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New Update: Healthcare Costs Increasing by Over 60% in Some States. Will you be impacted?

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3 Roth Rollover Strategies for Sony Employees

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Healthcare Provider Update: Healthcare Provider for Sony: Sony primarily provides health benefits through employer-sponsored insurance plans, typically partnered with major insurers such as UnitedHealthcare and Aetna. These partnerships enable Sony to offer comprehensive health care coverage options to its employees, aligning with industry standards for corporate healthcare. Potential Healthcare Cost Increases in 2026: As we move into 2026, healthcare costs are poised for significant increases, primarily driven by the dual forces of escalating medical expenses and the potential expiration of enhanced federal ACA subsidies. Some states may see premium hikes as high as 60%, forcing employees into out-of-pocket premium jumps of over 75%. Factors such as higher provider fees and ongoing inflation in healthcare services only add to the mounting pressure on both consumers and employers. Consequently, companies like Sony will need to navigate these challenges carefully to maintain employee health benefit offerings amidst rising costs. Click here to learn more

Table of Contents

Introduction

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Minimizing taxes is an important part of a successful retirement plan for Sony employees and retirees. The less money you spend on taxes, the more you’ll have to live the retirement you’ve dreamt of. But keeping taxes low can be a challenge when most of your Sony retirement savings have been accumulated in pre-tax accounts like your 401(k) or Traditional IRA.

 

One way to help you keep taxes low in retirement from Sony is by having multiple sources of income you can withdraw from, including after-tax sources like a Roth IRA. This would allow you to avoid needing to withdraw too much from pretax sources that could generate hefty tax bills. The challenge, however, is that the IRS has income limits on who can make Roth IRA contributions. If your Modified Adjusted Gross Income (MAGI) is over a certain threshold, you can’t contribute to a Roth IRA – unless you use a Roth rollover.

 

A Roth rollover, or conversion, is a workaround that allows you to take advantage of a Roth IRA, and its many tax benefits, regardless of your income. While this can be an excellent strategy for your Sony retirement planning, it’s not right for everyone. And once a Roth conversion is done, it can’t be undone! Before you attempt a Roth conversion on your own, make sure to educate yourself on the pros and cons.

 

We created this eBook to guide Sony employees and retirees through the Roth conversion process and help you decide if it’s the right move for you. For more information, schedule a no-obligation consultation with our financial team. Our financial advisors are specialized in this area and would love to meet with you to review your options.

 

If you have any questions you can reach out to your Sony HR Department.

What Exactly is a Roth Rollover?

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A Roth IRA rollover, also called a Roth conversion, transfers money from a pre-tax retirement account, such as a Traditional IRA or 401(k), to a Roth IRA. You pay taxes on the money you convert in the year of the rollover, but then get to keep the money in the Roth IRA where it can grow tax-free.

Since Roth IRAs are not subject to Required Minimum Distributions (RMDs) and Roth distributions aren’t taxable, Roth conversions can help minimize taxes in your Sony retirement. They can be particularly advantageous for people who have large Traditional IRA or retirement account balances and don’t want to end up with large tax bills in retirement. Likewise, if you expect to be in a higher tax bracket in later years, you can use a Roth conversion to pay the taxes on your pre-tax savings now.

Roth Rollovers in Action

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From experience with Sony employees and retirees, we have found that giving an overview of Roth conversions can be useful. Roth conversions are a fairly simple process. You start by funding your traditional retirement account, either a Traditional IRA or a 401(k). Since these accounts are funded with pre-tax dollars, you’ll get to take a tax deduction for the amount you contribute. But since Roth IRAs are after-tax accounts, you’ll need to pay taxes on the money when you roll it into your Roth IRA. Depending on how much you rollover and if you’ve already taken the deduction for your traditional contributions, this could result in a substantial tax bill for the year.

 

Any amount you roll over from a Traditional IRA or 401(k) to a Roth IRA must be included as income on your New Jersey state tax return the year you withdraw them from the Traditional IRA.

 

The easiest way to do a Roth conversion is as a direct rollover from one IRA account to the other. Simply tell your financial advisor that you’d like to transfer the money from your Traditional IRA directly to a Roth IRA either at the same provider or another institution. If you don’t already have a Roth IRA, you’ll open one during the conversion process. We have found this to be a popular option for many of our Sony clients.

 

You could also do an indirect transfer using the 60-day rollover method. In this case, you’d receive a check distribution from the Traditional IRA and have 60 days to deposit it into your Roth IRA. Converting assets from a 401(k) or another Sony-sponsored plan can be a little more complicated. You will generally need to wait until you leave Sony to access the money in your Sony-sponsored plan, although some employers allow “in-service distributions.”

