How do Severance, Layoff, or Disability Affect My Benefits?

Severance (Layoff and Termination)

Benefit Accruals and Severance Pay

• Exclusion of Severance Pay: "Severance benefits" are explicitly excluded from the calculation used under the Title VI Final Average Earnings (FAE) Benefit Formula and the Title VI Cash Balance Benefit Formula.

• Pay Credits: For Title VI (Cash Balance) participants, Pay Credits stopped being applied after December 31, 2008, even if actively employed. If employment terminated before that date, no Pay Credits were applied after the termination.

• Interest Credits: Regardless of separation, the Cash Balance Account (Title VI) continues to receive Interest Credits following termination through the end of the calendar quarter preceding the date benefit payments commence.

Defined Benefit Commencement and Reduction

• • • Phillips Retirement Income Plan (Title I)
      • Early Retirement Reduction Eligibility: If the participant's employment ends due to layoff, sale of assets, sale of stock, or transfer to an affiliated group during or after the calendar year in which they turn age 50, they will be eligible for Early Retirement Reduction, provided their benefit is not transferred to a successor employer's plan.
        • This reduction is 5% per year (or 0.4167% per month) for each month the benefit begins before age 60.
        • If the participant does not meet the criteria for the Early Retirement Reduction, the Actuarial Reduction applies, which is generally 6% per year (0.5% per month) before age 65.
          
      • Title I Layoff Provisions: If a participant is laid off, they may receive:
        • Credited Service: Based on 45 hours for each week of layoff pay for which they are eligible.
        • Final Average Earnings (FAE) Extension: Annual earnings used to determine FAE will be extended after the month of layoff for the number of months remaining until the end of the calendar year. This extension cannot exceed their layoff pay amount.
        • Limited Social Security Make-Up: If laid off during or after the calendar year they reach age 50 and they do not continue employment with a successor employer, participants may be entitled to a temporary limited Social Security Make-Up Benefit.
    • Tosco Pension Plan (Title III)
      • Deferred Vested Benefit Reduction: If the participant leaves the company before age 55 but has at least 10 years of service, they have a Deferred Vested Benefit. They can choose to receive a reduced benefit as early as age 55, subject to the Deferred Vested Benefit Reduction. This reduction is calculated based on tables and is typically a larger reduction than the Early Retirement Benefit Reduction for those with at least 10 years of service who remained with the company until age 55.

Disability

Defined Benefit Plans

• • • Phillips Retirement Income Plan (Title I) and FAE (Title VI): If the participant is on an approved leave of absence they still participate in the plan. For Title I, they will receive credited service for the time spent on leave if they return to work within the time specified.
    • Tosco Pension Plan (Title III):
      • If a participant becomes totally and permanently disabled and has 10 years of service, they are eligible for a disability retirement benefit and continue to accrue service until the retirement benefit commences.
      • If a participant does not have 10 years of service, the regular retirement benefit will be calculated as if employment ended two years after the day they stopped working due to disability.
    • Retirement Plan of Conoco (Title IV): A participant is eligible for incapacity retirement if they reach at least age 40 at termination, have at least 10 years of service, and become disabled while employed.
      • The benefit is not reduced for payment before the normal retirement date at age 65.
      • The lump-sum payment option is not available for incapacity retirement.
    • FAE (Title VI): For any period during which a participant earns credited service while disabled, Title VI credits them with monthly earnings equal to their earnings in their last full calendar month of employment before they became disabled (less any nondeferred annual incentive bonus paid in that month).

Cash Balance Plans

• • • Phillips 66 Cash Balance Account (Title II):
    • If they do not receive eligible monthly pay, they receive only Interest Credits.

Timing of Retirement Benefit Commencement Due to Disability

• • • PRIP (Title I) and Cash Balance (Title II): If the participant is at least age 65, the retirement benefit must commence no later than the first of the month after any disability benefits received from a company long-term disability plan end.
    • Tosco(Title III): If eligible for a disability retirement benefit and receiving long-term disability benefits, the participant may delay starting their pension benefits until the latest of: their approved disability leave ends, their long-term disability benefits end, or they reach age 65.

Long-Term Disability Offsets and Tax Implications

The Phillips 66  long-term disability benefit will be offset by disability income received from any other source, including benefits from the company’s defined benefit retirement plan.

• • • The long-term disability benefit is reduced by the amount of the participant's Single-Life Annuity payment (or its equivalent if a lump sum is elected).
    • If the participant does not commence their retirement plan benefit or elects a rollover of their retirement benefit, the retirement benefit is NOT considered disability income for the long-term disability offset.

Early Withdrawal Tax Penalty: The standard 10% federal early withdrawal tax penalty normally applied to distributions taken before age 59 ½ is waived if the payment is made because of permanent and total disability.

Disability Claims and Appeals

• • • All claims and appeals involving a determination of disability are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved.
    • If a claim denial involves a determination of disability, the participant has 180 days to file an appeal.

Real Wealth Questions

How do layoffs or early exits affect your healthcare coverage before you are eligible for Medicare? 

Are you eligible for Phillips 66’s disability retirement benefits?

What other financial resources are available to you in the event that you become disabled or are forced to leave the company ahead of schedule?

Questions? Visit the Philips 66 Benefits Glossary.