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***New Rates Coming Out on October 19th, Come Back for an Update***

Some great news was recently announced for ConocoPhillips employees considering the lump sum option on their pension payment. Interest rates are currently sitting at record lows for individuals that commence their benefits in Q4 2020. Over the last year, interest rates have dropped dramatically, which has greatly increased many lump sum payments. Should you desire to take your pension as a lump sum, ConocoPhillips will use interest rates and your age to calculate your lump sum payment. When interest rates move up or down, your pension lump sum amount will move in an inverse relationship.

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Analysis:


The 30-year Treasury and Corporate Bond Segment Rates are approximately 1% lower today than they were just 1 year ago. On average, a 1% decline in interest rates results in roughly an 8%-12% increase to your pension lump sum (varies by age). Conversely, a 1% increase to interest rates results in roughly an 8%-12% drop in your lump sum pension value. We will not know what Q1 2021 lump sum interest rates will be until the September Corporate Bond Segment Rates are published (typically the third week in October). Once these rates have updated, we encourage all employees that fall under one of these defined-benefit pension plans to rerun their pension projections to find out whether or not you are making money or losing money in your lump sum going into the next quarter. This is especially important if you are approaching retirement or already off payroll in order to potentially increase your pension lump sum.

Remember, you do not have to commence your pension benefit directly after you retire, unless you are age 65 or older at retirement. It may be advisable to defer the election of your pension benefit well beyond your retirement date, although you cannot commence your pension benefit prior to your retirement date in most cases.

 

2020 Rates

Benefit Commencement Date

30 Year TSR

(Quarterly)

PBGC (Monthly) Corporate Bond Segment Rates (Quarterly) 1st Corporate Bond Segment Rates (Quarterly) 2nd Corporate Bond Segment Rates (Quarterly) 3rd
Jan 1, 2020 2.16% 0.25% 2.13% 3.07% 3.65%

Feb 1, 2020

2.16% 0.25% 2.13% 3.07% 3.65%
Mar 1, 2020 2.16% 0.00% 2.13% 3.07% 3.65%
Apr 1, 2020 2.30% 0.00% 2.03% 3.06% 3.59%
May 1, 2020 2.30% 0.50% 2.03% 3.06% 3.59%
Jun 1, 2020 2.30% 0.00% 2.03% 3.06% 3.59%
Jul 1, 2020 1.46% 0.00% 2.22% 3.08% 3.73%
Aug 1, 2020 1.46% 0.00% 2.22% 3.08% 3.73%
Sep 1, 2020 1.46% 0.00% 2.22% 3.08% 3.73%
Oct 1, 2020 1.49% 0.00% 0.74% 2.57% 3.32%
Nov 1, 2020 1.49%   0.74% 2.57% 3.32%
Dec 1, 2020 1.49%   0.74% 2.57% 3.32%

 

 

2019 Rates

Benefit Commencement Date

30 Year TSR

(Quarterly)

PBGC (Monthly) Corporate Bond Segment Rates (Quarterly) 1st Corporate Bond Segment Rates (Quarterly) 2nd Corporate Bond Segment Rates (Quarterly) 3rd
Jan 1, 2019  3.15% 1.50%  3.21%  4.26%  4.55%
Feb 1, 2019  3.15% 1.25%  3.21%  4.26%  4.55%
Mar 1, 2019  3.15% 1.25%  3.21%  4.26%  4.55%
Apr 1, 2019  3.10% 1.25%  3.38%  4.32%  4.69%
May 1, 2019  3.10% 1.00%  3.38%  4.32%  4.69%
Jun 1, 2019  3.10% 1.00%  3.38%  4.32%  4.69%
Jul 1, 2019  2.98% 0.75%  2.86%  4.00%  4.42%
Aug 1, 2019  2.98% 0.50%  2.86%  4.00%  4.42%
Sep 1, 2019  2.98% 0.50%  2.86%  4.00%  4.42%
Oct 1, 2019  2.57% 0.00%  2.41%  3.51%  4.16%
Nov 1, 2019  2.57% 0.25%  2.41%  3.51%  4.16%
Dec 1, 2019  2.57% 0.25%  2.41%  3.51%  4.16%

 

 

ConocoPhillips Retirement Plan


As it turns out, there are 8 different pension plans at ConocoPhillips, called Titles. Most
employees fall under either the Phillips Retirement Income Plan (Title I), the Retirement Plan of Conoco (Title IV), The Burlington Resources Inc. Pension Plan (Title VI), or the ConocoPhillips Cash Balance Plan (Title II). If you don't fall under one of these plans or aren't sure which plan you fall under, please reach out to one of our COP-focused advisors for further guidance.

 

Because of how sensitive Titles I, IV, and VI are to interest rates, The Retirement Group puts an immense amount of effort into tracking these rates and educating employees on how they affect pension lump sums in an effort to help individuals potentially increase their pension benefit when they leave the company.

Phillips Retirement Income Plan:


If you are considering a lump-sum on this pension plan, it is very important to pay
attention to interest rates as you approach retirement. Interest rates on this plan
change quarterly and have a negative correlation with the lump-sum payout (i.e. rising
interest rates will typically reduce the value of your lump-sum). The interest rates that are
used in this calculation are the Corporate Bond Segment Rates (service after 2008) as well as the 30-year Treasury rate (service prior to 2009). ConocoPhillips will typically use the average interest rates of the fourth month prior to the quarter you commence your benefit, which can be helpful in timing the election of your benefit to potentially increase the lump sum payout.

 

"On average, a 1% decline in interest rates results in roughly an 8%-12% increase to your pension lump-sum."

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Burlington Resources Inc. Pension Plan (FAE Formula):

 


If you are considering a lump-sum on this pension plan, it is very important to pay
attention to interest rates as you approach retirement. Interest rates on this plan
change quarterly and have a negative correlation with the lump-sum payout (i.e. rising
interest rates will typically reduce the value of your lump-sum). The interest rates that are
used in this calculation are the Corporate Bond Segment Rates (service after 2008) as well as the 30-year Treasury rate (service prior to 2009). ConocoPhillips will typically use the average interest rates of the fourth month prior to the quarter you commence your benefit, which can be helpful in timing the election of your benefit to potentially increase the lump sum payout.


Retirement Plan of Conoco:


If you are considering a lump-sum on this pension plan, it is very important to pay attention to interest rates as you approach retirement. The interest rates that are used in this calculation are the PBGC rate (service prior to 2000), the 30-year Treasury rate (service from 2000-2008), the Corporate Bond Segment Rates (service after 2008). The Corporate Bond Segment Rates and 30-year Treasury Rate change quarterly, however the PBGC rate changes monthly. ConocoPhillips will typically use the average interest rates of the fourth month prior to the quarter you commence your benefit, which can be helpful in timing the election of your benefit to potentially increase the lump sum payout.

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Securities through FSC Securities Corporation, member FINRA/SIPC and investment advisory services offered through The Retirement Group, LLC, a registered investment advisor not affiliated with FSC Securities Corporation. Office of Supervisor Jurisdiction: 5414 Oberlin Dr #220, San Diego CA 92121. 800900-5867

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Tags: Pension, Interest rates