Navigating Terminal Illness: Essential Planning Tips for USG Corporation Employees

What Is It?

When you find out that you are terminally ill, you may want to start planning immediately for your current needs and for the future needs of your survivors. In particular, you'll want to provide enough money, insurance, and assets to ensure that you will be comfortable during your final months and that you will leave your survivors with adequate income.

By communicating your wishes to your family now and by executing certain legal documents (e.g., health-care proxy, living will, durable power of attorney), you can make decisions now about your medical care and plan for the possibility that you may become incapacitated. To our clients from USG Corporation who may be dealing with this or a situation similar, you'll also want to make sure that your estate will be passed on to your survivors according to your wishes.

Meeting Your Current Financial Needs

Make sure that you have adequate liquidity to meet your current needs--Find out if the amount of cash you have in a savings account, money market fund, or other liquid account is enough to cover your expenses during your final months. If not, consider withdrawing funds from your retirement account, applying for insurance benefits that you may be entitled to, or selling your life insurance policy to a viatical settlement company.
Consider withdrawing funds from your retirement account--You may ask that funds be distributed to you from a defined contribution plan to pay your medical expenses. This is called a hardship distribution and it can't exceed the amount of money necessary to meet your immediate financial need. To qualify for a hardship distribution, you must not have access to other resources that could meet this need.

Caution: A hardship distribution from a defined contribution plan is subject to income tax. However, if you are disabled, or if the distribution is used to pay qualified medical expenses, the 10 percent early withdrawal penalty won't apply.

Apply for Disability Benefits That You Are Entitled to

You may be eligible for disability benefits from an individual or group disability income insurance policy once you have satisfied the elimination (waiting) period. Check your policy, or ask USG Corporation if you don't know whether you are covered by a disability policy.

Review Your Life Insurance Policy for Ways to Raise Cash

You may be able to borrow against your life insurance policy or obtain accelerated death benefits from your policy. Your policy may also contain a waiver of premium, so that once you've been disabled for a certain time period (typically six months), your insurance premiums will be paid by the insurance company, which will save you a bit of money.

Caution: Borrowing against your life insurance or taking accelerated death benefits will reduce the benefit paid to your survivors.

Consider Viatical Settlements

A viatical settlement is the sale of a life insurance policy to a third party. Usually, this third party is a company or a group of investors that specialize in such sales. When you sell your policy, you will generally receive between 45 percent and 85 percent of the face value of your policy. You can use this lump-sum cash payment any way you want, and if you have a life expectancy of 24 months or less, this distribution will generally be tax-free. However, it's important for our clients from USG Corporation to note that there are drawbacks. For instance, your survivors will no longer be the beneficiaries of your life insurance policy, and receipt of viatical settlement proceeds may make you ineligible for Medicaid.

Providing Financially for Your Survivors

Buy More Life Insurance

If you believe the amount of benefit your survivors will receive from your life insurance policy won't adequately meet their needs and you have a life insurance policy through USG Corporation, find out if you can buy additional coverage during the open enrollment period without proving insurability. Also, review your current life insurance policy to see if you are entitled to buy more coverage without proving insurability. If you are taking out a loan to purchase consumer goods, you may be able to purchase credit life insurance to pay off your loan after you die.

Caution: Proceeds from a life insurance policy are generally nontaxable to your beneficiaries. However, those proceeds are includable in your gross estate for estate tax purposes if they are payable to your estate, your executor, or an individual or trust legally obligated to pay estate debts.

Make Sure That Your Survivors Will Have Access to Needed Funds

Your survivors may need money to pay for their daily living expenses, as well as expenses associated with your death. Although you can provide for them with life insurance, you may also want to ensure they have access to liquid property (cash you have in CDs, savings, and checking accounts, for instance). If necessary, add your spouse, child, or another survivor to your account so they can access funds as joint owners after you die.

Tip: Consider adding your spouse as a joint owner on your credit card account if you want to make sure that he or she has access to the credit line after your death, particularly if your spouse currently has no credit established in his or her own name.

Find Out What Benefits Your Survivors Will Be Eligible For

Your survivors may be eligible for Social Security survivor benefits, benefits from the U.S. military (if you are an active-duty or retired service member), or survivor's benefits from your qualified retirement plan. If you are already retired from USG Corporation and you elected to provide a survivor's annuity for your spouse, then he or she may have continued income from your retirement annuity after your death.

However, even if you are not yet retired from USG Corporation, your spouse or another beneficiary may receive a lump-sum payment from your qualified plan at your death.

