Phillips 66 Savings Plan TULSA, OKLAHOMA

Transcription

1 Phillips 66 Savings Plan TULSA, OKLAHOMA To celebrate their nickname Oil Capital of the World, a giant roustabout was built on the Tulsa Fairgrounds in 1953 and the statue was dubbed The Golden Driller.

2 ROUTE 66 AT 36 07'53"N 95 56'14"W TULSA, OKLAHOMA Once hailed as the Oil Capital of the World, Tulsa is the second-largest city in Oklahoma and the 45th-largest city in the United States. In 1927, Tulsa businessman Cyrus Avery established the Highway 66 Association in Tulsa and became known as the Father of Route 66. This book provides you with a summary plan description (SPD) of the Phillips 66 Savings Plan. It s an overview of certain terms and conditions, rather than a description of every detail of the plan. It s written in clear, everyday language that s designed to help you understand how the plan works. Every effort has been made to ensure the accuracy of the information provided in this SPD. However, if there s any discrepancy or conflict between this SPD and the terms of the official plan document, the official plan document will control. Phillips 66 reserves the right to amend, change or terminate the plan at any time without notice, at its sole discretion. Nothing in this SPD creates an employment contract between the company or its subsidiaries or affiliates and any employee.

3 Contributing to your future... 2 Here s the big picture... 4 Eligibility and enrollment... 5 Am I eligible?... 5 How do I enroll?... 5 Automatic enrollment for new employees... 6 Moving up to 5%... 6 How the plan works... 6 What s the difference between Before-tax, Roth 401(k) and After-tax?... 9 How much can I contribute? What are the IRS maximum limits? Can I roll over money from another eligible savings or retirement plan? How much does the company contribute? How does the company match work? What do I do to get a Success Share contribution? When am I vested in my account? How can I make the most of my savings? Do I get to decide how my money is invested? How can I choose my investments? Investing Why diversification matters How do I change my investment elections? Can I take a loan from this plan? Can I take money out of this plan while I m still employed? Taking money out for hardship How do I take money out of the plan after I ve left the company?...22 How do I request a distribution? When will my distribution be paid to me? Required minimum distributions starting at age 70½ Do I pay taxes?...25 How do I roll over my lump-sum distribution? What if I have a balance in the Phillips 66 Stock Fund?...28 How do I name a beneficiary?...28 What if I don t name a beneficiary? What happens if...29 I go on a military leave of absence? I die? What other important information do I need to know?...29 Administrative information ERISA information Agent for service of legal process Transfers from and to other plans Changes or termination of the plan Plan expenses Assignment of benefits How do I file a claim?...32 How do I appeal a claim denial? Payments to a minor or legally incompetent person Lost participants and beneficiaries What are my rights under ERISA?...34 Receive information about your plan and benefits Prudent action by plan fiduciaries Enforce your rights Who administers the plan?...36 Contacts Glossary...38 PHILLIPS 66 SAVINGS PLAN PHILLIPS 66 BENEFITS FOR TOMORROW 1

4 Contributing to your future It s easy to focus on the present and worry about the future later. But that s not a good plan for retirement. Especially when the Phillips 66 Savings Plan ( plan ) can make saving for retirement easier. Take a look!

5 Roberto At age 48, Roberto wonders how he can pay for his children s college education AND save for retirement. Even with his wife s paycheck, it seems impossible. Marjorie Marjorie is 25, and brand new to Phillips 66. She s still paying off student loans, and her budget is stretched. But she s determined to start saving now for retirement. She s just not sure how to begin. Alice At age 40, Alice has already built a healthy balance in the plan, but she s thinking about dropping out for a while to save up for a down payment on a house. The plan can help all of these employees. The plan is a 401(k) plan that helps you save for retirement through regular deductions from your paycheck. It offers tax savings, company matching and Success Share contributions, a choice of investment options, and, under certain circumstances, access to your money even while you re still employed. To get the most out of the plan, you need to make some decisions. Read on to see how you can put the plan to work for you. Consider it a contribution to your future! A couple of technical things The official name of this plan is the Phillips 66 Savings Plan. But in this SPD, it s called the plan. When we say Phillips 66, the company, we or our, we mean both Phillips 66 Company, Phillips 66 Pipeline LLC and, in some contexts, any other affiliated companies where Phillips 66 owns at least 80% of the affiliate. PHILLIPS 66 SAVINGS PLAN PHILLIPS 66 BENEFITS FOR TOMORROW 3

