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Are Philip Morris International Employees Prepared for Potential Tax Changes Ahead?

Healthcare Provider Update: Healthcare Provider for Philip Morris International Philip Morris International (PMI) primarily collaborates with global health insurance providers rather than being tied to a specific healthcare provider. The focus of PMI's health-related initiatives is primarily in supporting public health efforts linked to tobacco control and transitioning towards smoke-free products, reflecting its corporate commitment to sustainability and consumer health. Anticipated Healthcare Cost Increases in 2026 As the healthcare landscape evolves, significant increases in healthcare costs are anticipated for 2026. Record hikes in ACA premiums are projected, with some states reporting increases exceeding 60%. Contributing factors include rising medical costs, the potential expiration of federal premium subsidies, and aggressive pricing strategies from major insurers. Without congressional action to renew enhanced tax credits, many consumers may face out-of-pocket premium increases exceeding 75%, exacerbating the financial strain for millions of Americans. These factors collectively signal a challenging healthcare environment ahead. Click here to learn more

As the environment changes with the coming end of the Tax Cuts and Jobs Act, Philip Morris International 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 Philip Morris International 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 Philip Morris International 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, Philip Morris International 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.

Philip Morris International 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 Philip Morris International 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 Philip Morris International 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 does the investment strategy outlined by the Philip Morris Group Pension Plan aim to ensure that sufficient assets are available to pay membersâ€™ benefits as they fall due? What specific return objectives has the Trustee established that reflect the financial goals of the Philip Morris Group Pension Plan?

Investment Strategy and Return Objectives: The primary objective of the Trustee's investment strategy is to ensure sufficient assets are available to pay members’ benefits as they fall due. The return objective set by the Trustee is to achieve a return above that achievable on index-linked gilts. The Trustee is mindful that growth can come from both investment performance and company contributions(Philip_Morris_Group_Pen…).

In what ways does the Philip Morris Group Pension Plan address the risks associated with inadequate long-term returns, and how has the Trustee structured the investment portfolio to mitigate potential stock market underperformance relative to inflation?

Addressing Risks and Portfolio Structure: The Philip Morris Group Pension Plan mitigates risks associated with inadequate long-term returns by investing around 20% of its portfolio in equities expected to outperform gilts. Approximately 50% of the portfolio is in index-linked gilts to provide protection from inflation(Philip_Morris_Group_Pen…).

What considerations does the Trustee of the Philip Morris Group Pension Plan have for environmental, social, and governance (ESG) factors in their investment strategy, and how do these considerations impact the overall financial performance of the Plan?

ESG Considerations: The Trustee acknowledges that environmental, social, and governance (ESG) factors are sources of risk, potentially impacting financial performance. Although the Plan's primary investment manager tracks market indexes without specific ESG constraints, the Trustee expects them to account for financially material considerations when engaging with investee companies(Philip_Morris_Group_Pen…).

How does the Philip Morris Group Pension Plan incorporate diversification within its investment strategy to protect against extreme stock market fluctuations, and what specific controls have been implemented by the Trustee to maintain an appropriate balance among asset classes?

Diversification Strategy and Controls: The Trustee implements diversification to protect against stock market fluctuations by investing in a variety of global asset classes and bonds. A mix of UK and overseas equities, along with government bonds, ensures appropriate balance and protection from extreme market volatility(Philip_Morris_Group_Pen…).

What procedures are in place for the Trustee of the Philip Morris Group Pension Plan to review and potentially revise the investment strategy based on performance assessments, market conditions, and changes in the economic environment?

Review and Revision of Strategy: The Trustee reviews the investment strategy periodically, especially following significant changes in investment policy or economic conditions. These reviews involve performance assessments and market evaluations in consultation with advisers(Philip_Morris_Group_Pen…).

How can members of the Philip Morris Group Pension Plan keep informed about any significant developments in investment strategy that may affect their benefits, and what communication methods does the Trustee employ to ensure transparency?

Member Communication and Transparency: Members are informed about significant developments in the Plan’s investment strategy through direct communications from the Trustee. Members can request a copy of the Statement of Investment Principles for further details(Philip_Morris_Group_Pen…).

What is the role of the investment manager, State Street Global Advisors, in the governance and performance of the Philip Morris Group Pension Plan's assets, and how does the Trustee evaluate the success of this partnership?

Role of State Street Global Advisors: State Street Global Advisors is responsible for the day-to-day management of the Plan’s assets. The Trustee evaluates the performance of State Street Global Advisors annually and ensures that their investment approach aligns with the Plan’s objectives(Philip_Morris_Group_Pen…).

How does the Philip Morris Group Pension Plan handle the issue of Additional Voluntary Contributions (AVCs), especially considering the decision to no longer allow active members to make these contributions since April 2006?

Additional Voluntary Contributions (AVCs): Active members have been unable to make Additional Voluntary Contributions to the Plan since April 2006. The Plan offers various options for members with existing AVCs, including investments in passive funds and with-profits funds(Philip_Morris_Group_Pen…).

What specific risks, aside from investment risks, does the Trustee of the Philip Morris Group Pension Plan need to prepare for, such as mortality or sponsor risks, and how do these factors influence the overall funding strategy of the Plan?

Other Risks (Mortality, Sponsor, etc.): The Trustee prepares for non-investment risks like mortality risk and sponsor risk, which can affect the Plan’s funding strategy. These risks are considered alongside investment risks to manage overall funding risk(Philip_Morris_Group_Pen…).

For employees seeking more information regarding the content of the Philip Morris Group Pension Plan documents, what are the best channels to contact the company, and who specifically should they reach out to within human resources or benefits administration?

Contact for More Information: Employees seeking more information about the Philip Morris Group Pension Plan should contact the Plan administrators, Lane Clark & Peacock LLP, or reach out to human resources or benefits administration for assistance(Philip_Morris_Group_Pen…).

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

Philip Morris International provides RSUs and stock options to eligible employees.