Year-End Tax and Investment Decisions for Kroger Employees

According to a recent article published by Kiplinger in December 2022, it's important for retirees and soon-to-be retirees to consider the impact of year-end tax and investment decisions on their Social Security benefits. For example, if retirees have substantial taxable income in a given year, it can result in higher taxes on their Social Security benefits. On the other hand, by making strategic investment decisions before year-end, retirees can reduce their taxable income and potentially avoid higher taxes on their Social Security benefits. This information is particularly relevant to our target audience of Kroger workers looking to retire and existing retirees who may be looking for ways to optimize their retirement income.

What Are Year-End Investment Decisions?

Numerous Kroger customers have concerns concerning tax planning and end-of-year investment decisions. Tax planning may enable you to control the timing and manner in which you report your income and claim your deductions and credits, whereas year-end investment decisions may result in substantial tax savings. The fundamental year-end planning strategy that we would like to share with our Kroger clients revolves around timing — timing your income so that it is taxed at a lower rate, and timing your deductible expenses so that they can be claimed in years when you are in a higher tax bracket. In terms of investment planning, investing in capital assets may increase your ability to time the recognition of a portion of your income and enable you to take advantage of potentially lower-than-normal income tax rates. You have the option to determine when the income or loss from a variety of investment assets is recognized. In most cases, you decide when to sell your capital assets, but Kroger clients should be aware that shifting prospective capital gain income to other taxpayers through gifting may be an appropriate strategy in certain circumstances.

How Do You Use The Capital Gains Tax To Lower Your Taxes?

Our Kroger clients frequently inquire about capital gains tax deductions. Capital gains and losses are taxed in a unique manner. Currently, the maximum long-term capital gains tax rate (for most asset categories) is 20%, while the maximum ordinary income tax rate is 37% — a difference of 17%. It is essential for our Kroger customers to remember that converting ordinary income to long-term capital gain income may result in a reduction of your federal income tax liability.

Tip: Long-term capital gains are generally taxed at special capital gains tax rates of 0%, 15%, and 20% depending on your taxable income. The actual process of calculating the tax on long-term capital gains and qualified dividends is extremely complicated and depends on the amount of your net capital gains and qualified dividends and your taxable income.

Additionally, the 3.8% net investment income tax applies to some or all of your net investment income (including capital gains) if your modified adjusted gross income exceeds $200,000 for single or head of household filers, $250,000 for married taxpayers filing jointly, or $125,000 for married taxpayers filing separately.

Timing Your Capital Gain Recognition

If our Kroger clients time the sale of their capital assets judiciously, they may be able to reduce their federal income tax liability. If it's late in the year and you want to sell a capital asset, you can wait until January to do so (assuming you have a calendar tax year) so that you realize your capital gain or loss the following year. This strategy is particularly advantageous for our Kroger clients who are in a higher marginal tax bracket this year and anticipate being in a lower bracket next year. Capital gain income increases your adjusted gross income (AGI), so timing can also be crucial. Depending on your AGI, the quantity and availability of certain tax benefits may vary. For example, the itemized deduction for medical expenses is only available if medical expenses exceed 7.5% of adjusted gross income.

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Plan Your Year-End Capital Gain And Loss Status

We also advise our Kroger clients to schedule the recognition of capital losses. Any Kroger client who anticipates a capital gain this year should evaluate their portfolio for potential capital losses that could be used to offset the gain. If you are an Kroger client with capital loss carryforwards, you should evaluate your portfolio for capital gain opportunities that can be utilized with these carryforwards. In general, net capital losses are deductible dollar-for-dollar against net capital gains. Annually, excess losses may be used to offset up to $3,000 ($1,500 for married individuals submitting separate tax returns) of ordinary income. In excess of the limit, losses can be carried forward indefinitely.

The following strategies may be appropriate:

Sell a property with a capital gain before the end of the year if your capital losses for the year exceed the sum of your capital gains plus $3,000 ($1,500 for married taxpayers submitting separate returns).
For our Kroger clients whose annual gains exceed their losses, we should advise them to sell properties with built-in losses to mitigate their excess gains.
If your other allowable deductions for the year exceed your income, you should avoid incurring further capital losses as much as possible.
If you've owned an investment for close to a year and wish to sell it, you should wait (if feasible). If you hold an asset for over a year before selling it, you can take advantage of the reduced long-term capital gains rates.