6 Here s the big picture Do I have to contribute? Do I need to enroll? See page 5 Who contributes? See pages How much can I contribute? See page 10 How is my money invested? See page 16 When am I vested? See page 14 When can I use my savings? See page 22 You decide whether you want to contribute to the plan or not. Your participation in the plan allows you to enjoy tax-deferred savings and company contributions. So if you don t contribute, you re turning down money from the company for your retirement. As a new employee, you ll be automatically enrolled in the plan at a 3% before-tax contribution rate. In addition, your new hire contribution rate will have an automatic annual increase election of 1% set so your before-tax contribution increases by 1% each January until it reaches 5%. You can increase, decrease or stop your deferral or annual increase election or change your investment selections at any time. You do and if you contribute to the plan, the company will match your contributions dollar-for-dollar (up to 5% of your pay!). And your contribution of at least 1% of your pay also makes you eligible to receive an additional discretionary contribution from the company called Success Share. The target for the Success Share is 2% of your pay for each pay period in which you make at least a 1% contribution. However, it could range from 0% to 6% based on management discretion. You can contribute from 1% to 75% of your pay, up to limits set each year by the IRS. You have a choice of investment options, with tools and resources to help you decide where your money goes. Immediately. That means your entire account balance is yours, including the company contributions. You can keep saving and growing your money until you retire. At that time, you can choose to receive your money in cash, through monthly payments, or by rolling it over into another retirement plan or Individual Retirement Account (IRA). You can also choose to leave it in the plan for a while. Even before you retire, you can take a loan from your account (see page 19) or take part of it out as a withdrawal under certain circumstances (see page 21). Beware though, taxes and penalties may apply to any early withdrawal. That s the big picture. There s a lot more to the plan though, so don t stop reading now! Don t miss! The Glossary starting on page 38 for details about some of the terms used in this SPD. Contacts on page 37 for Vanguard s phone numbers, web and street addresses and hours of operations. 4 PHILLIPS 66 BENEFITS FOR TOMORROW PHILLIPS 66 SAVINGS PLAN

7 Eligibility and enrollment AM I ELIGIBLE? You re eligible if you re an active employee on the U.S. dollar payroll of one of the following companies: Phillips 66 Company Phillips 66 Pipeline LLC You re NOT eligible if You re a leased employee. You re a union employee whose collective bargaining agreement doesn t provide for participation in this plan. You re not on a direct U.S. dollar payroll (providing services under contract), whether or not you re determined to be an independent contractor or common-law employee. HOW DO I ENROLL? If you re enrolled in the plan, you re strongly encouraged to name a beneficiary. See page 28 to see how. If you weren t enrolled automatically (see page 6), contact Vanguard online or by phone as shown below. You can enroll at any time, and your contributions will begin as soon as administratively possible. There are three different ways to enroll: Online VOICE Network Telephone representative If you have never registered with Vanguard, go to Then enroll online at You can also find the Vanguard site links through HR Express on the Phillips 66 intranet site. To enroll online, you ll need the plan number (099066) and your Social Security number, birth date and home ZIP Code. If you don t have a Social Security number, use your six-digit employee number preceded by 999 (e.g., ). Call Vanguard s 24-hour interactive VOICE Network at (800) Call a Vanguard Participant Services associate at (800) weekdays from 7:30 a.m. to 8:00 p.m., Central time. PHILLIPS 66 SAVINGS PLAN PHILLIPS 66 BENEFITS FOR TOMORROW 5

8 Automatic enrollment for new employees If you re new to the company, you ll be automatically enrolled as soon as administratively possible. This enables you to be eligible for matching and Success Share contributions. Your initial contribution rate will be 3% of pay, contributed on a before-tax basis. You can change your contribution rate or change to Roth or after-tax savings, or any combination of the three (before-tax, Roth or after-tax). You can also choose to drop out of the plan completely. Keep in mind that you need to contribute at least 1% to the plan each pay period to maximize the Success Share contribution. And, you can maximize the company match if you increase your contribution to at least 5% each pay period. That way, your savings will grow faster from the company matching and Success Share contributions! Moving up to 5% You re encouraged to contribute at least 5% of your pay to the plan to take advantage of the maximum company matching contribution available. The 5% can consist of any combination of before-tax, Roth or after-tax contributions. To make that happen, beginning on January 1, 2014, if you re contributing less than 5%, your before-tax contribution percentage will be automatically bumped up 1% each January until you re contributing 5% in total to the plan. Of course, if you don t want to have your contribution rate raised, you can opt out of this auto-increase. How the plan works The plan consists of: Thrift which includes: Your contributions with tax advantages described later in this Summary Plan Description (SPD); and The company s matching contribution the company will match your contributions dollar-for-dollar (up to 5% of your pay!). º º Both your and the company s contributions are made each pay period. º º You must contribute at least 5% of your pay each pay period in order to receive the maximum company match. Success Share which is a discretionary company contribution. Success Share contributions are made in cash twice a year to your Thrift account. The amount will range from 0% to 6% of your pay. The target contribution is 2%. You must contribute at least 1% of your pay to Thrift if you want to qualify for a Success Share contribution. If you don t contribute, or if you don t contribute each pay period, you miss out on all or part of this valuable benefit! You ll receive the maximum Success Share contribution if you contribute at least 1% of your pay to Thrift each pay period. Your one-stop source for information Vanguard has set up a customized website for Phillips 66 employees. Just go to phillips66.vanguard-education.com/ekit to learn about: The plan in general Your investment options How to enroll How to manage your account 6 PHILLIPS 66 BENEFITS FOR TOMORROW PHILLIPS 66 SAVINGS PLAN

