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Navigating Estate Planning for Sempra Employees: Adapting to Federal and State Tax Changes

'Sempra employees must remain proactive in updating their estate plans to reflect the evolving tax landscape, ensuring their financial legacy is preserved despite anticipated changes to exemption limits and estate tax regulations.' – Michael Corgiat, a representative of The Retirement Group, a division of Wealth Enhancement Group.

'Sempra employees should consider adjusting their estate plans now to take advantage of current exemption limits before the anticipated reductions in 2026, ensuring that their assets are protected and efficiently passed on to future generations.' – Brent Wolf, a representative of The Retirement Group, a division of Wealth Enhancement Group.

In this article, we will discuss:

Upcoming Changes to Estate Tax Exemptions — How the reduction of the federal gift and estate tax exemption in 2026 may impact Sempra employees' estate plans.
Strategies for Managing Different Asset Types — The tax implications of retirement accounts, taxable accounts, and real estate when structuring an estate plan.
The Role of Life Insurance in Estate Planning — How irrevocable life insurance trusts can help mitigate estate tax burdens and facilitate a smooth transfer of wealth.

Estate planning remains a complicated area of financial management for Sempra employees. With major changes to federal tax regulations expected by the end of 2025, employees should consider adjusting their estate plans to accommodate possible changes.

Modifications to Exemption Limits' Effects.

At USD 13.99 million per person, the federal gift and estate tax lifetime exemption is currently USD 13.99 million. This exemption is expected to drop to around USD 7 million post-2025. This change creates concern among users of the existing higher gifting limits. But Treasury Department regulations from November 2019 say gifts made between 2018 and 2025 under the higher exemption amounts will not be affected even if the exemption amounts decrease after 2025. Source: Treasury Department:

Considered Aspects for Different Account Types.

The federal estate tax affects all account types differently - and that includes employees of Sempra companies - because assets at death are taxable at the full market value. Assets in retirement accounts like traditional IRAs or 401(k)s are subject to income taxes and possible penalties if passed before death. Alternatively, assets in taxable accounts like real estate or brokerage accounts might be better suited to lifetime gifting strategies. Roth conversions may also improve tax efficiency on large assets in retirement accounts.

Considerations Regarding Real Estate and Estate Taxes.

Estate planning for real estate involves considering the property's value at death because it directly affects estate tax, whether the heirs plan to sell or keep the property. States such as Nebraska and Pennsylvania tax the heirs on inheritances. Sempra employees planning their estates should structure plans that provide enough liquidity to cover estate taxes and other costs without having to liquidate large assets like real estate or family businesses, especially since estate tax exemptions could decrease in 2026.

Life Insurance & Estate Planning.

Life insurance proceeds are included in the estate's gross value. But the proceeds of a policy owned by an irrevocable trust are not included in the estate and are exempt from estate taxes. This setup allows structured planning using annual exclusion gifts to fund life insurance premiums through trusts - a useful tool for tax-advantaged wealth transfer - especially with estates that may be over federal exemption limits.

Reviewing Your Estate Plan

Sempra employees should review and update their estate plans every three to five years or at the time of a major life event like marriage, the birth of a child, or a significant change in net worth. State or federal tax laws also should cause an evaluation of estate plans. Some whose plans might not reflect new laws or personal circumstances should consult an estate planning attorney, especially with tax changes coming soon.

Final Thoughts

Sempra employees should take proactive estate planning steps to protect their legacy amid possible federal tax law changes. This means understanding how different asset types affect estate taxes, using trusts for life insurance, and maintaining estate liquidity to service tax obligations. Such strategies match financial planning to laws of today and tomorrow, preserving wealth for future generations.

Like navigating changing waters, Sempra employees should update their estate plans to reflect changing tax landscapes. Actively preserving financial legacies through lifetime gifting or asset restructuring may help them weather changes in federal tax exemptions. A bit like a captain in shifting seas, careful preparation may lead an estate to its destination.

Articles you may find interesting:

Source:

1. 'Understanding the 2026 Changes to the Estate, Gift, and Generation-Skipping Tax Exemptions.' Husch Blackwell , June 2024, www.huschblackwell.com .

2. 'Estate Planning Considerations for Highly Appreciated Assets.' McLane Middleton , September 2024, www.mclane.com .

3. 'Estate Planning Now and for the 2026 'Double Exemption' Sunset.' Eide Bailly , July 2023, www.eidebailly.com .

4. 'Make Estate Planning More Tax Efficient By NOT Splitting Assets Evenly.' Michael Kitces , August 2024, www.kitces.com .

5. 'Estate Tax Exemption Sunset 2026: Key Questions Answered.' Merrill Lynch Wealth Management , March 2024, pbig.ml.com.

How does Sempra Energy define and implement its retirement benefits policies, and in what ways do these policies align with current IRS regulations for 2024? Employees may want to explore how modifications to retirement plans can affect their financial readiness for retirement and the levels of income they can anticipate. Understanding the nuances of vested benefits can provide insight into the implications of early withdrawal or delays in retirement for employees at Sempra.

Retirement Benefits Policies and IRS Regulations Sempra Energy's retirement benefits policies include a 401(k) Savings Plan, nonqualified deferred compensation plans, and a broad-based Cash Balance Plan. These plans are structured to comply with IRS regulations, ensuring tax-qualified status and adherence to contribution limits set by the IRS. For example, their 401(k) plan includes features like immediate vesting of contributions and a variety of tax-deferred investment options, aligned with current IRS guidelines for 2024 .

