BP Retirement Savings Plan: A Comprehensive Guide
*We are an independent financial planning firm and are not affiliated with BP, Chevron, CITGO, ConocoPhillips, ExxonMobil, Halliburton, Shell, or Schlumberger. We help former employees of these companies with retirement planning and investment strategies.
The BP Employee Savings Plan (ESP) 401(k)
The BP ESP is a 401(k) retirement savings account thoughtfully designed to encourage long-term financial growth through tax-advantaged contributions. Here’s what you need to know about the ESP:
Automatic Enrollment: New hires are automatically enrolled unless you opt out, ensuring you start saving right away.
Salary Deferrals: Convenient pre-tax payroll deductions, or choose Roth (after-tax) contributions.
Tax-Deferred Growth: Pre-tax contributions lower your taxable income now and grow without annual tax until withdrawal.
After-Tax Options (Mega Backdoor Roth): Contribute extra after-tax dollars, then convert to a Roth IRA for potentially tax-free growth and withdrawals—especially valuable for high earners who can’t contribute directly to a Roth IRA.
Company Match: Through June 30, 2025, BP matches 100% of your contributions up to 7% of your pay. BP will contribute 3% automatically for all eligible employees and match 100% up to 4% of your pay, keeping the potential company contribution at 7%.
Competitive Investment Options: Access to top-tier investment vehicles and potentially lower fees through BP’s institutional partners.
Contribution Types
Employees can contribute to the ESP using two methods:
- Pre-Tax Contributions: Contributions reduce your taxable income today, helping you save on current tax payments. Withdrawals during retirement are taxed as income.
- Roth (After-Tax) Contributions: Contributions are taxed upfront, allowing for tax-free withdrawals on qualified distributions in retirement.
- Contribution Limits (2026): The IRS maximum contributions for the plan in 2026 are as follows:
- Pre-Tax/Roth Contributions: Up to $24,500 annually (or $32,500 if you’re 50 or older, thanks to a $8,000 catch-up contribution).
- Non-Roth After-Tax Contributions: Up to $22,000. Notably, these funds can potentially be rolled into a Roth IRA for continued tax-free growth.
- Company Match Contributions:
- Current Match: BP matches 100% of your contributions, up to 7% of your compensation.
Recent Change (Effective July 1, 2025): BP transitioned to a new matching structure:
- A 3% Non-Elective Contribution, meaning all eligible employees receive this even if they don’t contribute to their 401(k).
- A 4% Elective Matching Contribution, matching 100% of employee contributions up to 4%.
Withdrawal Rules & Penalties
Standard Rule: Early withdrawals (before age 59½) are generally taxed as income plus a 10% penalty.
Penalty Exceptions: No penalty for certain situations such as:
Birth or adoption of a child
Becoming disabled
Certain federally declared disasters
Up to $1,000/year for emergency expenses (from 2024 onward)
Required Minimum Distributions (RMDs): Must begin at age 73 (or at 70½, if you turned 70½ before 2020).
Taxation on Withdrawals:
Traditional (Pre-Tax) 401(k): Withdrawals are taxed as ordinary income.
Roth 401(k): Qualified withdrawals are tax-free
Strategy Highlight: BrokerageLink
A BrokerageLink strategy inside BP’s 401(k) uses the plan’s self‑directed brokerage window at Fidelity to build a more customized, diversified portfolio while keeping all the tax benefits of the 401(k). It is typically best suited for experienced investors or those working with an advisor who want access to a broader, often lower‑cost fund universe than the standard BP core options.
The BP Retirement Accumulation Pension Plan
The RAP is a company-funded pension plan designed to provide employees with guaranteed retirement income. Unlike the ESP, employee contributions aren’t required; BP funds the plan entirely. Here’s what you need to know about the RAP:
Cash Balance Pension
The plan operates as a cash balance pension, where BP contributes a percentage of your compensation to an individual account.
Contributions
Contributions are based on a combination of your age and length of service with BP, ensuring that experienced employees are rewarded.
Guaranteed Interest Credit
- Employees hired before January 1, 2016, receive a guaranteed minimum annual interest rate of 5%.
- Those hired after January 1, 2016, receive a minimum of 2% annual interest on new pay credits.
Distribution Options
When it’s time to access your retirement funds, you have two distribution choices:
- Receive your balance as a lump sum, offering flexibility for how you manage your funds.
- Opt for an annuity, providing regular payments during your retirement.