9 The combination of your contributions, the company s matching and Success Share contributions plus your investment earnings will help you prepare for retirement. Before getting into the details, let s circle back to Roberto and Marjorie, who were introduced on page 3. Roberto, age 48, and Marjorie, age 25, were both thinking of joining the plan. Let s assume they did join and that they both contributed every year until their retirement at age 65. For Roberto, that means 17 years of contributions versus Marjorie s 40 years. For this example, let s also assume: Both Roberto and Marjorie earned $60,000 per year and that their pay stayed the same throughout their career. They both contributed 5% of their pay to the plan. The company s Success Share contribution worked out to 2% per year. They earned 3% tax-deferred income on their investments, compounded annually. Here s what their account balances would look like at age 65.* Account balance at age 65 $600,000 $500,000 Investment income Success Share Company match Employee contribution $542,889 $400,000 $254,889 $300,000 $48,000 $200,000 $100,000 $0 $156,683 $34,283 $20,400 $51,000 $51,000 Roberto $120,000 $120,000 Marjorie * These examples are for illustrative purposes only and aren t a guarantee of your investment earnings or of the company s contributions to the plan. PHILLIPS 66 SAVINGS PLAN PHILLIPS 66 BENEFITS FOR TOMORROW 7

10 A couple of things probably caught your eye: Roberto s and Marjorie s contributions were only a small part of their total account balance. Most of their balance was the company s matching and Success Share contributions and their investment earnings. Even though they earned the same 3% on their investments, Marjorie s investment earnings were more than seven times higher than Roberto s ($254,889 versus $34,283)! That s due to compounded earnings, where Marjorie was earning money on each year s contributions PLUS on the money that was already in her account. Roberto had the same compounded earnings, but he had only 17 years of it versus Marjorie s 40 years. This is why it s so important to start contributing as early as possible in your career! The longer the money is in your account, the greater the compounding. Roberto s and Marjorie s examples show how your account can grow in four ways: Employee contributions (page 10). Company matching contributions (page 13). Company Success Share contributions (page 14). Investment earnings (page 16). But before getting into that, let s discuss the three ways you can contribute to the plan 8 PHILLIPS 66 BENEFITS FOR TOMORROW PHILLIPS 66 SAVINGS PLAN

11 WHAT S THE DIFFERENCE BETWEEN BEFORE-TAX, ROTH 401(K) AND AFTER-TAX? When you contribute to the plan, you choose before-tax, Roth 401(k) and/or traditional after-tax savings, in any combination. Here are the major differences: Do my contributions reduce my taxable income each year? Are my investment earnings taxable? Do I pay taxes when I take money out of the plan from: Before-tax savings Roth 401(k) after-tax savings Yes No No Your earnings grow on a tax-deferred basis; taxes are delayed until you take a distribution from the plan My contributions? Yes No* No** Investment earnings on my contributions? Company contributions? Investment earnings on company contributions? No Yes No* Yes Yes Yes Yes, because company contributions are not taxed when contributed Yes, because these earnings are related to the company contributions Traditional after-tax savings Your earnings grow on a tax-deferred basis; taxes are delayed until you take a distribution from the plan See How do I roll over my lump-sum distribution? on page 27 to see how you can postpone taxes on money you take out of the plan. * You must have held your Roth 401(k) account for at least five years and be at least age 59½ or have died or become disabled at the time the money is taken out of the plan. ** Generally some portion of your distribution will be taxable. Distributions are generally required to include a pro-rata portion of before-tax and after-tax contributions from your account, which means that a portion of each distribution will be taxable. However, pre-1987 after-tax contributions are not subject to the general rule and may be distributed prior to the before-tax contributions. Regardless, the after-tax contribution that you already made and paid taxes on will not be taxed again. For more information, you should contact Vanguard. Yes Yes PHILLIPS 66 SAVINGS PLAN PHILLIPS 66 BENEFITS FOR TOMORROW 9