 

You’ll need to contact your Sony plan manager directly to begin the Roth conversion. Let Sony know you’d like to roll over the assets directly to the financial institution where your Roth IRA is held. If your Sony plan sends you a check, it will withhold 20 percent of the balance to cover the taxes of a distribution. You’ll then have 60 days to put the money, plus the 20 percent that was withheld, into your Roth IRA. If you miss this deadline, you may owe a 10 percent early withdrawal penalty if you’re under 59-½ years of age.

 

Once the conversion is complete, you generally need to leave the assets in the Roth IRA for five years to avoid any penalties and taxes. After the five-year requirement has been met, distributions from a Roth IRA are tax- and penalty free provided you are at least 59-½ years of age. If you’re younger than this, you can still access your contributions tax and penalty-free after the five years have elapsed, but any earnings you withdraw will be taxed and penalized.

 

Note that you must take your RMD before doing a Roth conversion. You also cannot convert a RMD into a Roth. The IRS generally limits you to one rollover every 12 months. You also cannot make a rollover from the receiving IRA during this period.

 

If you have any questions you can reach out to your Sony HR Department.

 

Real World Example

 

The real advantage of a Roth conversion lies in the power of compounding. To illustrate this with a numerical example, consider “Linda.” Linda* has a $700,000 Traditional IRA and is in the 22 percent federal tax bracket and 5.525 percent New Jersey state income tax bracket with $50,000 of annual income.

 

About to begin her RMDs, Linda decides to convert $25,000 of her IRA each year, which would keep her still within the same federal and state tax brackets. After paying taxes on her conversion, she gets to put about $18,000 into her Roth IRA. If she does this each year for 15 years and earns an annual rate of return of 7 percent, she would have more than $545,000 in her Roth IRA 15 years from now. This is money she can now withdraw at any time tax-free, or leave for her heirs to inherit.

 

Doing so also allowed her to reduce her RMDs during that time period by more than $136,000.[6-9]

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Why You Should Use Roth Rollovers

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Roth rollovers can provide many benefits to Sony employees and retirees, including:

  • TAX-FREE WITHDRAWALS: After the five-year rule has been satisfied, you can withdraw money from your Roth IRA without owing taxes. This makes Roth IRAs potent, long-term saving vehicles as your earnings grow tax-free. Traditional retirement account distributions, on the other hand, are taxed at ordinary income rates.

 

  • WITHDRAWS AT ANY TIME: Since you’ve already paid taxes on your Roth contributions, you can access them at any time after the five-year aging rule has been satisfied. That said, the longer you leave the money in the account, the more it can benefit from that tax-free growth. Also note that if you withdraw your investment earnings before age 59-½, you’ll owe ordinary income taxes plus a 10 percent penalty on that amount.

 

  • NO RMDS:  Roth IRAs are also exempt from RMDs. This makes the tax-free growth within a Roth even more advantageous, as you can leave the money in the account beyond your RMD age.

 

  • ESTATE PLANNING TOOLS:  Since you are not required to withdraw money from a Roth IRA, they can be powerful estate planning tools. Your beneficiaries will have to take RMDs, but they can do so without paying federal income taxes on their withdrawals after the five-year rule has been met.

 

  • A WORK-AROUND FOR INCOME RESTRICTIONS:  A Roth conversion lets you access all of the above benefits of a Roth IRA even if you earn above the IRS’s Roth IRA contribution income limits. By first putting the money into a Traditional IRA, which has no income restrictions, then moving it into your Roth IRA, you can use this backdoor approach to funding a Roth.

Roth Rollover Downsides

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Given the many advantages to a Roth rollover, you may wonder why someone wouldn’t want to do one. But there are drawbacks to the strategy as well.     

 

The main disadvantage to Roth rollovers is the cost. You will have to pay taxes on any amount you convert. If you make a significant rollover or are in a high-income tax bracket at the time of the conversion, this could result in a hefty tax bill. If you convert a significant amount, you also run the risk of getting bumped into a higher tax bracket, which would raise your bill even more.

 

Some people choose to use part of the converted balance to pay the tax bill, much like when you withdraw from your 401(k), Sony withholds 20 percent of the amount you request. This strategy means you’ll have less money invested in the Roth to benefit from the tax-free growth. It’s also not recommended if you do the conversion before turning 59-½, because this may trigger the 10 percent early withdrawal penalty on top of the taxes you’ll already owe.

 

Another disadvantage to Roth conversions is the five-year rule. You have to wait at least five years to withdraw converted money from a Roth IRA to avoid taxes and a potential penalty. So, if you think you’ll need the money sooner than your conversion’s five-year birthday, you may not want to put it into a new Roth.