Tip: Continuing payments made to your estate (if named as beneficiary) or to a family member may be includable in your gross estate for estate tax purposes.

Make Use of Appropriate Planning Opportunities to Minimize Potential Federal Estate Taxes

If your estate is less than the applicable exclusion amount, it will be exempt from federal gift and estate tax. However, if your estate exceeds the applicable exclusion amount, you should consider implementing strategies to minimize potential estate taxes, such as making gifts in the amount of the annual gift tax exclusion each year to any number of recipients (this figure is indexed for inflation, so it may change in future years), transferring property to a spouse, or making charitable contributions.

Estate Planning Concerns and Opportunities

Review Your Will or Make One

To our clients from USG Corporation who have a will, you should review it and make any necessary changes. If you don't have a will, you should execute one now with the help of an attorney. In your will, you'll want to nominate a guardian for your minor children (if any), name an executor for your estate, and determine how your assets will be distributed after your death.

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Ensure That Your Estate Is Liquid

Now is the time for these USG Corporation clients to ensure that their estate is liquid enough to pay the costs associated with settling the estate. If your survivors are forced to sell assets to meet the obligations, they may lose income or assets that you intended for them. There are many ways to ensure estate liquidity, such as distributing non-liquid assets to your heirs in your will, selling estate assets before your death, and establishing a buy-sell agreement if you are a business owner.

Planning for Incapacity

When you're terminally ill, you must plan for the day you won't be able to handle your own affairs. A durable power of attorney will give a person of your choice the right to act on your behalf if you become incapacitated and can no longer manage your finances or sign legal documents. If you want that person to have the power to make healthcare-related decisions only, consider executing a healthcare proxy.

If you want to make sure that no procedures are used to prolong your life, you may want to execute a living will. A living will can also protect your family from having to make traumatic decisions on your behalf by making your wishes clear while you are still competent.

Tip: To protect yourself from people who may think you are incapacitated when you aren't, ask your doctor to sign a physician's certificate certifying that you are able to sign and execute legal documents.

Income Tax Planning Concerns

If you can no longer work at USG Corporation, you may have to liquidate your investment, retirement, or insurance assets to cover your expenses. By controlling when you recognize income or gain, you can control taxation. In addition, these USG Corporation clients should keep track of their medical expenses in case they qualify as allowable deductions to reduce their taxable income.

Making Decisions About The Future

Planning for Medical Care

Maintaining health insurance coverage is crucial when you're terminally ill. If you drop your coverage, you probably won't be able to purchase more. If you lose your coverage because you lose your job with USG Corporation, plan to purchase follow-on COBRA insurance to maintain coverage. In addition, these USG Corporation clients should review the limits of their healthcare insurance to determine whether their healthcare policy will pay for in-home care, including hospice care, if they don't need or want care in a hospital.

Planning Your Funeral

Many people may prefer planning their own funeral because they can make sure the funeral and final arrangements are what they want. It may be helpful to your family as well because they won't need to make stressful decisions while they are grieving.

Tip: If you are a veteran of the U.S. Armed Forces, find out what death benefits you are entitled to. For instance, you may be eligible for burial in a national cemetery, final honors, a headstone, a flag, or other benefits.

Making an Organ Donation

For our clients from USG Corporation who would like to be an organ donor, make arrangements now. Talk over the matter with your family because they may be upset by your wish to be an organ donor. Be sure they understand your decision before you proceed. For information on organ-donor programs, check with your local department of motor vehicles or ask your doctor for a referral.

How does the retirement plan structure at USG Corporation impact both final average earnings participants and cash balance participants, especially regarding their eligibility and benefits accrued over time? In what ways does the differentiation between these two categories influence the retirement outcomes for employees of USG Corporation?

Retirement Plan Structure: USG Corporation's retirement plan differentiates between Final Average Earnings Participants and Cash Balance Participants. Final Average Earnings participants, who joined before January 1, 2011, accrue benefits based on their final average earnings and years of service, which can result in higher benefits for longer-serving employees. Cash Balance participants, who joined after January 1, 2011, have their benefits calculated based on a cash balance account, which grows with contributions and interest credits. These differences affect retirement outcomes, as Final Average Earnings participants may see higher pension payments if they have longer service or higher wages, while Cash Balance participants have more predictable but potentially lower benefits based on their account balance(USG Corporation_Retirem…).

USG Corporation's Retirement Plan allows for different age-specific rules regarding early retirement. How do the "Rule of 90" and "Rule of 82" affect the financial planning of employees considering an early retirement option, and what should they consider regarding their long-term financial security?