12 What kind of tax advice can you expect from Vanguard? None. And this is an important point. While Vanguard and the company can explain your options, neither provides tax advice. That s why it s a good idea to have your own financial or tax advisor to whom you can turn with your questions. Which type of savings is right for you? We can t answer that question for you since so many factors are involved, including: Your tax bracket now and your anticipated tax bracket when you retire. Your other sources of retirement income. How many years you have until retirement. That said, and offers tools and information to help you understand your options. Information is also available through many other print and online resources. HOW MUCH CAN I CONTRIBUTE? Once you decide on your type of savings, you need to pick your contribution percentage. You can contribute from 1% to 75% of pay,* in whole percentages (no fractions), up to the dollar limits set by the IRS each year. You can start, stop or change this percentage at any time. If you were contributing less than 3% of pay on January 1, 2013, you were bumped up to 3% on that date. After that date, if you re contributing less than 5%, your before-tax contribution rate will go up by 1% of pay each January until you reach 5%. * Pay is defined in the Glossary. $ 10 PHILLIPS 66 BENEFITS FOR TOMORROW PHILLIPS 66 SAVINGS PLAN

13 What are the IRS maximum limits? 401(k) provisions like those found in the plan come with some great tax breaks but also some strict limits that must be followed. The IRS limits the amount you can save each year and the limits often change each year. The most recent three years of annual limits are posted on hr.phillips66.com. For 2013, these limits are: 2013 Calendar Year Limits Your before-tax and Roth 401(k) contributions combined* If you re under age 50 If you re age 50 or older as of the end of the year (includes $5,500 in catch-up contributions; see page 12) Total annual additions This includes your contributions (before-tax, Roth and after-tax) as well as the company s matching and Success Share contributions If you re under age 50 If you re age 50 or older as of the end of the year (includes $5,500 in catch-up contributions; see page 12) Maximum pay $17,500 $23,000 $51,000 $56,500 Maximum pay considered for plan purposes $255,000 * This limit applies to all amounts you ve contributed to 401(k) plans in 2013, including any other employer s plan. If you make before-tax and/or Roth 401(k) contributions to two unrelated employers plans in a single calendar year that are greater than the annual limit (say, because you re a new hire), contact Vanguard. If the total of your before-tax and Roth 401(k) contributions to the plan reach the annual IRS limit before the end of the year, any contributions you have from that point on will automatically be converted to traditional after-tax contributions for the rest of the year. (Note: Your contributions to unrelated employer s plans are not tracked.) Before-tax and Roth 401(k) contributions will start again with your first paycheck in January of the next year. IRS non-discrimination limits The IRS limits contributions to qualified retirement plans made by highly compensated employees. If you re a highly compensated employee, in order to comply with this non-discrimination limit, the Plan Benefits Administrator may change your before-tax and/or Roth 401(k) contributions to after-tax contributions, reduce your contribution percentage or refund the excess contributions during the following year. You ll be notified if such changes impact you. PHILLIPS 66 SAVINGS PLAN PHILLIPS 66 BENEFITS FOR TOMORROW 11

14 If you re age 50 or older, you can contribute more! As you get a little closer to retirement, you may find that your savings aren t quite what you had hoped they would be. Fortunately, the IRS offers a way for you to add more money to your retirement savings. If you are or will be age 50 or older as of December 31, you can contribute an additional $5,500 to the plan. That means your maximum contribution is $23,000 rather than $17,500 for This additional $5,500 is called a catch-up contribution, and the exact amount allowed may change each year. To determine what percentage you should defer to include the catch-up contribution in your plan, just divide the higher allowed total by your annual pay, and multiply by 100. This will be the new contribution percentage you should enter on the Vanguard site in order to take advantage of the maximum catch-up contributions. For example Rebecca turns age 50 in 2013, and her pay is $92,000 per year. She wants to contribute the full $23,000 in To figure out her contribution percentage, she divides $23,000 by $92,000, and then multiplies that by 100 to determine her contribution percentage of 25% for 2013 ($23,000 $92,000 x 100 = 25). Can I roll over money from another eligible savings or retirement plan? Yes! In addition to contributing through your current paycheck, you may also roll over the following into this plan at any time:* Before-tax and after-tax money from a former employer s 401(k) or other eligible plan. Before-tax money from an Individual Retirement Account (IRA). Distributions from another company-sponsored savings or retirement plan (for example, any rollover-eligible distribution from the Phillips 66 Retirement Plan). In order to qualify as an eligible rollover contribution into the plan: The rollover must be made directly from the other plan, or occur on or before the 60th day after the distribution from the other plan was received by you; The distribution must qualify as an eligible rollover distribution under IRS regulations; The amount rolled over can t include any loans taken from the other plan; and Any non-taxable portion of the distribution must be identified so that it can be accounted for separately under this plan. You direct how your rollover contributions are invested among the plan s various investment options. See Do I get to decide how my money is invested? on page 16 for details. Contact Vanguard to request a Qualified Rollover form. * Rollover contributions aren t available to non-spousal beneficiaries. 12 PHILLIPS 66 BENEFITS FOR TOMORROW PHILLIPS 66 SAVINGS PLAN

