ConocoPhillips employees considering the lump sum option on their pension payment, may have an opportunity to take advantage of lower interest rates in Q2 2022 before higher rates take into effect for the Q3 2022. Over the course of 2020, interest rates dropped dramatically, which greatly increased many lump sum payments. However, interest rates spiked modestly through 2021. While the overall trajectory of interest rates has been higher, Conoco Philips employees who retired in the first quarter might have seen their lump sums increase, but any increases in lump sums going forward will be entirely diminished due to rising rates now in effect for Q3.

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As rates have continued to rise, it is likely that the last opportunity to take advantage of those low rates will be those who are retiring in the second quarter of 2022. 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 (except for Cash Balance Pension Lump Sum payouts).

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Analysis:


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 in interest rates results in roughly an 8%-12% drop in your lump sum pension value. Now that the December Corporate Bond Segment Rates are published, we encourage all employees that fall under one of these defined-benefit pension plans to re-run their pension projections to find out whether or not their lump-sum has decreased. We also encourage you to keep an eye on future rates as they seem to be trending upward. This is especially important if you are approaching retirement or already off payroll. You potentially may see a change in your pension lump sum.
Fwd-HUGE-Drop-again-on-PPA-Rates-Jul-20-0-59-2-25-3-01-j-mccaffrey-retiregroup-com-The-Retirement-Group-Mail (1)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.

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ConocoPhillips Segment Lump Sum Interest Rates:

2022 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
Sep 1, 2022

2.41%

N/A

2.44%

3.71%

3.94%

Aug 1, 2022

2.41%

N/A

2.44%

3.71%

3.94%

Jul 1, 2022

2.41%

N/A

2.44%

3.71%

3.94%

Jun 1, 2022

1.85%

N/A

1.16%

2.72%

3.10%

May 1, 2022 1.85% N/A

1.16%

2.72%

3.10%

Apr 1, 2022 1.85% N/A

1.16%

2.72%

3.10%

Mar 1, 2022 1.94% N/A

0.70%

2.55% 3.06%
Feb 1, 2022 1.94% N/A 0.70% 2.55% 3.06%
Jan 1, 2022 1.94% N/A 0.70% 2.55% 3.06%

 

 

2021 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

Dec 1, 2021

2.16% N/A 0.63% 2.70% 3.32%
Nov 1, 2021 2.16% N/A 0.63% 2.70% 3.32%
Oct 1, 2021 2.16% N/A 0.63% 2.70% 3.32%
Sep 1, 2021 2.34% N/A 0.69% 2.92% 3.69%
Aug 1, 2021 2.34% N/A 0.69% 2.92% 3.69%
Jul 1, 2021 2.34% N/A 0.69% 2.92% 3.69%
Jun 1, 2021 1.67% N/A 0.51% 2.26% 3.01%
May 1, 2021 1.67% N/A 0.51% 2.26% 3.01%
Apr 1, 2021 1.67% N/A 0.51% 2.26% 3.01%
Mar 1, 2021 1.42% N/A 0.51% 2.31% 3.15%
Feb 1, 2021 1.42% N/A 0.51% 2.31% 3.15%
Jan 1, 2021 1.42%

N/A

0.51% 2.31% 3.15%

 

 

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

 

 

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.

 

Considering 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 for 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.

 

"A 1% increase in interest rates results in roughly an 8%-12% drop in your lump sum pension value."

Closeup image of businessman drawing 3d graphics-Aug-19-2020-03-21-59-47-PM

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 for 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 for 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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The Retirement Group is not affiliated with nor endorsed by ConocoPhillips. We are an independent financial advisory group that focuses on transition planning and lump sum distribution. Neither The Retirement Group or FSC Securities provide tax or legal advice. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

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. (800) 900-5867

Tags: Pension, Interest rates, ConocoPhillips, Inflation