ConocoPhillips Retirement Plan Guide
Everything You Need to Know as A ConocoPhillips Employee
Everyone wants to make sure they have enough saved away to live the life they want in retirement. ConocoPhillips employees have certain retirement plans and vehicles that will help them achieve their specific retirement goals.
Below we will put together a roadmap of all of the different retirement plans available to ConocoPhillips employees. We will look to give you insight as to how each of the plans works as well as how to maximize them for retirement so that ConocoPhillips employees will be able to better achieve their specific retirement goals and plans.
ConocoPhillips 401(K)
The centerpiece of the ConocoPhillips retirement plan is the 401(K) also known as the ConocoPhillips Savings Plan (CPSP). It enables employees to save and invest a portion of their earnings for retirement on a tax-advantaged basis by contributing to either a pre-tax or Roth account. Contributions to the CPSP will be withheld in a set percentage amount per pay period.
If a ConocoPhillips employee contributes at least 1% of their eligible pay each period to the CPSP they will receive a 6% company match. On top of this, ConocoPhillips also has a discretionary contrition that can be up to 6% (but ConocoPhillips targets 3% annually).
This discretionary contribution paired with the employer match of 6% means that by a ConocoPhillips employee only contributing 1% of their eligible pay to CPSP, they will be matched 9% of their pay by ConocoPhillips through their company contribution. These benefits are vested immediately to the employee.
In addition to the employer match ConocoPhillips has company Retirement Contribution (CRC) of 6% of eligible pay each period. This 6% contribution requires no contribution by the employee and will vest after three years of service by a ConocoPhillips employee. All of these aspects of the CPSP help ConocoPhillips employees store large amounts away for retirement.
Once the funds are in the CPSP there are fixed investment options offed for employees to invest in. Employees are also able to invest in ConocoPhillips stock through this plan. For employees that have been at ConocoPhillips for most of their employment might have a large number of COP stock built up in their CPSP. If some of these shares were purchased back when the stock price was very low in comparison to where it is today, these employees might be able to benefit from a retirement tax savings strategy called Net Unrealized Appreciation or NUA. To read more about what NUA is and how it might benefit a ConocoPhillips employee, please see our article on this topic.
ConocoPhillips CPSP also has the ability to let high net worth employees supercharge their retirement through a Mega Backdoor Roth Conversion. For more information on how the retirement planning tool works please see our article on this topic.
ConocoPhillips Pension Plan
The next major part of the ConocoPhillips retirement plan is the ConcoPhillips Pension Plan (CPPP). This plan differs from the CPSP in that it is fully funded by ConocoPhillips.
The benefit received from the CPPP is determined by a formula that takes into account years of service, compensation, and social security benefits. This plan benefit will grow as the ConocoPhillips employee goes through their career.
Once the employee reaches retirement, they will have a couple of options on how to collect their accumulated pension benefits. The employee will be allowed to take the money out as a lump sum that may be rolled into an Individual Retirement Account tax free.
Here the employee has a great deal of flexibility in how the funds are invested as well as how and when the funds are distributed. The other option at retirement would be to take the pension benefit as an annuity that will pay the employee a fixed income every month. This annuity can be for their life or for the joint life of them and their spouse.
The CPPP is a nice reward the company offers employees for staying with the company and is very helpful in allowing ConocoPhillips employees to reach their retirement goals.
Stock Based Rewards, Options and Benefits
ConocoPhillips helps can offer a number of different stock rewards and incentives to employees. Through these programs ConocoPhillips employees are granted shares of COP stock for reaching certain performance or service requirements.
Stock rewards are shares of stock that are usually given to an employee based on a vesting schedule. When the shares vest, they are given to the employee and the cost of the shares are included on the employee’s W-2 as taxable income for that year. Then, the employee may hold these shares as an investment and sell them at a later date.
Stock options on the other hand are a way for ConocoPhillips to incentivize employees to better the company and increase the COP stock price. These work by ConocoPhillips offering to sell the employee a set number of COP stock at a certain price (price is established when options are granted). The hope is that the stock price will increase and by the time the employee can exercise the options, the employee will be able to purchase the shares for a lower price and then sell them at the new higher price.
Another benefit ConocoPhillips has is the ability for employees to join what is known as the Employee Stock Purchase Program or ESPP. This allows employees to have a portion of their paycheck withheld and used to purchase COP stock at a discounted price. These shares are not held in their CPSP but are instead held with a custodian called Computershare and can be sold at any time once they are purchased.
While employees have access to these shares of COP once they are vested or purchased, they are often not sold immediately and instead used to help fund employee retirement goals. It is important for ConocoPhillips to keep an eye on how many shares of COP stock they have and what percentage of their overall investment portfolio they represent. If they start to become too large of a percentage of the employee’s overall investment portfolio it might be beneficial for them to look into diversification into other investment assets to avoid the success of reaching their retirement goals being determined by the rise or fall of COP stock.
Conclusion
ConocoPhillips offers many ways for employees to store away funds and investments for retirement. These different retirement vehicles help their employees reach their retirement goals in many different ways and have flexibility in reaching these goals.
Need Some Help?
If you’d like some help from a CPA or CERTIFIED FINANCIAL PLANNER (CFP®) professional regarding this strategy and how it applies to you, the Rhame & Gorrell Wealth Management team is here to help.
Our experienced Wealth Managers can help you review your financial, estate, and tax situation to come up with a custom strategy going forward.
Feel free to contact us at (832) 789-1100, [email protected], or click one of the buttons below to ask a question or schedule your complimentary strategy session today.
IMPORTANT DISCLOSURES:
Rhame & Gorrell Wealth Management is not affiliated with or endorsed by ConocoPhillips
Rhame & Gorrell Wealth Management, LLC (“RGWM”) is an SEC registered investment adviser with its principal place of business in the State of Texas. Registration as an investment adviser is not an endorsement by securities regulators and does not imply that RGWM has attained a certain level of skill, training, or ability.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own CPA or tax professional before engaging in any transaction. The effectiveness of any of the strategies described will depend on your individual situation and should not be construed as personalized investment advice.
For additional information about RGWM, including fees and services, send for our Firm Disclosure Brochures as set forth on Form ADV Part 2A and Part 3 by contacting the Firm directly. You can also access our Firm Brochures at www.adviserinfo.sec.gov. Please read the disclosure brochures carefully before you invest or send money.