15 HOW MUCH DOES THE COMPANY CONTRIBUTE? The company matches a portion of your savings and may also make a separate Success Share contribution with respect to periods when you re actively contributing to Thrift. If you re contributing From 1% to 75% of your pay At least 1% of your pay The company contributes A dollar-for-dollar (100%) match on the first 5% of pay you save each pay period.* PLUS Success Share contribution of 0% to 6% of your pay during each six-month period. Please see page 14 for more details on Success Share contributions. * The company does not make year-end true-up contributions. As with your own savings, you choose how the company contributions are invested. See page 16. How does the company match work? Each pay period, the company contributes $1 for every $1 you contribute to the plan, up to 5% of your pay. If you don t contribute at least 5% each pay period, you re just throwing that money away. Remember Alice from page 3? She s thinking about ending her contributions so she can save up to buy a house. Well, let s see how much money Alice, who earns $50,000 per year, would lose if she did that: Alice s annual contributions Annual company match If Alice Contributes 3% Contributes 5% Contributes 10% $1,500 ($50,000 x 3%) $2,500 ($50,000 x 5%) $5,000 ($50,000 x 10%) $1,500 ($50,000 x 3%) $2,500 ($50,000 x 5%) $2,500 ($50,000 x 5%) Total $3,000 $5,000 $7,500 If Alice stops contributing, she ll lose $1,500 per year at a 3% contribution rate and $2,500 at a 5% or higher contribution rate! And that s on top of any Success Share contributions the company might make. (Alice has another option though. See page 19 to learn how she can take a loan from the plan.) PHILLIPS 66 SAVINGS PLAN PHILLIPS 66 BENEFITS FOR TOMORROW 13

16 What do I do to get a Success Share contribution? You need to contribute at least 1% of your pay to Thrift each pay period. At the end of each six-month period, the company may make a Success Share contribution into the account of everybody who contributed to Thrift during that six-month period. The contribution may range from 0% to 6% of pay, depending on management discretion. The target contribution is 2%. If the Success Share contribution for the six-month period is 2%, your Success Share contribution will be 2% of your compensation for each pay period you contributed to Thrift during the six-month period, regardless of whether you ve contributed 1% to the plan or 20%. The only way you won t get a contribution is if you contributed nothing, or if the company doesn t make a Success Share contribution for that six-month period! A couple of details: Success Share contributions are made in cash to your Thrift account, and are invested based on your current Thrift account deferrals. Contributions are pro-rated based on your participation during each six-month period. Company contributions in lieu of pension (CILP) (applies to certain former TOSCO employees) If you re a former Tosco employee who is eligible for CILP contributions under this plan, the company will contribute an amount equal to 5% of your base pay and scheduled overtime pay each pay period as a CILP contribution whether or not you re making contributions. You re 100% vested in your CILP contributions. CILP contributions are eligible for withdrawal only after termination from employment. CILP contributions are not eligible for plan loans. Rehired former Tosco employees are not eligible for CILP. WHEN AM I VESTED IN MY ACCOUNT? Great news: Immediately! Vesting is the right to the money the company paid into your account. Many companies require that you work there for a few years before you are vested in the company contributions. But at Phillips 66, you re always 100% vested in all contributions to your account, including the company s match and Success Share contributions. 14 PHILLIPS 66 BENEFITS FOR TOMORROW PHILLIPS 66 SAVINGS PLAN

