What Are My Pension Eligibility and Payment Options?

The Phillips 66 Retirement Plan includes five active pension plans, each with its own eligibility criteria and payment options. 

Defined Benefit Plans

Title I: Phillips Retirement Income Plan

• A participant before the plan closed to new entrants on January 1, 2002. 
• Not eligible if you are a foreign national, covered by a union agreement not providing participation, on a participating company payroll, an independent contractor, a leased employee, paid through a temporary agency, or if your compensation is not reported on a W-2.

Vesting: All participants in this plan are fully vested.

• • Final Average Earnings (FAE)
  • Minimum Retirement Income Formula

Normal Retirement Date: The first day of the month nearest your 65th birthday.

Early Retirement: You can receive benefits as early as the first day of the month nearest your 55th birthday after leaving the company. Your benefits may be subject to early retirement or actuarial reductions.

Title II: Phillips 66 Cash Balance Account

• • An employee on the direct U.S. payroll of Phillips 66 Company or Phillips 66 Pipeline LLC who has completed a year of Eligibility Service.
  • Hired or rehired on or after January 1, 2017 and completed a year of Eligibility Service before participation.
  • Participation begins the first day of the month following completion of Eligibility Service, with benefit accrual from the first of the month after hire or rehire.
  • Not eligible if you elected to continue in a heritage retirement plan, are a foreign national covered by a different plan, or are covered by a collective bargaining agreement that doesn't provide for participation.

• • Working for the company for three consecutive years with a minimum of 1,000 hours of service per year.
  • Reaching age 65 or your normal retirement date while employed, on layoff, or the plan is terminated.

Benefit Formula: The sum of all Pay Credits and Interest Credits. 

Normal Retirement Date: The first day of the month nearest your 65th birthday.

Commencement: If you are vested, as early as the first day of any month after you have left the company.

Title III: Tosco Pension Plan

• • A participant before the plan closed to new entrants on December 31, 2001.
  • Not eligible if you are a foreign national, covered by a union agreement not providing participation, an independent contractor, a leased employee, or paid through a temporary agency.

• • Alliance Cash Balance Plan: Special rules apply to eligible Alliance Refinery employees, including vesting requirements, specific pay and interest credit calculations and the availability of a lump-sum payment option.

• • For most participants: Basic Benefit Formula
  • For eligible Alliance Refinery employees: Alliance Refinery Cash Balance Formula
    

Normal Retirement Date: The first day of the month on or after your 65th birthday. Special rules apply to former Phillips Petroleum Company or Mobil employees.

Early Retirement: Benefits can commence as early as the first day of the month on or after your 55th birthday, provided you had at least 10 years of service when employment ended. Benefits may be reduced for early commencement.

Title IV: Retirement Plan of Conoco

• • A participant before the plan was closed to new entrants on January 1, 2003.
  • Not eligible if you are a foreign national, covered by a union agreement not providing participation, not on a participating company payroll, an independent contractor, a leased employee, paid through a temporary agency, or if your compensation is not reported on a W-2.

Vesting: All participants in this plan are fully vested.

• • 3-Year Average Compensation (High-3) Formula
  • Minimum Benefit Formula
  • 10-Year Average Compensation (High-10) Formula

Normal Retirement Date: The first day of the month after your 65th birthday.

Early Retirement: Eligible if you have at least 10 years of service and are between age 50 and age 64 when your employment ends. Benefits are subject to an early retirement reduction.

Separation Retirement: Applies if you terminate with a vested benefit but are not eligible for normal, early, or incapacity retirement (e.g., less than 10 years of service or under age 50 when employment ends). Benefits are subject to a separation retirement reduction.

Title V: No longer active.

Title VI: Burlington Resources Inc. Pension Plan – Final Average Earnings Participants

• • A participant before the plan was closed to new entrants on March 31, 2006.
  • Final Average Earnings Participants whose retirement benefit is calculated according to the Title VI FAE benefit formula.

Vesting: All participants in Title VI with an FAE formula benefit are fully vested.

Benefit Formula: Title VI Final Average Earnings Formula

Normal Retirement Date: The first day of the month including or immediately following the later of your 65th birthday or the completion of five years of participation/service.

Early Retirement: Eligible if you leave the company after reaching age 55 with at least 10 years of credited service. Benefits may be reduced for early commencement.

Deferred Retirement: You may work past age 65, and your benefits will begin when you leave employment.

Vested Termination Benefits: If the lump-sum present value of your vested benefit is greater than $1,000, you can elect to receive it upon termination or defer receipt. If $1,000 or less, it's automatically paid as a lump sum.

