ConocoPhillips Retirement Plans
When it comes to planning for retirement, having access to comprehensive benefits can make all the difference. ConocoPhillips provides its employees a competitive 401(k) Savings Plan (CPSP), along with various Pension Plans depending on your employment start date.
For current employees and retirees, understanding the nuances of these plans is essential for making informed financial decisions. Let’s take a closer look at each plan and evaluate their features from our perspective.
*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 ConocoPhillips Savings Plan (401k)
The ConocoPhillips Savings Plan (CPSP) is a robust 401(k) program that employees can take full advantage of to maximize their retirement savings.
Key Features of the CPSP
1. Employee Contributions
Employees can contribute up to 75% of their eligible pay to the plan (subject to IRS contribution limits). This flexibility allows participants to determine how much of their income they want to allocate toward their retirement goals...
2. Company Match
ConocoPhillips provides a company match on employee contributions. To qualify for the full match and any discretionary contributions, employees must contribute at least 1% of their eligible pay. This matching contribution is effectively “free money” that boosts your savings.
3. Company Retirement Contribution (CRC)
One major advantage of the CPSP is the CRC. ConocoPhillips makes a non-discretionary contribution to the plan, even if an employee doesn’t contribute themselves. This feature ensures that all employees are building retirement savings, regardless of their personal contribution levels.
4. Investment Options
Employees have the opportunity to invest their CPSP funds in a variety of pre-selected investments, as well as in ConocoPhillips stock which opens the door for a retirement tax savings strategy called Net Unrealized Appreciation.
5. Mega Backdoor roth conversions
For high-income earners, the CPSP includes a unique feature that allows for after-tax contributions and potential Roth conversions. This is a powerful strategy for employees looking to save beyond traditional limits and minimize their tax burden in retirement.
6. Vesting
Employees are immediately 100% vested in their own contributions, company matches, and discretionary contributions. The CRC, however, requires three years of service to fully vest.
Strategy Highlight: BrokerageLink
A BrokerageLink strategy inside ConocoPhillips’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 ConocoPhillips core options.
ConocoPhillips Pension Plans
The ConocoPhillips Pension Plan (CPPP) offers a defined benefit structure, providing employees with a guaranteed payout upon retirement based on a pre-determined formula.
Key Features of the CPPP
Defined Benefit
Unlike the CPSP, the CPPP is fully funded by ConocoPhillips, so employees do not need to contribute to receive benefits. The payout is determined by variables such as years of service, compensation, and Social Security benefits.
Predictable Payouts
One of the standout features of the CPPP is its predictability. Employees don’t need to worry about market fluctuations or investment returns; the employer bears the investment risk.
Payout Flexibility
Upon retirement, employees can choose from two options to receive their pensions:
- A lump sum payment
- A monthly annuity that guarantees income for life
ConocoPhillips Retirement Plan Titles
The ConocoPhillips Retirement Plan consists of multiple titles, each with distinct provisions:
- Title I: Phillips Retirement Income Plan (Heritage Phillips employees)
- Title II: ConocoPhillips Cash Balance Account (closed to new entrants January 1, 2019)
- Title IV: Retirement Plan of Conoco (Heritage Conoco employees)
- Additional Titles: Various heritage company plans (Tosco, Burlington Resources, etc.)
Critical Eligibility Updates
- New employee eligibility for Title II (Cash Balance Account) ended December 31, 2018. Employees hired after January 1, 2019, are generally eligible for the Company Retirement Contribution in the ConocoPhillips Savings Plan instead.
Cash Balance Account Pension Overview
For Title II participants, the account grows through:
Pay Credits: Monthly contributions based on age plus service points:
- Under 44 points: 6% of eligible pay
- 44-66 points: 7% of eligible pay
- 66+ points: 9% of eligible pay
Interest Credits: Based on 30-Year U.S. Treasury Securities rate, updated quarterly:
- Minimum rate: 0.99% annually
Vesting Requirements:
Title II: 3 years of vesting service (1,000+ hours per year)
Automatic vesting: Age 65 while employed, layoff, or death
Hours calculation: 190 hours per month classified as employee
Final Average Earnings (FAE) Pension Overview – ConocoPhillips Heritage Plans
What Is the FAE Pension?
- Traditional pension plan for legacy Phillips (Title I) and Conoco (Title IV) employees
- Benefit based on your final average earnings and years of credited service
- Offers a choice between monthly annuity payments (for life) or a lump sum at retirement
How Your FAE Pension Grows
- Final Average Earnings (FAE): Highest 3 consecutive years of eligible pay in your last 11 years
- Credited Service: Total years (months) you participated in the plan
- Social Security Offset: Reduces pension by a portion of your estimated Social Security benefit
Final Average Earnings (FAE) Plans (Titles I, IV, Others)
- Employment Date: Must have been hired before the plan’s closure date (varies by heritage company; most closed before 2003).
- Vesting: Typically, after 5 years of service.
- Age and Service: Minimum age (often 55) and service requirements (often 10 years) for early retirement. Normal retirement age is usually 65.
- Separation from Service: Must have ended employment or met plan-specific retirement criteria.
Interest Rate Impact on Pension Values
High Impact: Traditional DB Plans (Titles I & IV)
Interest rates have a dramatic inverse relationship with lump sum values in traditional plans. When rates increase:
- Lump sum values decrease significantly
- The 2nd segment rate (years 6-20) has the highest impact due to its weighting
Low Impact: Cash Balance Plan (Title II)
Interest rates have minimal impact on Title II lump sums because:
- The lump sum is simply the account value
- Interest rates only affect future account growth, not current value
Key Differences Between the 401k and Pension Plan
To better understand how these plans complement each other, here’s a quick comparison:
Both plans serve different purposes and together create a balanced approach to retirement savings. The 401(k) offers the potential for significant growth and flexibility, while the pension plan provides stability and peace of mind through guaranteed income.
Building a Comprehensive Retirement Strategy
From a financial perspective, ConocoPhillips’ retirement benefits are noteworthy for their balance of flexibility and security. By combining the CPSP and CPPP, employees can create a multipronged strategy:
Maximizing Contributions
Employees should aim to contribute enough to their 401(k) to receive the full company match. This ensures they aren’t leaving money on the table.
Leveraging the Mega Backdoor Roth
High-income earners, in particular, can use the after-tax contributions and Roth conversions to optimize retirement savings.
Understanding Pension Options
Prior to retirement, it’s crucial to evaluate whether a lump sum or annuity payment better fits long-term financial goals. Seeking advice from a financial professional can help make this decision easier.
Regularly Reviewing Investments
Employees should periodically review their 401(k) investments to ensure they’re aligned with their retirement timelines and risk tolerance.
Planning for Tax Efficiency
Combining tax-deferred growth from the 401(k) with post-tax Roth contributions creates a tax-efficient framework for retirement savings.
Take Charge of Your Retirement
The ConocoPhillips retirement package provides employees and retirees with a powerful array of tools to secure their financial future. By taking full advantage of the 401(k) Savings Plan and the Pension Plan, employees can enjoy both customizable growth and dependable income. Now is the time to evaluate your financial strategy and ensure you’re making the most of these generous benefits.
Disclosures: Saxon Financial Group is not affiliated with or endorsed by ConocoPhillips. 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.
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