17 HOW CAN I MAKE THE MOST OF MY SAVINGS? First: Save more. Let s put all the pieces of the plan together for Alice: If Alice Annual pay: $50,000 Contributes 3% Contributes 5% Contributes 10% Alice s annual contributions $1,500 $2,500 $5,000 Annual company match $1,500 $2,500 $2,500 Annual Success Share contribution (assuming two six-month periods at 2%) $1,000 $1,000 $1,000 Total $4,000 $6,000 $8,500 At the 5% contribution level, Alice contributes $2,500 but ends up with $6,000 in total contributions! It s even higher at the 10% contribution level. That s how you build a nest egg! Second: Start early and keep contributing. As the example on page 7 showed, the earlier you start, the more time you ll have for your savings to grow. Third: Learn a bit about investing so you can choose your investments wisely. This is important because you re in charge of choosing your investments. Any investment earnings will add to your savings, but there s also the risk of losing money. See page 16 for more on the plan s investment options. PHILLIPS 66 SAVINGS PLAN PHILLIPS 66 BENEFITS FOR TOMORROW 15

18 Do I get to decide how my money is invested? Yes. In fact, it s your responsibility, and you should consult with an investment advisor. When your contributions come out of your paycheck, they go into your Vanguard account. The company match and Success Share also go into this account. You choose investment options for your account and can change your elections at any time. If you don t make an investment election, your contributions and the company s contributions will be invested in the Vanguard Target Retirement Fund with a target date closest to your 65th birthday. Like any money you invest, you can gain or lose value based on how your investments do. Therefore, having a sound investment strategy is important. HOW CAN I CHOOSE MY INVESTMENTS? You can find a list of the plan s investment funds by: Visiting the plan website at vanguard-education.com/ekit. Using or the automated VOICE Network at (800) hoursa-day. You can also reach the Vanguard site through HR Express on the Phillips 66 intranet site. Calling a Vanguard Participant Services associate at (800) weekdays from 7:30 a.m. to 8:00 p.m., Central time. You can choose to invest in one or more of the plan s investment funds. You ll invest in whole percentages that need to add up to 100%. The list of investments may change from time to time. 16 PHILLIPS 66 BENEFITS FOR TOMORROW PHILLIPS 66 SAVINGS PLAN

19 What resources can I find on the Vanguard site? There s a wealth of information about your plan investment options and investing in general on and vanguard-education.com/ekit, including: A short summary of each of the plan s investment options, which includes the fund s investment objectives, strategies, risk and performance. To help you compare risk, each summary includes an overall risk level number ranging from 1 (conservative) to 5 (aggressive). Updated information on past investment returns for each investment option. A detailed prospectus for each option (available on only). General education about investing including diversification, risk and return, retirement planning, estate planning and other general financial information. Whether you re new to investing or are a seasoned professional, be sure to take advantage of these resources! If you d like, you can also call Vanguard. INVESTING 101 When it comes to investing for your future, there are a few fundamental strategies that experts recommend following: Create a diversified portfolio that gradually becomes more conservative over time. Keep your costs as low as possible. The plan includes several extremely low-cost investment options. Rebalance your portfolio once or twice a year. ( Rebalancing simply means that you bring your portfolio back to your desired asset mix for example, 60% stocks and 40% bonds.) Remember that you re investing for the long term. Don t make frequent changes in your investment strategy in reaction to short-term changes in the stock market. WHY DIVERSIFICATION MATTERS As the saying goes, don t put all your eggs in one basket. This is especially true when investing for retirement. Maintaining a mix of stocks, bonds and short-term investments in your plan account can help manage your investment risk. This diversification is a key principle of sound investing. The idea is that when one type of asset is doing poorly, another may be doing well. For example, if your stock funds are losing value, your bond funds may be going up or holding steady. Of course, the opposite may also occur, where your bond funds lose value while your stock funds are going up. And there may be times when it seems that every type of investment is losing value. How much of your account you should allocate to the different asset classes depends on you your financial goals, your tolerance for risk, your other assets and needs, and how much time you have until retirement. PHILLIPS 66 SAVINGS PLAN PHILLIPS 66 BENEFITS FOR TOMORROW 17

