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Is a Lump-Sum Pension Payout the Right Choice for Marathon Petroleum Employees as Interest Rates Rise?

Healthcare Provider Update: Healthcare Provider for Marathon Petroleum Marathon Petroleum primarily partners with Cigna and Anthem Blue Cross Blue Shield to provide healthcare benefits to its employees. These partnerships ensure that employees have access to comprehensive health insurance plans, including medical, dental, and vision coverage. Potential Healthcare Cost Increases in 2026 As we look towards 2026, healthcare costs for employees at Marathon Petroleum are likely to surge. Record premium hikes are predicted in the marketplace, with some states facing increases of over 60%. Factors such as the expiration of enhanced federal premium subsidies and rising medical costs are crucial drivers behind these increases. Similar to broader trends across the industry, employees could see their out-of-pocket expenses rise dramatically, potentially exceeding 75% for many, complicating access to affordable healthcare amid escalating costs. This scenario emphasizes the need for strategic decision-making in selecting insurance options before the upcoming enrollment periods. Click here to learn more

Marathon Petroleum employees who have a lump sum option and are considering taking a lump-sum payment from Marathon Petroleum need to move fast.

You shouldn’t wait much longer to decide, as the Federal Reserve’s planned series of interest-rate increases stands to reduce the size of the payout.

Lump-sum payouts, if available to you from Marathon Petroleum, are calculated by determining the present value of your future monthly guaranteed pension income, using factors based on age, mortality tables published by the Society of Actuaries, and the Internal Revenue Service’s minimum present value segment rates.

There is an inverse relationship between interest rates and lump-sum pension payouts. When rates are low, the calculated payout rises because it takes a higher initial sum to arrive at the same future value of your lifetime monthly payments. As interest rates climb, it takes a lower initial sum to arrive at the same future value of those monthly payments, so the lump-sum buyout decreases.

As a Marathon Petroleum employee, it is important to understand how companies sometimes offer lump-sum pension buyouts to workers at or near retirement, and former employees with vested pension benefits who haven’t begun taking monthly payments. This reduces the total obligations and risk within their plans.

As interest rates rise, more corporations will offer pension buyouts intending to reduce pension obligations on their balance sheet while paying out smaller lump sums.

As a Marathon Petroleum employee potentially being offered a lump-sum payment, it is important to consider the risks associated with this alternative. According to research published in February by MetLife, in an online survey of 1,911 Americans ages 50 to 75 last fall, 34% of retirees who took a lump-sum buyout from their defined-contribution plan depleted that sum within five years.

With that taken into account, it becomes worthy to consider collecting monthly payments for the remainder of one's life as an alternative to the lump sum. Furthermore, given the availability of a survivor benefit, payment would carry on past the owner's death to the end of their spouse's life. Monthly checks provide longevity protection, preventing seniors from depleting their assets during a lengthy retirement.

According to the MetLife survey, 79% of retirees who took a lump sum made at least one major purchase, such as a vehicle, vacation, or a new or second home, within a year of getting their money. Monthly payments can serve as “guard rails” and prevent overspending, providing retirees with an established spending limit.

Although receiving monthly benefits may promote longevity by establishing monthly limits, the alternative of taking a lump sum is a better option for some. Those in poor health may not live long enough to collect all the money in monthly payments, and taking the lump sum now may allow them to leave more money to heirs. Single retirees may also opt for the lump sum since they aren't responsible for providing income to their spouse post-death.

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Some pension plans have capped benefits, so workers who have been with the company for most of their lives might not earn higher monthly payments by sticking around. Under circumstances like these, one may opt to retire with a lump sum prior to the rise of interest rates and work elsewhere.

Those with other assets besides their pension and Social Security may opt to take a lump sum. Having other assets provides enough security to afford the added risk of investing the buyout and seeking a better return. Similarly, seniors who plan to work full or part-time may want to invest part of their lump sum, knowing that their regular paychecks will help them weather a market downturn.

Rising inflation rates may make the lump sum option more attractive compared to the monthly payments. Assuming an annual inflation rate of 3%, a $1,000 monthly payment today will be equivalent to about $744.09 in 10 years. With that in consideration, it becomes beneficial for Marathon Petroleum retirees to sit down with a financial adviser and calculate which option is best for their specific case.

Indexed annuities offer principal protection and the opportunity for investment gains when the market rises, serving as a hedge against inflation. Those retiring from Marathon Petroleum companies should be aware of the high costs associated with many annuities and understand the details before exercising the purchase.

Using a lump sum to buy an annuity can prove to be of benefit when retirees fear the financial instability of their employer. Private-sector workers should inquire about their company's participation in the Pension Benefit Guaranty Corp., which covers a portion of their monthly benefits in the event that an employer’s pension fund becomes insolvent.

Democratic Sens. Patty Murray of Washington, Tina Smith of Minnesota, and Tammy Baldwin of Wisconsin reintroduced a bill that holds sponsors of pension plans accountable for providing detailed information to participants about proposed pension buyouts. The bill, known as the Inform Act, urges sponsors to provide a comparison of benefits participants would receive if they take the buyout or accept monthly payments, as well as an explanation of how the lump sum was calculated.

How does the vesting schedule within the Marathon Petroleum Retirement Plan impact an employee's long-term financial security, and what steps can employees take to ensure they are fully vested by their intended retirement age with Marathon Petroleum?

The vesting schedule within the Marathon Petroleum Retirement Plan generally requires three years of service for an employee to become fully vested. This means that if an employee leaves before completing three years of service, they may forfeit their pension benefits. To ensure full vesting by the intended retirement age, employees should maintain continuous employment with Marathon for at least three years or more. Additionally, employees can consider keeping track of their vesting progress through available resources such as Fidelity’s NetBenefits system to align with their long-term financial security goals.