What are the key features of the 401(k) Savings Plan offered by Sempra Energy, and how do these features compare to industry standards? Employees should analyze the matching contributions, eligibility requirements, and enrollment procedures, as well as the variety of investment options available, to assess the plan's overall effectiveness in meeting their long-term retirement savings goals.

Key Features of the 401(k) Savings Plan The Sempra Energy 401(k) Savings Plan allows employees to contribute a portion of their eligible pay on a tax-deferred basis, with an option for Roth contributions. The plan offers matching contributions of up to 4% of eligible pay, with a basic match of 50% on the first 6% of employee contributions and a stretch match on the next 5%. This structure is designed to encourage higher employee contributions and is comparable to industry standards, which typically offer similar matching schemes .

In what ways does Sempra Energyâ€™s approach to employee financial wellness programs benefit employees nearing retirement, and how does this approach reflect industry trends? Engaging in benefits like financial counseling and retirement planning workshops can empower employees to make informed decisions about their retirement strategy and provide them with necessary tools to plan for their future.

Employee Financial Wellness Programs Sempra Energy's approach to employee financial wellness includes offering financial counseling and retirement planning workshops. These programs are aimed at helping employees nearing retirement make informed decisions about their financial future. This proactive approach aligns with industry trends where comprehensive financial wellness programs are increasingly becoming a standard part of employee benefits packages to enhance overall employee satisfaction and retention .

How does Sempra Energy evaluate the impact of economic factorsâ€”such as inflation and tax changesâ€”on its retirement plans and what provisions are in place to adjust benefits accordingly? Employees should be informed about how external economic pressures might affect their retirement savings and the company's commitment to adapting its benefits to ensure continued retirement security.

Impact of Economic Factors on Retirement Plans The company regularly evaluates the impact of external economic factors like inflation and tax changes on its retirement plans. Adjustments are made to ensure that the benefits remain competitive and secure, thereby safeguarding employees' retirement savings against economic fluctuations. This commitment to adapting benefits in response to changing economic conditions demonstrates a proactive approach to maintaining the robustness of its retirement offerings .

What are the different retirement options available to employees at Sempra Energy, including traditional pensions and defined contribution plans? Understanding the distinctions and implications of these options can play a crucial role in retirement planning, enabling employees to choose the best path for their individual circumstances.

Retirement Options Available to Employees Employees at Sempra Energy have access to traditional pensions through the Cash Balance Plan and defined contribution plans like the 401(k). The availability of these diverse options allows employees to tailor their retirement planning according to their individual financial goals and circumstances, providing flexibility in choosing the most suitable retirement path .

How can Sempra Energy employees navigate the process of applying for retirement benefits, including required documentation and typical timelines for approval? Itâ€™s essential for employees to be aware of the step-by-step process, what is expected from them, and how long they should anticipate before benefits become accessible, which will ultimately affect their transition into retirement.

Navigating the Retirement Benefits Application Process Sempra Energy provides a clear process for applying for retirement benefits, which includes detailed documentation requirements and typical timelines for approval. This streamlined process is designed to minimize uncertainties and ensure that employees understand what is required of them to successfully access their retirement benefits upon transitioning into retirement .

What resources does Sempra Energy provide for employees seeking retirement planning assistance, and how do employees gain access to these resources? Employees should be encouraged to utilize available financial planning tools and advisory services to enhance their understanding of retirement savings options and strategies that align with their personal financial goals.

Retirement Planning Assistance Resources The company offers various resources for retirement planning, including access to financial planning tools and advisory services. These resources are readily available through the company's employee portal, allowing employees to enhance their understanding of different retirement strategies and make well-informed decisions that align with their personal financial goals .

How does Sempra Energyâ€™s retirement strategy address the needs of a diverse workforce, particularly in the context of equity and access to retirement benefits? Employees may benefit from exploring how inclusive practices enhance participation in retirement plans and ensure that all employees receive equitable access to benefits critical to their retirement readiness.

Addressing Diverse Workforce Needs in Retirement Strategy Sempra Energy’s retirement strategy includes measures to ensure equitable access to retirement benefits for its diverse workforce. This approach is indicative of the company's broader commitment to diversity and inclusion, ensuring that all employees, regardless of their background, have fair access to the benefits essential for their retirement readiness .

In what ways can Sempra Energy employees stay informed about changes to retirement policies and IRS regulations, and whom should they contact for more detailed inquiries? Understanding the importance of maintaining current knowledge regarding benefits administration can help employees align their personal financial planning with the companyâ€™s offerings.

Staying Informed About Retirement Policy Changes Employees at Sempra Energy are encouraged to stay informed about changes to retirement policies and IRS regulations through regular updates provided by the HR department. This ensures that employees can align their retirement planning with the latest company policies and regulatory requirements, maintaining their financial well-being .

How can Sempra Energy employees best prepare for their retirement, and what specific steps are outlined in Sempraâ€™s retirement resources? Employees need to be informed about practical strategies they can implement to ensure a comfortable post-employment lifestyle and how to effectively utilize the resources provided by Sempra for planning their retirement journey. To learn more about the content in this document and clarify any questions regarding retirement plans and benefits, employees can contact Sempra Energyâ€™s Human Resources Department directly via their official website or the HR helpline available in the employee portal.

Preparing for Retirement at Sempra Energy Sempra Energy outlines specific steps for employees to prepare for retirement, emphasizing the importance of early and informed planning. The company provides detailed resources and support to help employees understand their retirement options, effectively use company-provided tools, and develop a personalized retirement strategy that ensures a comfortable and secure retirement .