20 Creating a diversified portfolio To help you build a diversified portfolio, the plan investment options are classified into three groups. Target Retirement Funds Index funds Actively managed funds Investing in the Target Retirement Fund is a simple way to build a diversified portfolio. The Target Retirement Funds are designed for investors expecting to retire around the year indicated in each fund s name. For example, if you expect to retire around 2040, you d choose the Target Retirement 2040 Fund. Each fund is comprised of two or more funds and holds a diversified mix of stocks and bonds. The investment mix gradually becomes more and more conservative as you near retirement. The investment manager takes care of all rebalancing. However, you should still check in from time-to-time to make sure the mix is still right for you. If you want to be more involved in the management of your plan investments, you can also build a low-cost diversified portfolio by investing in the plan s index funds. To do so, decide on your asset mix (the mix of stocks, bonds and more conservative investments you want in your portfolio), and allocate your money among the applicable index funds. Remember to rebalance your portfolio once or twice a year to keep your desired asset mix. The plan s actively managed funds can help you to further diversify and fine tune your portfolio to your specific needs. Actively managed fund managers use research and other tools to select the stocks or bonds in their portfolios. As with the index funds, you need to decide on your asset mix, allocate your investments among your chosen funds, and periodically rebalance your portfolio. Investment costs for actively managed funds tend to be higher than for the other investment options. You can also invest in the Phillips 66 Stock Fund. This fund is separate from the three categories shown above. Funds that hold the common stock of a single company, such as the Phillips 66 Stock Fund, are generally considered a higher risk investment than a fund that holds many different stocks, such as actively managed funds described above. The advantage of an actively managed fund is that not all of the stocks within a fund will have price movements in the same direction at the same time, and this reduces investment risk when compared to a single stock. You don t need to select your funds from only one group; you can mix and match your funds from among all of the groups. Whichever funds you choose, you re always responsible for selecting and monitoring your investment choices to ensure they continue to meet your investment objectives. 18 PHILLIPS 66 BENEFITS FOR TOMORROW PHILLIPS 66 SAVINGS PLAN

21 HOW DO I CHANGE MY INVESTMENT ELECTIONS? You can make changes to your investments at any time through Vanguard. You can: Change the way future/new money is invested ( current contributions ); and Change the way your existing balances are invested ( exchanges ). These are two different processes through your account at Vanguard. Current contributions Contact Vanguard to change how your current and future savings are invested at any time. These changes will take place as soon as administratively possible for all future contributions. Existing account balances You can change how your existing account is invested by exchanging into or out of any investment option available under the plan. Keep in mind that rules and restrictions apply to some exchanges: The cutoff time for exchanges is 1:00 p.m. Central time for the Phillips 66 Stock Fund and 3:00 p.m. Central time for all of the other funds. If you transfer money out of a fund, you can t transfer it back into the fund for 60 calendar days. This restriction doesn t apply to: The Vanguard Prime Money Market Fund or the Stable Value Fund; Shares purchased from payroll contributions or company contributions, loan repayments, dividend or capital gains distributions; or Written requests for transfers submitted to Vanguard via U.S. mail. (Requests sent via fax or are subject to the restriction.) You can t transfer money directly from the Stable Value Fund to the Vanguard Prime Money Market Fund or Vanguard Inflation-Protected Securities Fund. Instead, you need to complete a two-step process: Transfer the money out of the Stable Value Fund into any fund other than the Vanguard Prime Money Market Fund or Vanguard Inflation-Protected Securities Fund and leave it there for 90 days; then Take that money out of the second fund and transfer it into the Vanguard Prime Money Market Fund or Vanguard Inflation-Protected Securities Fund. Contact Vanguard for more information and/or to make an exchange. Your exchange will be processed as soon as possible. Can I take a loan from this plan? Remember Alice, who wants to drop out of the plan so she can save for a house? We ve already talked about how she would lose out on company matching and Success Share contributions if she did that. Well, there s no need for her to forgo those contributions. She can continue to save through the plan. Then, when she s ready to buy, she can borrow the money for her down payment from her own plan account and pay herself back, with interest. When you take out a loan, your money comes out of your plan account and is paid to you. You repay your loan over time through payroll deductions, and your repayments and interest go back into your plan account. PHILLIPS 66 SAVINGS PLAN PHILLIPS 66 BENEFITS FOR TOMORROW 19