In what ways do the new in-service distribution features for employees aged 59Â½ and above alter the landscape of retirement planning for Marathon Petroleum employees, and how should employees consider these options in their overall retirement strategy with Marathon?

The new in-service distribution feature, effective November 1, 2022, allows employees aged 59½ and above to take distributions from their Legacy Retirement Benefit without having to retire or terminate employment. This option can alter retirement planning by providing more flexibility for accessing funds while still employed. Employees should evaluate whether taking distributions early aligns with their financial goals, considering potential tax implications and the impact on their remaining retirement balance(Marathon_Petroleum_Comp…).

Employees working for Marathon Petroleum Company often have questions regarding their benefits when considering early retirement. How do the options for Cash Balance Retirement Benefits at Marathon compare to traditional pension plans, and what factors should employees weigh when deciding which option aligns best with their retirement goals?

Marathon’s Cash Balance Retirement Benefit offers a lump-sum option based on accumulated pay and interest credits, differing from traditional pension plans that typically provide a fixed monthly annuity. When comparing these options, employees should consider factors like their need for liquidity, risk tolerance, and life expectancy. The Cash Balance option may offer more flexibility, while traditional pensions provide a predictable, lifelong income stream. Employees should also factor in the availability of early retirement benefits and how these options align with their retirement objectives(Marathon_Petroleum_Comp…).

What specific processes must a Marathon Petroleum employee follow to initiate the application for their retirement benefits, and are there specific documents that need to be prepared and submitted to the Plan Administrator to avoid delays in this process?

To initiate the application for retirement benefits, Marathon Petroleum employees must contact the Marathon Benefits Center at Fidelity, ideally 45 to 180 days before their desired retirement date. Required documents include properly completed benefit election forms and spousal consent if applicable. Submitting all necessary paperwork in advance helps avoid delays. Employees should also review benefit estimates through Fidelity to ensure accurate calculations(Marathon_Petroleum_Comp…).

Given the importance of spousal consent in the Marathon Petroleum Retirement Plan, what are the legal implications of not obtaining this consent before electing certain payment options, and how can employees ensure compliance with these requirements while planning their retirement with Marathon?

Spousal consent is a critical legal requirement in the Marathon Petroleum Retirement Plan, particularly when electing non-survivor options like a lump sum. Failing to obtain consent can invalidate certain payment elections. To ensure compliance, employees should submit a notarized spousal consent form during the retirement application process to avoid legal disputes and ensure a smooth transition to retirement(Marathon_Petroleum_Comp…).

What are the rights and responsibilities of Marathon Petroleum employees under the Employee Retirement Income Security Act (ERISA), particularly concerning the enforcement of retirement benefits, and how does this legislation protect employees' interests within the Marathon Petroleum Retirement Plan?

Under ERISA, Marathon Petroleum employees have rights such as receiving plan information, benefiting from fiduciary oversight, and accessing grievance procedures. ERISA ensures employees’ retirement benefits are protected and can be enforced if disputes arise. Employees can rely on ERISA to safeguard their interests, including ensuring fair treatment and timely payment of their pension benefits(Marathon_Petroleum_Comp…)(Marathon_Petroleum_Comp…).

How do the contributions and funding mechanics of the Marathon Petroleum Retirement Plan serve to benefit its employees, and what assurances do employees have that the benefits will be available to them upon retirement?

Marathon Petroleum funds the Retirement Plan through employer contributions, held in a trust fund to secure future benefits. Employees are assured that their benefits are backed by this trust, and the Plan is subject to federal insurance through the Pension Benefit Guaranty Corporation (PBGC) for additional security. The plan’s mechanics, including pay and interest credits, ensure steady growth of employees’ retirement funds(Marathon_Petroleum_Comp…)(Marathon_Petroleum_Comp…).

In cases of military service, what provisions does the Marathon Petroleum Retirement Plan offer to employees on leave, and what steps must these employees take to ensure their service time is credited toward their benefits with Marathon upon their return?

Employees on military leave are protected under USERRA, ensuring their service time is credited toward their benefits when they return to Marathon Petroleum. To ensure service time is recognized, employees must provide proper notice before leave and return to work within the timeframes outlined by USERRA. Military service credit helps preserve and enhance retirement benefits for these employees(Marathon_Petroleum_Comp…).

What options do Marathon Petroleum employees have if they experience a denial of their retirement benefits claims, and what steps can they take to appeal these decisions effectively within the guidelines set forth by the Marathon Petroleum Retirement Plan?

If a Marathon Petroleum employee's retirement benefits claim is denied, they can follow the plan’s formal appeals process, starting with submitting a written claim to the Plan Administrator. If denied again, they may file an appeal, which will be reviewed by the Plan Administrator. Employees must adhere to deadlines and ensure they provide all necessary documentation for their appeal(Marathon_Petroleum_Comp…).

How can Marathon Petroleum employees get in touch with the Plan Administrator or utilize available resources to obtain more information about their retirement benefits, including pension calculations and plan details, ensuring they have the most accurate and current information to aid in their retirement planning?

Employees can contact the Plan Administrator through Fidelity’s NetBenefits system or the Marathon Benefits Center for assistance with pension calculations and plan details. These resources provide up-to-date information and tools, such as benefit estimates, to help employees plan their retirement strategy. Employees can also obtain plan documents for more in-depth information(Marathon_Petroleum_Comp…).

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

Marathon Petroleum offers RSUs to its executives and key employees. RSUs vest over multiple years, promoting alignment with long-term company goals.