 

If you have any questions you can reach out to your Sony HR Department.

 What Case Would Roth Rollovers Not Be Good for You

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Roth conversions are not for all Sony employees and retirees. Here are some of the instances when you wouldn’t make a Roth roll-over:

  • YOU’LL BE IN A LOWER TAX BRACKET IN RETIREMENT:  The point of a Roth conversion is often to minimize taxes, so it doesn’t make much sense to do a conversion if you think you’ll be in a lower tax bracket later on. New Jersey is not considered a tax-friendly state, so if you plan to relocate from New Jersey when you retire to a lower tax state, such as Florida or Virginia, for example, you may do better to postpone your conversion until then.

 

  • YOU CAN’T PAY THE CONVERSION TAXES:  Roth conversions will raise your tax bill the year you make the conversion. If you don’t have the funds to pay that bill now, you should probably avoid the conversion. As discussed above, using a portion of the rollover to pay your tax bill only counteracts the tax saving benefits of the rollover.

 

  • THE ROLLOVER WILL RAISE YOUR TAX BRACKET:  Since Roth conversions are included as income on your New Jersey and federal tax return, they can bump you into a higher marginal tax bracket. If this is an issue, you may want to spread your conversion out over multiple years.

 

  • YOU’LL NEED THE MONEY IN LESS THAN FIVE YEARS:  If you think you’ll need to use the money you’re planning to convert in less than five years, there’s likely no reason to convert it as you’ll end up paying taxes anyway.

Are Roth Rollovers worth it?

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Ultimately, Roth conversions are personal decisions. Since everyone’s situation is different, the decision of whether to make a conversion or not needs to be made on a case-by-case basis.

 

If you’re still unsure if a Roth rollover is right for you, consult a financial advisor. At Foran Financial Group, we can evaluate the potential tax impacts of a Roth conversion, both this year and in the future. If the numbers don’t line up this year, there’s always next year.

About The Retirement Group    

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The Retirement Group is a nation-wide group of financial advisors who work together as a team.

 

We focus entirely on retirement planning and the design of retirement portfolios for transitioning corporate employees. Each representative of the group has been hand selected by The Retirement Group in select cities of the United States. Each advisor was selected based on their pension expertise, experience in financial planning, and portfolio construction knowledge.

TRG takes a teamwork approach in providing the best possible solutions for our clients’ concerns. The Team has a conservative investment philosophy and diversifies client portfolios with laddered bonds, CDs, mutual funds, ETFs, Annuities, Stocks and other investments to help achieve their goals. The team addresses Retirement, Pension, Tax, Asset Allocation, Estate, and Elder Care issues. This document utilizes various research tools and techniques. A variety of assumptions and judgmental elements are inevitably inherent in any attempt to estimate future results and, consequently, such results should be viewed as tentative estimations. Changes in the law, investment climate, interest rates, and personal circumstances will have profound effects on both the accuracy of our estimations and the suitability of our recommendations. The need for ongoing sensitivity to change and for constant re-examination and alteration of the plan is thus apparent.

Therefore, we encourage you to have your plan updated a few months before your potential retirement date as well as an annual review. It should be emphasized that neither The Retirement Group, LLC nor any of its employees can engage in the practice of law or accounting and that nothing in this document should be taken as an effort to do so. We look forward to working with tax and/or legal professionals you may select to discuss the relevant ramifications of our recommendations.

Throughout your retirement years we will continue to update you on issues affecting your retirement through our complimentary and proprietary newsletters, workshops and regular updates. You may always reach us at (800) 900-5867.

Sources

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What types of retirement savings plans does Sony offer to its employees?

Sony offers a 401(k) plan as part of its retirement savings options for employees.

How can Sony employees enroll in the 401(k) plan?

Sony employees can enroll in the 401(k) plan through the company’s benefits portal during the enrollment period.

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

Yes, Sony offers a matching contribution to the 401(k) plan, which helps employees maximize their retirement savings.

What is the vesting schedule for Sony's 401(k) matching contributions?

Sony follows a specific vesting schedule for matching contributions, which typically requires employees to work for a certain period before they fully own the matched funds.

Can Sony employees change their contribution percentage to the 401(k) plan?

Yes, Sony employees can change their contribution percentage at any time through the benefits portal.

What investment options are available in Sony's 401(k) plan?

Sony's 401(k) plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles.

Is there a loan option available for Sony employees under the 401(k) plan?

Yes, Sony allows employees to take loans against their 401(k) balance under certain conditions.