How Do You Select Investments To Control Income?

You may choose investments likely to generate ordinary income, such as interest, or income subject to reduced tax rates (certain qualified dividends or long-term capital gains). You can also choose investments with a high probability of producing ordinary or capital losses. You can determine when your investment income is taxed, keeping in mind that income distributions are generally not taxed until they are received (assuming you use the cash method of accounting). By understanding the tax laws, our Kroger customers can reduce their taxes.

What about Shifting Income?

Through gifts, it may be possible to transfer prospective capital gains to other taxpayers. For Kroger clients in a higher tax bracket, transferring appreciated assets to relatives in a lower tax bracket may be advantageous.

Conclusion

Just as a marathon requires consistent training and preparation over time, retirement requires a long-term plan that includes saving and investing wisely. Both require setting goals, building endurance, and staying on track to achieve those goals. Just as runners need to stay focused and motivated to cross the finish line, retirees need to stay focused on their financial goals and make adjustments along the way to ensure a successful retirement.

How does the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN ensure that employees receive adequate retirement benefits calculated based on their years of service and compensation? Are there specific formulas or formulas that KROGER uses to ensure fair distribution of benefits among its participants, particularly in regards to early retirement adjustments?

The KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN ensures that employees receive adequate retirement benefits based on a formula that takes into account both years of credited service and compensation. The plan, being a defined benefit plan, calculates benefits that are typically paid out monthly upon reaching the normal retirement age, but adjustments can be made for early retirement. This formula guarantees that employees who retire early will see reductions based on the plan’s terms, ensuring a fair distribution across participants(KROGER_2023-10-01_QDRO_…).

In what ways does the cash balance formula mentioned in the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN impact the retirement planning of employees? How are these benefits expressed in more relatable terms similar to a defined contribution plan, and how might this affect an employee's perception of their retirement savings?

The cash balance formula in the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN impacts retirement planning by expressing benefits in a manner similar to defined contribution plans. Instead of a traditional annuity calculation, the benefits are often framed as a hypothetical account balance or lump sum, which might make it easier for employees to relate their retirement savings to more familiar terms, thereby influencing how they perceive the growth and adequacy of their retirement savings(KROGER_2023-10-01_QDRO_…).

Can you explain the concept of "shared payment" and "separate interest" as they apply to the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN? How do these payment structures affect retirees and their alternate payees, and what considerations should participants keep in mind when navigating these options?

In the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN, "shared payment" refers to a payment structure where the alternate payee receives a portion of the participant’s benefit during the participant's lifetime. In contrast, "separate interest" means that the alternate payee receives a separate benefit, typically over their own lifetime. These structures impact how retirees and their alternate payees manage their retirement income, with shared payments being tied to the participant’s life and separate interests providing independent payments(KROGER_2023-10-01_QDRO_…).

What procedures does KROGER have in place for employees to access or review the applicable Summary Plan Description? How can understanding this document help employees make more informed decisions regarding their retirement benefits and entitlements under the KROGER plan?

KROGER provides procedures for employees to access the Summary Plan Description, typically through HR or digital platforms. Understanding this document is crucial as it outlines the plan’s specific terms, helping employees make more informed decisions about retirement benefits, including when to retire and how to maximize their benefits under the plan(KROGER_2023-10-01_QDRO_…).

With regard to early retirement options, what specific features of the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN can employees take advantage of? How does the plan's definition of "normal retirement age" influence an employee's decision to retire early, and what potential consequences might this have on their benefits?

The KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN offers early retirement options that include adjustments for those retiring before the plan’s defined "normal retirement age." This early retirement can result in reduced benefits, so employees must carefully consider how retiring early will impact their overall retirement income. The definition of normal retirement age serves as a benchmark, influencing the timing of retirement decisions(KROGER_2023-10-01_QDRO_…).

How does the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN address potential changes in federal regulations or tax law that may impact retirement plans? In what ways does KROGER communicate these changes to employees, and how can participants stay informed about updates to their retirement benefits?

The KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN incorporates changes in federal regulations or tax laws by updating the plan terms accordingly. KROGER communicates these changes to employees through official channels, such as newsletters or HR communications, ensuring participants are informed and can adjust their retirement planning in line with regulatory changes(KROGER_2023-10-01_QDRO_…).

What are some common misconceptions regarding participation in the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN that employees might have? How can these misconceptions impact their retirement planning strategies, and what resources does KROGER provide to clarify these issues?

A common misconception regarding participation in the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN is that it functions similarly to a defined contribution plan, which it does not. This can lead to confusion about benefit accrual and payouts. KROGER provides resources such as plan summaries and HR support to clarify these misunderstandings and help employees better strategize their retirement plans(KROGER_2023-10-01_QDRO_…).

How does the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN interact with other employer-sponsored retirement plans, specifically concerning offsetting benefits? What implications does this have for employees who may also be participating in defined contribution plans?

The KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN interacts with other employer-sponsored retirement plans by offsetting benefits, particularly with defined contribution plans. This means that benefits from the defined benefit plan may be reduced if the employee is also receiving benefits from a defined contribution plan, impacting the total retirement income(KROGER_2023-10-01_QDRO_…).

What options are available to employees of KROGER regarding the distribution of their retirement benefits upon reaching retirement age? How can employees effectively plan their retirement income to ensure sustainability through their retirement years based on the features of the KROGER plan?

Upon reaching retirement age, KROGER employees have various options for distributing their retirement benefits, including lump sums or annuity payments. Employees should carefully plan their retirement income, considering the sustainability of their benefits through their retirement years. The plan’s features provide flexibility, allowing employees to choose the option that best fits their financial goals(KROGER_2023-10-01_QDRO_…).

How can employees contact KROGER for more information or assistance regarding the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN? What are the recommended channels for employees seeking guidance on their retirement benefits, and what type of support can they expect from KROGER's human resources team?

Employees seeking more information or assistance regarding the KROGER CONSOLIDATED RETIREMENT BENEFIT PLAN can contact the company through HR or dedicated plan administrators. The recommended channels include direct communication with HR or online resources. Employees can expect detailed support in understanding their benefits and planning for retirement(KROGER_2023-10-01_QDRO_…).

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

Kroger offers both a defined benefit pension plan and a 401(k) retirement savings account plan. The defined benefit plan provides retirement income based on years of service and final average pay. The 401(k) plan allows employees to save for retirement with personal and employer contributions, including a company match. Employees can choose from various investment options within the 401(k) plan to grow their retirement savings.

Operational Changes: Kroger is undergoing a restructuring process that includes closing underperforming stores and cutting administrative costs. Layoffs: The company has announced layoffs affecting about 1,500 employees (Source: CNN). Financial Performance: Despite these changes, Kroger reported a 7% increase in same-store sales for Q2 2023, reflecting strong consumer demand (Source: Kroger).

Kroger offers RSUs that vest over time, providing shares to employees upon vesting. Stock options are also available, allowing employees to purchase shares at a set price, potentially benefiting from stock price increases.

Kroger has made significant updates to its employee healthcare benefits to align with the current economic, investment, tax, and political environment. In 2022, Kroger Health, the healthcare division of The Kroger Co., entered into a direct agreement with Prime Therapeutics to ensure continued access to affordable healthcare services for over 33 million Americans. This agreement, effective January 1, 2023, allowed Kroger's pharmacies to remain in-network for Prime's Medicare Part D members and other commercial, Medicare, and Medicaid customers. This initiative underscores Kroger's commitment to providing comprehensive healthcare services, including administering COVID-19 vaccines, offering in-store antibody tests, and distributing at-home COVID-19 tests, thereby enhancing health access and affordability. In 2023, Kroger was recognized for its commitment to workplace mental health, receiving the Gold Bell Seal for Workplace Mental Health from Mental Health America for the second consecutive year. This certification highlights Kroger's efforts to create a supportive and caring environment for its associates, focusing on mental, physical, and financial well-being. Kroger's wellness programs, mental health services, Employee Assistance Programs (EAP), and paid time off were rigorously evaluated, demonstrating the company's ongoing dedication to employee well-being. These efforts are part of Kroger's broader strategy to ensure a healthy and productive workforce, which is critical in navigating the current economic challenges and maintaining long-term business success.