Maximizing Your BP Retirement Savings Plan
The BP retirement savings plan offers incredible benefits, but to truly maximize its value, consider the following strategies:
1. Contribute Enough to Get the Full Match
BP’s matching contributions are a significant benefit, so be sure to contribute enough to take full advantage. Remember that starting in July 2025, all employees will receive a guaranteed 3% contribution, even without contributing themselves.
2. Explore Tax-Efficient Strategies
For those looking to optimize their retirement savings, consider the Mega Backdoor Roth strategy. By contributing after-tax funds to your 401(k), you can roll them over into a Roth IRA for tax-free growth and withdrawals. This is particularly beneficial for high-income earners.
3. Diversify Your Investments
Take time to select a mix of investment options based on your personal risk tolerance and retirement timeline. Target date funds can be a great set-it-and-forget-it option that adjusts automatically as you near retirement.
4. Plan for Tax-Efficient Withdrawals
Consider leveraging Net Unrealized Appreciation (NUA) strategies with your BP stock held in the Employee Savings Plan (ESP) to potentially unlock significant tax savings. NUA allows you to transfer BP shares from your 401(k) to a taxable brokerage account upon retirement or separation from service. When you do this correctly, you pay ordinary income tax only on the original cost basis of the BP shares at the time of distribution—not on the stock’s total market value. The appreciation (the difference between the market value and your cost basis) is then taxed at the more favorable long-term capital gains rate when you eventually sell the shares, rather than at higher ordinary income tax rates typically applied to regular 401(k) withdrawals.
5. Consult with a Financial Advisor
While BP provides an impressive array of tools, it’s always helpful to have a roadmap tailored to your unique financial goals. A certified financial advisor can help you decide on contribution levels, investment choices, and strategies for withdrawal that align with your vision for retirement.
How Does the Mega Backdoor Roth Conversion Work?
Step 1 - After-Tax Contributions ls
The first step is contributing the maximum allowable amount to your 401(k). This includes your typical employee deferrals (up to $23,500 in 2025, including catch-up contributions) and any employer matching contributions.
Once you hit these limits, you can make additional after-tax contributions to your 401(k), as long as your total contributions (employee, employer match, and after-tax) do not exceed the Section 415 limit of $77,500 (2025).
Step 2 - Conversion to Roth
After making your after-tax contributions, you need to convert them to a Roth account. There are two ways to do this based on your 401(k) plan’s options:
In-Plan Roth Rollover
If your 401(k) plan supports it, you can directly convert your after-tax contributions into a Roth 401(k) within the same plan.
Roth IRA Conversion
Alternatively, you can roll over your after-tax contributions (plus any earnings) into a Roth IRA. This option is particularly attractive because Roth IRAs have fewer withdrawal restrictions than Roth 401(k)s.
Tip: Earnings on after-tax contributions are treated as pre-tax: While your after-tax contributions themselves have already been taxed, any earnings they generate within the employer plan are considered pre-tax money. The best practice is to convert after-tax contributions to a Roth account (either Roth 401(k) or Roth IRA) as soon as possible, ideally before substantial earnings accumulate. This minimizes taxable income triggered by the conversion and maximizes the amount growing tax-free in the Roth account moving forward.
example scenario
- Salary: $250,000
- Maxes out pre-tax: $22,500
- Receives 9% company match: ~$31,000
- Remaining room: $24,000 for after-tax contributions
- Converts immediately to Roth = $24,000 tax-free growth potential
Take Charge of Your Retirement
As you plan for retirement with BP, remember that both the Employee Savings Plan (ESP) 401(k) and the Retirement Accumulation Plan (RAP) are structured to support your long-term financial well-being. By understanding your options—maximizing contributions, leveraging strategic tax advantages like Mega Backdoor Roth conversions or Net Unrealized Appreciation, and choosing a diversified investment mix—you’re empowered to make informed decisions that align with your goals. Take action today to secure your future, and consider partnering with us to tailor these powerful tools to your needs.
Disclosures: Saxon Financial Group is not affiliated with or endorsed by BP. Corporate benefits may change at any time. Be sure to consult with human resources and review your plan summary before making a decision.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. This information is provided for educational purposes only and does not constitute tax advice.
Contact us
Get Started Today
Take control of your financial future with confidence. Contact Saxon Financial Group to schedule your consultation and learn how we can tailor a financial plan around your unique needs as an Oil & Gas professional. Together, we’ll guide you down the most strategic path to achieving financial security and peace of mind.
Tell us how we can help you today
By providing a telephone number and submitting the form, you consent to be contacted via SMS from Saxon Interests Inc. Message frequency may vary. Message & data rates may apply. Reply STOP to opt out of further messaging. Reply HELP for more information.
