Optimizing the Graco Employee Investment Plan: Fiduciary Wealth Strategies for Graco Professionals

Equity Compensation Coordination

Balancing the Graco ESPP, ESOP, and Concentrated Stock Risk

Graco offers a robust Employee Stock Purchase Plan (ESPP) allowing participants to buy company shares at a discount. In fact, historical records indicate that approximately 64% of eligible employees participate in this stock purchase program. This high enrollment demonstrates a strong belief in the firm's growth; however, it also presents a standard financial planning dilemma: concentrated equity risk.

For long-tenured employees, often referred to as Graco lifers, a highly specific and valuable wealth opportunity exists within the Graco Employee Investment Plan: the Employee Stock Ownership Plan (ESOP) and Net Unrealized Appreciation (NUA). Over the decades, many lifers were gifted Graco stock directly inside their 401(k) at an exceptionally low cost basis.

Under NUA rules, when you distribute these shares in kind from your 401(k) to a taxable brokerage account, you pay ordinary income tax only on the original, low cost basis of the shares. The remaining appreciation is taxed at more favorable long-term capital gains rates when sold, rather than the higher ordinary income rates. Coordinating this distribution with other strategies, such as Roth conversion planning or deferred compensation timing, is critical to managing your lifetime tax liabilities.