Should you make a Roth IRA Conversion for Altria Group Employees

Traditional IRA Vs. Roth IRA

If you have qualified funds in your Altria Group retirement portfolio and are concerned about future tax law changes, converting those eligible funds to a Roth IRA could be a good solution for any Altria Group employee or retiree.

Traditional IRAs are usually funded with before-tax dollars and are generally fully taxable when withdrawn. The owner of a traditional IRA generally has required minimum distributions (RMDs) beginning at age 72. If withdrawals are taken before age 59 1/2, they may be subject to an additional 10% federal tax.

Roth IRAs are funded with after-tax dollars. Distributions after age 59 ½ are completely income-tax-free as long as the Roth IRA owner has met a five-year requirement, determined by the date the owner first funded any Roth IRA. No required minimum distributions apply during the owner’s lifetime, but certain RMD rules do apply to Roth IRA beneficiaries.

The Benefits of a Roth IRA Conversion

A Roth IRA conversion entails taking all or a portion of funds from a traditional retirement account and converting them to a Roth IRA. This could also apply to pre-tax funds in a qualified plan like your Altria Group 401(k). Since you are moving pre-tax dollars to a post-tax account, you owe income taxes on the amount converted in the year of conversion. This can be paid with funds outside of your IRA or qualified plan. Any such conversion should be done with due diligence and consult with a financial planner to avoid major tax implications.

A few of the advantages of this strategy include:

Tax-free growth inside of Roth IRAs.
Qualified distributions from Roth IRAs are income-tax free, providing flexibility to choose when to take these distributions for smarter tax management.
There are no RMDs for Roth IRA owners when you reach age 72, but certain rules apply to Roth IRA beneficiaries.
There is a potential for lower taxes if the income tax bracket is projected to be the same or higher at the time of distribution than at the time of conversion.
A Roth IRA conversion could lower your income-tax bracket
Can reduce your estate taxes and eliminate the income tax your heir would have to pay

Some other items for consideration:

Roth IRA conversions are subject to ordinary income tax on the entire amount of the conversion in the year of conversion.
Distributions may be subject to the additional 10% federal tax if removed within five years of the conversion.

If you have any questions about your Altria Group 401(k) plan, you can reach out to your Altria Group HR Department.

How a Roth Conversion Works:

Jim and Linda are both 66 and retired from working at Altria Group. They have a pension and Social Security benefits that amount to a taxable income of $65,000 a year. In 2022, they are in the 12% tax bracket ($20,551-$83,550) and are concerned that future tax law changes could put them in a higher bracket. [6]

Jim and Linda also have a traditional IRA with an account value of $750,000. In a few years, they will be required to start taking Required Minimum Distributions from this account that could bump them up to the next tax bracket.

While a Roth conversion is a fairly simple concept, there are many things to consider and several ways to do it. After discussing all of the variables with their financial professional, Jim and Linda decide to use a method often called “tax-bracket stuffing.”

With a taxable income of $65,000, there is $18,550 until they hit the top of the bracket - $83,550. If Jim and Linda convert $40,000 from the traditional IRA to a Roth IRA, they are bumped in to the 22% bracket, but once the standard deduction of $25,100 is applied, their taxable income will be $79,900.

By converting some of the funds from their traditional IRA to a Roth IRA, they can choose the amount of the distribution, so it stays within their lower tax bracket of 12% once the standard deduction is applied. And since qualified distributions from Roth IRAs are income tax free, Jim and Linda have the flexibility to choose when to take these distributions for smarter tax management.

If this method is used each year until Jim and Linda turn 72, they will continue to reduce the amount in their traditional IRA and increase the amount in their Roth IRA.

Want to learn if a solution like this is right for you? Call us today to discuss your financial goals.

What is Your Next Step?

Your receipt of this report entitles you to a one on one conversation with one of our TRG financial advisors to explore the benefits of diversifying your assets with your taxes in mind. Any customary hourly planning fees associated will be waived for this one hour session.

What should you expect at this meeting? Below are some frequently asked questions about what you can expect from our one on one meetings

Q: What will be discussed in this meeting?

A: This meeting is simply an opportunity for you to ask any questions that you may have related to the diversification of your assets with taxes in mind, as well as your personal finance and retirement. Throughout the course of the meeting, we will ask questions about you and your situation.

From working with many Altria Group employees and retirees, we’ve found that everyone’s definition of a comfortable retirement from Altria Group is a little different and that everyone’s situation is unique. Our goal is to learn about your personal goals as we explore how to help you retire from Altria Group the way you want.