Cash Balance Plan

Title VI: Burlington Resources Inc. Pension Plan - Cash Balance Participants

• • A participant before the plan was closed to new entrants on March 31, 2006.
  • Accruing benefits under the Title VI Final Average Earnings (FAE) formula and elected to switch to the Cash Balance Formula effective January 1, 2004.

Vesting: All participants in Title VI with a Cash Balance Formula benefit are fully vested. A partial plan termination on December 23, 2008, ensured all Title VI participants as of January 1, 2006, were fully vested in benefits accrued as of or after that date.

Benefit Formula: Cash Balance Benefit Formula (Title VI)

Pension Payment Options

If your vested benefit exceeds $1,000 (or if your Cash Balance Account exceeds $1,000 for relevant plans), you generally have several ways to receive your benefits. 

Once benefits begin, you cannot change the form of payment or the beneficiary designation for joint and survivor annuities.

• • The required payment method if you are single.
  • Provides monthly payments for your lifetime.
  • Benefits stop upon your death.
  • If you are married, this optional form of payment requires your spouse's written consent as witnessed by a notary public.

• • The required payment method if you are married.
  • Typically a 50% J&S annuity with your spouse as beneficiary.
  • Provides a reduced monthly benefit for your lifetime.
  • Upon your death, your surviving beneficiary (usually your spouse) receives a specified percentage (25%, 50%, 75%, or 100%) of the benefit you were receiving.
  • The monthly amount is smaller than a Single Life Annuity because it's expected to be paid over two lifetimes.
  • The benefit reduction depends on your age and your beneficiary's age when benefits start.
  • Spousal consent is required to elect any form of payment other than a J&S option of at least 50% with the spouse as the named survivor, or to name a beneficiary other than your spouse.

• • An optional form of payment available only for benefits accrued through December 31, 2013.
  • You receive a reduced monthly benefit until your death, with a minimum of 120 payments (10 years) guaranteed.
  • If you live longer than 120 months, your pension continues for your life, and your beneficiary will not receive further payments after your death.
  • If you die before 120 payments are made, your designated beneficiary receives the remaining payments.
  • If the beneficiary also dies, payments go to their estate.
  • Requires spousal consent if you are married.

• • Pays your benefit as a single payment.
  • The automatic form of payment if your Cash Balance Account (or vested benefit for FAE/Tosco) is $1,000 or less and you have no other benefit from another title of the Phillips 66 Retirement Plan.
  • An optional form of payment if your distribution is greater than $1,000.
  • Tosco Pension Plan: Generally available only to Alliance Refinery employees.
  • Spousal consent is required if you are married and elect this option.
  • Benefit Calculation: The greater of your vested Cash Balance Account balance or the actuarial equivalent of a previously accrued FAE benefit.

• • Regardless of your account value, you can roll all or part of your plan distribution into another tax-qualified plan, IRA, or 401(k) (including the Phillips 66 Savings Plan) to postpone paying taxes and avoid early withdrawal penalties.
  • For lump-sum distributions, 20% federal income tax will be withheld unless a direct rollover is elected.

Timing of Benefit Payments

• • Benefits must commence no later than the earliest of your Normal Retirement Date (if you terminated before it) or the first of the month after your employment ends (if you worked beyond your Normal Retirement Date).
  • Payments are generally received 4 to 6 weeks after your requested Benefit Commencement Date if your application is timely completed.
  • If you do not apply for your benefit, it will automatically be deferred to your normal retirement date and paid using the required form of payment, unless you elect otherwise.

Taxes on Benefits

In most cases, all or part of your retirement benefits will be considered taxable income upon payment. Consult a tax professional and your financial advisor before choosing a payment method or commencement date.

• • Monthly annuities: Federal, state, and/or local income taxes may be withheld.
  • Lump sums: 20% federal income tax will be withheld.
  • Early withdrawal: An additional 10% early withdrawal federal tax penalty may apply if you are under age 59½ when you elect to receive your benefits, though this is not typically withheld. This penalty would not apply if your employment ends during or after the year you reach age 55.
  • You may be able to avoid withholding and tax penalties by electing a direct rollover. 

Real Wealth Questions

Have you confirmed eligibility for a Phillips 66 pension benefit based on your hire date and employment classification?
Should you choose a lump sum or annuity? How does each option affect your long-term retirement cash flow and legacy planning?
What is your “breakeven age” between monthly pension payments and a lump sum distribution?
Will your pension trigger an income-related monthly adjusted amount (IRMAA) to your Medicare premiums?
Will your pension raise your income high enough to make your Social Security benefits partially taxable?
What survivor options should you elect for your pension to balance lifetime income and spouse protection?

Questions? Visit the Philips 66 Benefits Glossary.