A Resource for shell employees (USA)

We work with Shell professionals and retirees often, and we enjoy helping our Shell clients align their personal values and financial objectives with strategic decisions around the benefits Shell offers.

Feel free to contact us if you’d like to hear more about our fee-only, financial planning and advisory approach.

Shell Provident Fund: Pre-Tax, Roth, non-Roth after-tax

This defined contribution plan is offered to most Shell employees. In 2023, an employee can contribute up to $22,500 (plus an additional catch-up of $7,500 if over age 50) to their SPF plan on a pre-tax or Roth basis. Shell matches what you contribute to your plan based on your years of service at Shell with a maximum of a 10% employer match once you have completed 9 years of service.

For Shell employees with a desire to maximize their retirement savings, non-Roth after-tax contributions are an option as long as employee contributions plus Shell’s contributions do not exceed $66,000 for 2023; this excludes the additional catch-up contribution if over age 50). These non-Roth after-tax contributions can have substantial tax value when converted (or rolled over) to Roth at retirement.

Often, the Shell Provident Fund is many employee’s largest investment portfolio, and ensuring the contributions are tax-efficient and invested prudently and effectively is of critical importance over the long-term. We review our client’s SPF throughout the year and make allocation adjustments when needed.

Shell Provident Fund Benefit restoration plan (SPF BRP)

Shell also has an ‘excess plan’ that allows for highly compensated employees to receive additional employer contributions to the Shell Provident Plan on top of the limitations of typical qualified plans such as a 401(k).

For example, if you earn over this IRS set limit ($330,000 for 2023), then Shell contributes the employer match on your compensation over and above the limit to the SPF BRP on your behalf. Similar to the qualified portion of your SPF, you can then choose how to invest these SPF BRP contributions.

Because Shell Provident Fund BRP typically pays out in a taxable lump sum upon retirement (it cannot be rolled over or kept indefinitely pre-tax), we often suggest considering a more conservative allocation relative to the qualified portion of the Shell Provident Fund, but there are circumstances where that might not be the case.

Shell Pension Plans

At Shell you are also eligible for a pension upon your termination from Shell. If you were hired after 2013 you will use the “Alternate Pension Formula” (APF), while if you were hired before 2013, you have the choice between APF or 80-Point formula. Both Pensions are based on your years of service and age.

It is important to note that if you switch from 80-Point to APF, or vice versa, your years of service number is separate for each of the pension calculation purposes. Another key item is that the Shell 80-Point pension pays out as an annuity, while the APF pension allows you to choose between a lump-sum or annuity payment upon separation (or a later date).

We always encourage Shell employees to consult with a professional who can model and walk through the pros and cons of when and how to make their elections upon retirement.

Accumulated Percentage Formula (APF)

• Each year, you earn a benefit percentage based on your age plus the number of prior years in which you participated in the APF. Annual percentages range from 3% to 16%.

• Upon termination, your annual percentages are accumulated and multiplied by your annualized Average Final Compensation (AFC).

• You can receive your benefit as a lump sum or as an annuity.

80-Point Formula

• You reach 80 points when your current age plus eligibility of service adds up to 80 (and you are at least age 50)

You earn a monthly lifetime annuity based on your years of 80-Point Service, your Average Final Compensation (AFC), and Social Security Offset (SSO).

• When you can start receiving your annuity following termination will depend on whether or not you retire with immediate pension eligibility.

• If you retire with immediate pension eligibility, you are also eligible for a Free 50% survivor benefit and the SSO Supplement.

Under the 80-Point Formula, there is also 70-Point eligibility if, at the time you terminate, the following applies:

• You must be at least age 50;

• You must have a minimum of 20 years of eligibility service; and

• You have terminated for one of the following reasons:

  1. your serious ill health, which is expected to continue for the foreseeable future (a medical report is required);

  2. the sale or closing of a facility, office, or plant;

  3. the sale or dissolution of a participating company; or

  4. the restructuring, reorganization, or reduction of the workforce of a participating company.

Shell Pension Benefit restoration plan (Pension Brp)

The IRS also sets limitations for the amount your employer can contribute to a Defined Benefit Plan (such as Shell’s Pension Plan), which is determined by annual wages.

However, as a benefit for highly compensated employees, Shell has put together an ‘excess plan’ (a non-qualified employer plan) that allows money to be set aside for employees exceeding the IRS qualified compensation limitations ($265,0000 for 2023). Unlike the SPF BRP, you cannot invest these dollars, and the balance may be dependent on years of service, annual compensation, interest rates, and other factors.

Distribution options for Pension BRP balances are as follows:

• Pre-2005 “Old Money” amounts – Payable based on your election prior to termination. If a timely election is not submitted, payment will be made as a lump sum approximately 90 days following termination. Election forms are available via Net Benefits.

• Post-2005 “New Money” amounts – Paid as a lump sum approximately 90 days following termination unless a special election was made prior to December 31, 2007.

Navigating and modeling these options in long-term retirement projections can prove tricky. We work with our clients to properly account for ‘excess plans’ and their distribution options in alignment with their financial objectives.

Performance Share Plan (PSP) and Long-Term Incentive Plan (LTIP)

Shell often rewards highly compensated employees with additional compensation in the form of Restricted Stock Units (RSUs). While this can often be an attractive incentive in addition to other cash compensation, it also varies considerably based on the value of Shell stock at the time of vesting.

Once awarded (or granted), performance shares generally vest over a 3-year period at one-third annually. It is important to note that you will generally be taxed on the shares based on the share value at vesting.

We partner with our clients to evaluate how to manage concentrated stock positions and vesting shares in respect to a client’s objectives.