Q: Why is the consultation free?

A: Simple. It gives us an opportunity to meet people from around the area that may have questions about financial matters. It’s no secret that we love new clients. Gaining new clients is the way that our business grows. However, we want to provide a comfortable environment for exploring a new, potential professional relationship — for you and for us. By offering this time, it provides a non-threatening way for us to spend some time with you to see if it makes sense for us to continue discussions regarding your Altria Group retirement in the future.

Q: Will there be a presentation?

A: Not at all. In fact, we are very hesitant to talk about any potential solutions to any questions or concerns you may have. It is important for us to understand your goals and desires about what retiring from Altria Group or investing for your future means to you. We feel it would be financial malpractice to begin exploring solutions prematurely.

We tend to look at the first meeting as an opportunity for you to ask some questions and for us to get to know each other. Furthermore, we can both be more informed by the end of the meeting which will help determine whether or not it will be beneficial for us to meet again.

Q: How long is the meeting?

A: Most of our meetings are stacked throughout the day. Future sessions may require more time, but we’ve found that an hour, provides a good basis for getting to know a little more about each other.

Q: Is there anything I should bring to the meeting?

A: We are sensitive to the fact that your personal financial information is just that — very personal. However, it is hard for us to help if we don’t have at least a fundamental understanding of your financial position. We ask that you bring information regarding your financial accounts and your previous year’s tax return. However, we follow a strict policy of not looking at any of this until you are comfortable with us doing so.

Q: When would we meet again?

A: If we both decide that it would be beneficial to meet again, we’ll schedule another time to get together. At that meeting, we would introduce to you the various areas in which our firm may be able to provide value to your situation. Again, we shy away from offering solutions at this point because we still consider it to be a discovery meeting. At that point, you should be in a better position to make an educated decision as to whether you wish to engage the services of our firm.

Q: Should someone come with me?

A: We do ask that if you are married you bring your spouse with you. If you wish to bring any children with you to the meeting, you are welcome to do so. For that matter, anyone that you may utilize in helping you with your Altria Group retirement and personal finances is welcome to join.

About The Retirement Group

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

How does the retirement plan at Brown & Williamson Tobacco Corporation ensure the financial security of its employees in retirement? What are the specific features and benefits incorporated into the plan that aim to provide a reliable income source for employees after they retire?

Financial Security in Retirement: The retirement plan at Brown & Williamson Tobacco Corporation (B&W) provides financial security through its defined benefit structure, which ensures a steady stream of income post-retirement. The plan integrates with the RAI 401(k) Savings Plan, Social Security, and personal savings to offer a comprehensive retirement package, helping employees secure a reliable income after they retire.

In what ways does the Broward Health Cash Balance Pension Plan accommodate employees who wish to retire early? Explain the eligibility requirements, benefits available upon early retirement, and how these may differ from benefits received at normal retirement age.

Integration with Social Security: B&W's retirement plan works in conjunction with Social Security benefits and individual savings to create a well-rounded retirement strategy. The retirement income calculation incorporates a Social Security Adjustment, which reduces the pension benefit by a portion of Social Security payments. Employees should consider the combined effect of these sources when planning their retirement income to ensure they meet their financial needs.

How does the vesting schedule work within the Broward Health Cash Balance Pension Plan, and what does it mean for employees in terms of their rights to benefits? Elaborate on how years of service impact vesting percentages and detail the consequences for employees who leave before becoming fully vested.

Eligibility for Early Retirement Pension: Eligibility for early retirement at B&W depends on the employee being at least 55 years old with a minimum of 10 years of Qualifying Service. The calculation of early retirement benefits considers factors like years of service and age, with reductions applied for retirement before age 60. Those with 30 years of service can avoid reductions even if they retire early.

What role does the Broward Health Pension Plan Committee play in the administration of the Cash Balance Pension Plan, and how does this committee ensure compliance with applicable laws and the financial soundness of the plan? Discuss the responsibilities of overseeing plan implementation and benefits management.

Payment Forms and Impact: B&W offers various forms of retirement payments, including single life annuities and joint and survivor annuities. Each option has different financial implications, with single life annuities offering higher payments but ending upon the retiree’s death, while joint annuities provide for a surviving spouse at a reduced rate. Employees must weigh these options to choose the one that best suits their financial goals.