Rule of 90 and Rule of 82: The "Rule of 90" allows employees to retire early without a reduction in benefits if their age plus years of service total 90, provided they retire at or after age 62. The "Rule of 82" permits early retirement with reduced benefits for those whose age and years of service total 82. Employees planning early retirement must consider these rules as they directly affect the amount of benefits they receive, making it important to assess how long-term financial security will be impacted, especially if they retire before age 62(USG Corporation_Retirem…).

Could you elaborate on the process through which employees at USG Corporation can change their beneficiaries within the retirement plan? What steps need to be taken, and what are the implications of these changes on the benefits received upon the participant's death?

Changing Beneficiaries: To change beneficiaries, USG Corporation employees must contact Your Benefits Resources™, where they can designate a primary and contingent beneficiary. If married, the spouse must provide notarized consent to name a different primary beneficiary. The process involves completing a form, and any changes affect who receives benefits upon the participant's death. Failing to update the beneficiary could result in benefits being paid to unintended individuals(USG Corporation_Retirem…).

As part of the retirement process at USG Corporation, how are pensionable earnings calculated? What factors are included in this determination, and how might they vary among different employees based on their roles within the organization?

Pensionable Earnings Calculation: Pensionable earnings at USG Corporation include regular pay, shift differentials, and bonuses but exclude items like nonqualified deferred compensation, severance, and stock awards. These earnings are used to calculate benefits based on formulas that take into account an employee’s service years and earnings over the 36 highest consecutive months of the last 15 years of participation(USG Corporation_Retirem…).

How does the automatic enrollment in the USG Corporation Retirement Plan work, and what options do employees have if they initially chose not to participate? What implications might this have for their retirement savings strategy?

Automatic Enrollment and Opting In: Employees at USG Corporation are automatically enrolled in the retirement plan unless they choose to opt out. If employees decide not to participate initially, they can enroll later by contacting Your Benefits Resources™. Failure to participate from the start could result in lower retirement savings due to fewer years of contributions(USG Corporation_Retirem…).

In the context of USG Corporation, what are the potential tax consequences for employees withdrawing their retirement benefits, especially regarding the mandatory withholdings? How might employees effectively manage these tax liabilities when planning for retirement?

Tax Consequences of Withdrawals: Employees withdrawing their retirement benefits from USG Corporation will face mandatory federal income tax withholdings, typically 20% for lump sum distributions, unless the distribution is rolled over into an IRA. Employees must plan for these taxes when withdrawing to avoid unexpected liabilities and ensure they maximize their after-tax retirement income(USG Corporation_Retirem…).

How do employees at USG Corporation access the necessary documents related to their retirement benefits, and what is the process for obtaining copies of these documents if needed? What are the responsibilities of the Plan Administrator in this process?

Accessing Retirement Documents: Employees can access documents related to their retirement benefits through Your Benefits Resources™ online or via phone. If additional copies are needed, employees can request them from the Plan Administrator for a small fee. The Plan Administrator oversees ensuring these documents are provided to participants as required by ERISA(USG Corporation_Retirem…).

What unique provisions exist for USG Corporation employees who experience a break in service? How do these provisions impact their accumulated benefit service and overall benefits upon reemployment?

Break in Service Provisions: USG Corporation allows employees who experience a break in service to retain their accumulated benefits if they are reemployed within one year. If reemployed after one year, their previous service may not count toward future benefits unless they were vested prior to termination. This can affect the total benefits an employee accrues if they leave and later return(USG Corporation_Retirem…).

What options do employees of USG Corporation have for managing their benefits if they return to work after retirement? How does this affect their pension benefits and the overall strategy for maximizing retirement income?

Returning to Work After Retirement: Employees returning to work after retirement at USG Corporation will have their pension payments suspended and recalculated based on additional years of service. This recalculation takes into account prior payments, meaning employees should consider the impact of returning to work on their long-term pension strategy(USG Corporation_Retirem…)(USG Corporation_Retirem…).

How can employees of USG Corporation contact their Benefits Resourcesâ„¢ for more information on their retirement plan options? Are there specific channels preferred for different types of inquiries, and what resources are available to assist them?

Contacting Benefits Resources™: Employees can contact Your Benefits Resources™ via the web or a toll-free number to inquire about retirement plan options. Different inquiries, such as changes to beneficiaries or requesting benefit estimates, can be handled through these channels. Resources such as detailed benefit estimates are available to help employees plan for retirement(USG Corporation_Retirem…).