBGC): The PBGC plays a protective role for Avaya Inc. employees by ensuring that pension benefits are secure even if the plan faces financial difficulties. Employees should understand how the PBGC's coverage affects them, particularly in scenarios where the company’s pension plan might be terminated or underfunded.

If Avaya Inc. employees want to learn more about their pension benefits or have specific questions about the retirement process, who should they contact and what resources are available to them? This question prompts employees to engage with the Avaya Inc. Pension Service Center and access information crucial for their retirement planning.

Accessing Pension Information and Assistance: Employees seeking more information about their pension benefits or needing specific help regarding their retirement process should contact the Avaya Pension Service Center. This center provides detailed guidance, handles claims and appeals, and offers comprehensive support to ensure employees understand and can effectively manage their pension benefits.

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

Avaya Holdings has announced a major restructuring plan involving significant layoffs and changes to their benefits and retirement plans. The company is focusing on streamlining operations to improve profitability, which includes reducing its workforce and altering pension and 401(k) contributions for current employees.

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For more information you can reach the plan administrator for Avaya Holdings at 350 Mt Kemble Ave Morristown, NJ 7960; or by calling them at +1 908-953-6000.