How does the Broward Health Cash Balance Pension Plan address potential changes or amendments to its terms, and what protections are in place for employees' vested rights? Discuss the process for plan amendments and any circumstances under which the plan could be terminated.

Disability and Death Benefits: B&W’s retirement plan provides disability and pre-retirement death benefits, offering financial protection for employees and their families in unexpected circumstances. For example, a surviving spouse may receive a Pre-Retirement Surviving Spouse Annuity if the employee dies before retirement, ensuring continued financial support.

For employees with prior service history seeking to return to Broward Health, how does the Cash Balance Pension Plan facilitate the recognition of their past contributions and service? Discuss re-employment rules and how they affect benefit calculations for those returning after a break in service.

Steps to Initiate Retirement: To initiate the retirement process, employees must contact the Alight Benefits Center 60 to 90 days before their desired retirement date. The process includes understanding accrued benefits, selecting a payment form, and completing the required paperwork to ensure a smooth transition into retirement.

What options are available to employees of Broward Health regarding beneficiary designations, and how does this affect benefit distributions upon an employee's death? Detail the procedures for appointing a beneficiary and the implications of not having a designated beneficiary in place.

Accessing Benefits after Termination: Former employees who leave B&W before meeting the vesting requirements may not be eligible for full retirement benefits. However, those who complete at least five years of Qualifying Service before leaving are fully vested and can receive benefits when they reach the appropriate retirement age.

How does the Broward Health Cash Balance Pension Plan manage and calculate interest credits on cash balance accounts? Discuss the methodology for determining interest rates and the impact these credits have on overall retirement savings.

ERISA Rights: Employees participating in the B&W retirement plan are entitled to rights under ERISA, such as the right to receive information about the plan, review plan documents, and appeal denied benefit claims. These rights ensure that participants are well-informed and protected under federal law.

What challenges might Broward Health employees face when navigating the claim filing process for retirement benefits? Describe the steps involved in requesting benefits, what to do in case of a denied claim, and the importance of timely communications with the Plan Administrator.

Handling Unlocatable Participants: If participants cannot be located for benefit distribution, their payments are temporarily forfeited. However, B&W has a process to restore these benefits if the participant is later found, without the addition of interest. Employees should keep their contact information updated to avoid such issues.

How can employees contact Broward Health to learn more about the Cash Balance Pension Plan and its provisions? Provide details on the available resources, including contact information for the Employee Benefits department, and explain how these resources can assist employees in understanding their retirement options.

Contact Information for Resources: Employees can contact the RAI Benefits Administration Committee for plan-related questions or the Alight Benefits Center for administrative assistance. The Alight Benefits Center can be reached at 1-866-342-6986 or through the website www.RAIbenefits.com for help with retirement processes and questions(Brown_and_Williamson_To…).

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

Name of Pension Plan: Identify the official name of Altria Group's pension plan. Eligibility: Determine the years of service and age qualifications required to qualify for the pension plan. Pension Formula: Find details on the pension formula used to calculate benefits. Name of 401(k) Plan: Identify the official name of Altria Group's 401(k) plan. Eligibility: Determine who qualifies for the 401(k) plan.

Restructuring and Layoffs: In 2023, Altria Group announced a significant restructuring effort aimed at streamlining operations and reducing costs. This included a reduction in workforce across various departments, impacting hundreds of employees. The decision to restructure is partly in response to declining cigarette sales and shifts in consumer preferences towards reduced-risk products. It’s crucial to monitor these changes given the broader economic challenges and evolving regulatory environment impacting the tobacco industry.

Stock Options: Altria Group offers stock options as part of its compensation packages. Employees eligible for stock options typically include executives and senior management. Stock options give employees the right to purchase company stock at a predetermined price. RSUs: Restricted Stock Units (RSUs) are granted to employees as a form of compensation. These units vest over time, meaning employees receive the actual stock only after meeting certain conditions, such as continuing employment with the company. RSUs are commonly used to retain key employees. Eligibility: Generally, stock options and RSUs are provided to higher-level employees and executives within Altria Group. They are often part of long-term incentive plans designed to align employees' interests with the company's performance.

2024: Altria announced enhancements to its health benefits package, including increased contributions to HSAs and expanded coverage for mental health services. The company has also introduced new wellness programs aimed at improving overall employee well-being. 2023: Altria made changes to its medical plan options, introducing a new PPO plan and offering additional resources for managing chronic conditions. The company has been actively promoting its wellness initiatives, including mental health support and fitness programs.