FAQs for our Friends at EntergySubmitted by ADVISOR.INVESTMENTS on March 15th, 2019
We see many of our friends at Entergy Louisiana Station confronted by a perplexing situation as the company will not renew its power plant operating contract with ExxonMobil. Here’s what we know about the upcoming change and what we anticipate to be the questions that our friends at Entergy may be asking.
FAQs for our Friends at Entergy
Over the years, we’ve worked with employees of Entergy, an electric utility serving customers in Arkansas, Louisiana, Mississippi and Texas. We’ve found that these employees tend to be highly loyal to the company as many of them come from the communities it serves. Many are “family first” people who share similar desires during retirement. It’s that sort of person who shaped our business; you could say we built our business around the needs of our “family first retirees.”
And now we see many of our friends at Entergy Louisiana Station confronted by a perplexing situation as the company will not renew its power plant operating contract with ExxonMobil. The contract ends on May 31, 2019, at which point those Entergy employees become employees of Ethos.
Here’s what we know about the upcoming change and what we anticipate to be the questions that our friends at Entergy may be asking.
Keep in mind that we are not basing this on verified knowledge as we are not employees of the company. If you want to know the fact and figures, please consult with Entergy’s benefits department.
How is my severance package taxed?
We have heard that the hourly employees at the Louisiana Station site will be eligible for a severance benefit per their union contract. In general the IRS views severance like any other pay: it is taxed as wages.
Assuming your employer withholds taxes, you can expect your net amount to be reduced similar to previous paychecks. The question of whether that’s enough taxes withheld requires a personal review. Don’t assume you are paid up. Items such as other income, qualified distributions, new employment will affect your taxes due and is beyond the scope of common employer withholdings.
To answer these questions, we recommend that you check with your accountant and/or financial advisor about tax strategies.
Should I take the lump sum or annuity?
If you take a lump sum amount instead of your pension, investing the lump sum amount will allow you control and access to your money while also exposing that money to market risks and changes, which have been substantial at times in the past.
The pension provides a reasonable assurance of a steady income based on the credit-worthiness of Entergy as well as the Pension Benefit Guarantee Corporation (PBGC), the government agency that insures private sector pension plans. However, both choices have risks and possible “buyer’s remorse”.
Advisor.Investments is an advocate of individuals treating this decision like a project and doing research so the actual decision becomes a reflection of their own best interest having had reasonable time and effort to review the many pros and cons. It may be very helpful to contact a financial advisor to map it all out.
How do I transition my savings plan away from Entergy?
A few highlights regarding this process would involve setting up an outside IRA account, calling the Entergy Savings Plan custodian and requesting a direct rollover into your IRA. Keep in mind you will want to get your “ducks in a row” before making that decision.
It’s more than just your current Savings Plan investment decision. Items such as your “Post- 1986 After-tax basis” are important to be aware of along with how it can be used in your tax strategy prior to initiating a rollover/distribution.
How do I know if my monthly pension amount is fair?
This process involves taking your Pension Lump Sum equivalent and compare that with multiple insurance company lifetime annuity payouts.
The payment is only one thing. Payout options are very important. Some company pensions lack the payout choices that your spouse would prefer in the private market. You will want to know how long payments are guaranteed not only for your life, but also for your spouse (if applicable), and your beneficiaries. There are many ways to structure it.
How do I handle my Entergy company stock?
You can sell it, keep it there, or roll your shares over to your personal IRA without paying any taxes and decide later.
You have the flexibility to make a decision around your personal situation and how it will fit within your retirement income strategy.
How do I avoid the 10% tax penalty on distributions before 59½?
There are at least three factors to consider:
· Some company plans allow for it if the money is kept within the Company Savings plan and future withdrawal follow the plan rules.
· You may have the option to take a one-time partial distribution upon your final distribution
· IRS Rule 72(t)- Substantially Equal Periodic Payments
You will need to consult with benefits, read your summary plan description, and/or consult with your accountant or Financial Advisor. Make sure you are fully informed before taking any action.
Should I roll over my Entergy savings plan?
That answer depends on your personal circumstances. Technically you can:
· Leave it with your employer plan custodian
· Roll it over into your personal IRA(s)
Roll it over to your new employer plan
· Complete a full liquidation
· Complete a partial liquidation while leaving it with employer plan custodian
Items for consideration include fees and expenses, investment options, services available, penalty free withdrawals, Required Minimum Distributions, tax strategies and company stock to name a few.
As you can see, the Entergy plan has many facets to consider as you make your transition. Don’t assume it’s all straightforward. We strongly suggest that you check in with your accountant and/or financial advisor as you make these decisions.
We’re curious what questions you have about the Entergy plan. If you’re an employee or know someone who is facing this transition and would like to discuss, please contact us.
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