Kraft Heinz Layoffs in Champaign
If you are leaving Kraft Heinz, you may or may not have planned for it. Either way you have some decisions to make. You can leave your money in the Kraft 401k plan or you can roll it over into an IRA. You should check with your HR department to see of your 401k plan offers an annuity option.
If your 401k plan does have an annuity option, you may begin annuity payments based on your life expectancy that can have a survivors benefit for your spouse. Check with you human resources department to see if an annuity option is available to you through your Kraft Heinz 401k. An advantage is that these payments will last for your lifetime or that of your spouse. A downside to consider is that you will no longer have access to fund balances other that the annuity payment you chose. If you are separating in the year in which you attain age 55, you will not incur a 10% additional tax on your payments.
You can stay in the Heinz Kraft 401k plan after you leave or complete a direct rollover to an IRA from your 401k. You may access the money in your 401k plan at age 55 if you Leave Heinz Kraft in the calendar year in which you reach age 55, without incurring a 10% additional tax on distributions. (Generally speaking, taking funds from an IRA or 401k plan prior to age 59 ½ will cause you to incur a 10% additional tax, in addition to paying ordinary income tax on the distribution. Separating from your company in the year you reach 55 is an exception for 401k accounts.) You will only pay ordinary income tax on distributions using this exception. You can budget the amount of funds you will need each year and have a payment made to you. The remainder of the account will remain available to you should you find that you need additional funds from time to time. Again, subject to ordinary income tax, but the 10% additional tax will not apply.
If you are 59 ½ when you leave Kraft Heinz, you may consider a direct rollover to an IRA from your 401k. Be sure you have a complete understanding of the IRA you may be considering, and compare the fees of the IRA account to those you currently have in your 401k at Kraft Heinz. If you are 59 ½, funds can be withdrawn from an IRA or 401k without the 10% additional tax. Be sure to see if you have any outstanding loans against your 401k. Any loan balances will be treated as income at the time of the rollover. It is possible to withdraw funds from an IRA prior to age 59 ½ without a 10% additional tax by using a series of substantially equal payments. These payments must last the longer of 5 years or until you are 59 ½, whichever is the longer period of time. These payments must be made at least annually. Utilizing this option limits access to your funds, other than the series of substantially equal payments, and can be less favorable than remaining in the plan until age 59 ½.
An often overlooked aspect of plans like the Kraft Heinz plan is net unrealized appreciation (NUA) of company stock in your plan. Net Unrealized Appreciation (NUA) is special tax treatment for company stock held in your 401k plan. Company stock can be rolled into a nonqualified brokerage account. The basis, your contribution, will be considered income in the year in which this option is exercised, and appreciation of the stock above the basis will be treated as capital gain when the stock is liquidated. Stock held for over one year will be treated as long term capital gains. The company stock rolled out of the account using the NUA rules will no longer be part of a qualified plan, or IRA. It may be in your interest to use the NUA rule as long term capital gains may have a lower tax rate than the ordinary income tax you are subject to. You will need to work with an advisor who is familiar with Net Unrealized Appreciation rules.
For more information on these complex rules, as well as situations that trigger additional tax restrictions, review IRS publication 575, Pension and Annuity Income, which is available at IRS.gov. I always advise that you consult with a CPA to review all the pertinent information prior to removing any stock from your 401k plan.
I feel that any retirement plan should also include a detailed calculation of how to maximize your lifetime social security benefits. It is quite common for retirees to begin their benefits as soon as allowed, when waiting until the age of full benefits may actually be beneficial to their long term financial stability.
These items above are a quick review of distribution options from your Kraft Heinz 401k account that are available to you. There are of course a number of other issues to consider including how you will deal with what will happen to other group benefits you may have such as life, health and disability coverage. If you would like a free consultation to review your particular situations, feel free to contact Paul Lewis at 217-337-5584 or email me any questions at email@example.com.
Securities and Advisory Services offered through Triad Advisors Member FINRA/SIPC