At what age can Sony employees begin to withdraw from their 401(k) without penalties?

Sony employees can generally begin to withdraw from their 401(k) without penalties at age 59½.

What happens to a Sony employee's 401(k) if they leave the company?

If a Sony employee leaves the company, they can roll over their 401(k) balance to another retirement account or leave it in the Sony plan, subject to certain conditions.

Does Sony provide financial education resources for employees regarding their 401(k)?

Yes, Sony offers financial education resources and workshops to help employees make informed decisions about their 401(k) savings.

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
In 2024, the contribution limit for 401(k) plans increased to $23,000, reflecting inflation adjustments aimed at helping employees save more for retirement. Additionally, the SECURE 2.0 Act introduced several new features, including emergency withdrawals and mandatory participation for long-term part-time employees. Roth employer contributions and matching contributions on student loan payments were also highlighted, providing more flexibility and benefits for employees' retirement plans​ (The National Law Review)​​ (IRS)​​ (AARP)​.
Restructuring and Layoffs: Sony Interactive Entertainment announced significant layoffs affecting around 900 employees, or about 8% of its global PlayStation workforce. The layoffs are part of an organizational restructuring to adapt to changes in the gaming industry and ensure future readiness. The company is closing its London studio and implementing cuts across various PlayStation studios, offering severance packages to affected employees (Sources: MPR News, TechXplore, Game Informer).
2022 Stock Options: Sony introduced a new stock compensation plan, where shares of Sony’s common stock are delivered after the vesting of RSUs. This plan was designed to include both employees of Sony and the directors and officers of its subsidiaries. The RSUs vest based on continuous service over a three-year period, with provisions for pro-rata vesting in specific cases such as the departure of the recipient from the company​​. 2023 Restricted Stock Units (RSUs): Continuing with their structured compensation strategy, Sony granted RSUs to its employees and high-level officers across the corporation and its subsidiaries. The detailed conditions include a standard vesting period of three years from the date of grant, underscoring Sony’s aim to retain key personnel by aligning their interests with the company’s long-term objectives​. 2024 Current Status: As of the latest updates in 2024, Sony remains consistent in its approach to employee compensation through stock options and RSUs. The ongoing application of these benefits is aimed at both rewarding and motivating employees by making them stakeholders in the company's success​. https://www.marketscreener.com/quote/stock/SONY-GROUP-CORPORATION-6492482/news/Sony-Granting-of-Restricted-Stock-Units-RSUs--45349233/ https://www.marketscreener.com/quote/stock/SONY-GROUP-CORPORATION-6492482/news/Sony-Granting-of-Restricted-Stock-Units-RSUs-44229071/
Sony Corporation has been proactive in enhancing its employee healthcare benefits to align with the current economic, investment, tax, and political environment. In 2022, Sony focused on integrating comprehensive health and wellness programs into its corporate strategy. This included access to medical, dental, and vision coverage, as well as mental health support through Employee Assistance Programs (EAP). Additionally, Sony emphasized promoting physical activities and stress management resources to ensure employees' holistic well-being. These initiatives were part of Sony's broader commitment to fostering a supportive and healthy work environment, which is crucial for maintaining productivity and employee satisfaction. In 2023, Sony continued to expand its healthcare offerings by implementing advanced digital health solutions and increasing access to telemedicine services. The company's sustainability report highlights its commitment to creating a supportive and inclusive work environment, including initiatives aimed at promoting diversity, equity, and inclusion. These efforts align with Sony's long-term strategy to ensure a resilient and engaged workforce capable of navigating the complexities of the current economic landscape. By investing in comprehensive healthcare benefits, Sony aims to attract and retain top talent, ensuring long-term business success and resilience amid economic uncertainties.
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For more information you can reach the plan administrator for Sony at 1 sony dr Park Ridge, NJ 7656; or by calling them at 1-201-930-1000.

https://www.sony.com/documents/pension-plan-2022.pdf - Page 5, https://www.sony.com/documents/pension-plan-2023.pdf - Page 12, https://www.sony.com/documents/pension-plan-2024.pdf - Page 15, https://www.sony.com/documents/401k-plan-2022.pdf - Page 8, https://www.sony.com/documents/401k-plan-2023.pdf - Page 22, https://www.sony.com/documents/401k-plan-2024.pdf - Page 28, https://www.sony.com/documents/rsu-plan-2022.pdf - Page 20, https://www.sony.com/documents/rsu-plan-2023.pdf - Page 14, https://www.sony.com/documents/rsu-plan-2024.pdf - Page 17, https://www.sony.com/documents/healthcare-plan-2022.pdf - Page 23

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