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Are Carvana Employees Prepared for Potential Tax Changes Ahead?

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Healthcare Provider Update: Carvana's healthcare provider is Aetna. As we look ahead to 2026, significant increases in healthcare costs are anticipated, primarily due to the expiration of enhanced premium subsidies under the Affordable Care Act (ACA). Without these subsidies, many enrollees could see their out-of-pocket premium payments rise by over 75%, exacerbating the financial burden on consumers. Additionally, insurers are projecting higher medical costs due to inflation and increased utilization of healthcare services, leading to average premium hikes that could reach 20% or more across various states. This combination of factors signals a challenging landscape for Carvana's employees and many other Americans seeking affordable health coverage. Click here to learn more

As the environment changes with the coming end of the Tax Cuts and Jobs Act, Carvana 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 Carvana 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 Carvana 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, Carvana 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.

Carvana 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 Carvana 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 Carvana 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.

What is the 401(k) plan offered by Carvana?

Carvana offers a 401(k) plan that allows employees to save for retirement through pre-tax and/or Roth contributions, providing a tax-advantaged way to build savings.

Does Carvana match employee contributions to the 401(k) plan?

Yes, Carvana provides a company match on employee contributions to the 401(k) plan, helping employees increase their retirement savings.

How can I enroll in Carvana's 401(k) plan?

Employees can enroll in Carvana's 401(k) plan through the employee benefits portal or by contacting the HR department for assistance.

What types of investment options are available in Carvana's 401(k) plan?

Carvana's 401(k) plan offers a range of investment options, including mutual funds, target-date funds, and other investment vehicles to suit various risk tolerances.

Can I change my contribution percentage to Carvana's 401(k) plan at any time?

Yes, employees can change their contribution percentage to Carvana's 401(k) plan at any time, typically through the employee benefits portal.

What is the vesting schedule for Carvana's 401(k) company match?

Carvana has a specific vesting schedule for the company match, which means that employees must work for a certain period before they fully own the matched contributions.

Are there any fees associated with Carvana's 401(k) plan?

Yes, Carvana's 401(k) plan may have administrative and investment fees, which are disclosed in the plan documents provided to employees.

How often can I review my 401(k) account with Carvana?

Employees can review their 401(k) account with Carvana at any time through the plan's online portal, allowing for regular monitoring of investments.

What happens to my Carvana 401(k) if I leave the company?

If you leave Carvana, you have several options for your 401(k), including rolling it over to another retirement account, cashing it out, or leaving it in the Carvana plan if permitted.

Does Carvana allow loans against the 401(k) plan?

Yes, Carvana's 401(k) plan may allow employees to take loans against their vested balance, subject to specific terms and conditions.

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
Carvana's 401(k) Plan: Carvana offers a traditional 401(k) plan, allowing employees to contribute a portion of their salary to a retirement savings account, which grows tax-deferred until withdrawal. In 2024, employees can contribute up to $23,000, with an additional catch-up contribution of $7,500 for those aged 50 or older, totaling $30,500. The company likely offers a match on employee contributions, though specific match details were not found. The plan includes a variety of investment options, typically mutual funds or ETFs, chosen by the employee from a list curated by the plan administrator​ (Annuity.org)​ (MissionSquare). Pension Plan: Carvana does not offer a traditional defined benefit pension plan as part of its retirement benefits package. Instead, they focus on the 401(k) plan, which aligns with the shift in many modern companies from defined benefit plans to defined contribution plans. The emphasis is on employee-driven retirement savings with employer support, rather than a fixed monthly pension payout​
Restructuring Layoffs (2023-2024): In response to economic pressures, Carvana has been undergoing significant restructuring efforts, including layoffs and reduction in work hours for many employees. These layoffs began in 2022 with the cutting of approximately 4,000 jobs and have continued into 2023 and 2024. The company has been discreetly reducing its workforce to combat financial losses, driven by increased inflation and rising interest rates. Carvana's stock has also suffered, with a 95% drop over the past year, further complicating its financial stability. Addressing these layoffs is crucial because they reflect broader economic challenges that could affect both current employees and investors, particularly in an unstable economic environment​ (markets.businessinsider.com). Benefit, Pension, and 401(k) Changes (2023-2024): Carvana has also been exploring changes to its employee benefits, particularly in terms of retiree health benefits. The company, like many others, is navigating the legal landscape concerning the reduction or elimination of post-employment health care benefits. For current and former employees, understanding these changes is essential as federal law does not protect retiree health benefits unless explicitly promised by the company. Such shifts in benefit structures underscore the importance of staying informed, especially given the volatile economic and political environment that impacts retirement planning
Carvana offers a comprehensive health benefits package including medical, dental, and vision insurance. They also provide access to telemedicine services and an Employee Assistance Program. There were updates to their benefits plan in 2023 to include more mental health resources and enhanced telehealth options.
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For more information you can reach the plan administrator for Carvana at 1930 W. Rio Salado Parkway Tempe, AZ 85281; or by calling them at +1 800-333-4554.

https://markets.businessinsider.com/news/stocks/carvana-layoffs-2023-what-to-know-about-the-latest-cvna-job-cuts-1032017776 https://www.theretirementgroup.com/featured-article/5448081/can-carvana-cut-benefits https://www.kiplinger.com/retirement/cash-balance-pension-plan-options https://www.mercer.com/insights/law-and-policy/taking-a-look-at-secure-2-0-defined-benefit-plan-provisions/ https://www.kiplinger.com/article/retirement/t047-c000-s004-the-pros-and-cons-of-cash-balance-plans.html https://www.annuity.org/retirement/401k/ https://www.missionsq.org/plan-sponsors/plan-rules/contribution-limits https://pensionrights.org/resource/retirement-plan-contribution-and-benefit-limits/ https://www.linkedin.com/company/carvana/ https://www.hrdive.com/

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