22 Here s a quick summary. Your loan documentation will contain complete details. As with any loan, be sure you read and understand the terms of the loan before taking one from the plan. Who can take a loan?* Minimum loan amount Maximum loan amount Maximum number of outstanding loans at a time How long you have to repay your loan Fee to apply (per loan) Maintenance fee (per year) Interest rate To request a loan or for more information Active employees who have at least $2,000 in their plan account. (Former employees, beneficiaries or alternate payees aren t eligible.) $1,000 50% of your account balance, up to an aggregate amount of $50,000 (or less if you have had an outstanding plan loan in the past 12 months; call Vanguard for details). Three (including one home loan). Up to 58 months for a general purpose loan. Up to 238 months for purchase of a principal residence (your main home). You can always repay your loan in full sooner without penalty. While you re an active employee, you pay yourself back through payroll deductions in equal amounts. If you re on a leave of absence, loan payments are suspended if you re not receiving full pay while on an active duty military leave. For any other type of leave, check your leave policy for repayment information. If you leave the company, you ll need to make repayments through automatic electronic debits (ACH) over the period of time remaining. $35 when applying online or through the Vanguard VOICE system. $85 when applying by phone with personal assistance from a Vanguard associate. $20 per loan. The national prime rate plus 1% as of the end of the previous month. Your interest rate is determined at the time you apply for your loan, and it will remain in effect for the entire term of your loan. Note: The interest paid is not tax deductible. Contact Vanguard. * You can t take a loan if the Plan Benefits Administrator has received a qualified domestic relations order and a final determination on that order hasn t yet been made. In addition, you may not be able to take a loan if you ve defaulted on a previous plan loan. Contact Vanguard for details. 20 PHILLIPS 66 BENEFITS FOR TOMORROW PHILLIPS 66 SAVINGS PLAN

23 WHAT IF I MISS A LOAN PAYMENT? Your loan is considered in default if you fail to make a loan payment within 60 days after its due date (in accordance with your loan s repayment schedule). At that point, your outstanding principal loan balance will be treated as a deemed distribution or as a withdrawal that: Is reported to the IRS as taxable income on IRS Form 1099-R; May be taxable income for you in the calendar year of the default; and May also be subject to a 10% early withdrawal penalty if you re under age 59½. In addition, in most instances, you won t be allowed to take any new loans from the plan. Can I take money out of this plan while I m still employed? As shown below, under certain circumstances, you may be allowed to take your money out of the plan while you are still employed. Type of contribution What you can take out What you should know Before-tax and Roth 401(k) Traditional after-tax Company contributions Rollover Your entire account balance, if you re at least age 59½ or totally disabled. The amount required to meet your financial need, if you qualify for a hardship withdrawal. Nothing, if you re not yet age 59½ and don t qualify for a hardship withdrawal. Your entire account balance. Everything the company has contributed to your account (company matching and Success Share contributions). The entire amount you rolled into the plan (including investment earnings on that amount). If you take a hardship withdrawal (see page 22), you can t contribute to the plan for six months or receive company matching or Success Share contributions with respect to that same period. For all other types of withdrawals, you can continue your plan contributions. For a withdrawal due to total disability, you must prove your disability through a doctor s certification or Social Security disability determination. You can continue your plan contributions. You can continue your plan contributions. You can continue your plan contributions. You may owe taxes and penalties on any money you withdraw from the plan. For more information, see Do I pay taxes? on page 25 and the Special Tax Notice Regarding Plan Payments that s available from Vanguard. It s strongly recommended that you talk to your tax or financial advisor before initiating a withdrawal. PHILLIPS 66 SAVINGS PLAN PHILLIPS 66 BENEFITS FOR TOMORROW 21

24 TAKING MONEY OUT FOR HARDSHIP You can take out some or all of the money in your before-tax or Roth 401(k) contribution account if you re an employee (salary grade level 18 and below) and suffer a financial hardship as described below. The IRS has strict rules about what is a hardship for this purpose. Hardship withdrawals can be made only in cash. To request a hardship withdrawal, contact Vanguard to obtain a hardship withdrawal form. Complete, sign and return the form and other requested paperwork to Vanguard for approval. For your hardship withdrawal to be approved, it must be for one or more of the following reasons: Costs directly related to buying your principal residence (main home) not including mortgage, refinance or paying off a current mortgage or earnest deposits. Payments necessary to prevent your eviction from your main home or to prevent the foreclosure of the mortgage on your main home. Health care expenses for you or your dependent that aren t reimbursed by someone else. If expenses have not already been paid, you ll need: The service provider s written statement, showing fees for the services to be performed; and A copy of the predetermination of benefits form from your health care insurance provider showing the portion of such fee that would not be reimbursed by your health coverage as of the date of the form. Tuition, room and board expenses and other education fees for the current term or the next 12 months of post-high school education for you or your eligible dependent. Burial or funeral expenses for your parent, spouse, child or eligible dependent who recently died. Expenses to repair damage to your main home that would qualify for a casualty loss deduction (contact Vanguard for details). The following rules apply to hardship withdrawals: The amount you take out from your before-tax and/or Roth 401(k) savings can t be more than what you contributed to those sources (investment earnings cannot be taken in a hardship withdrawal). The amount you take out can t be more than what you need for your hardship. However, you may increase the amount to cover any federal, state or local income taxes or penalties that may result from the withdrawal, as long as it is within the overall limits allowed for a hardship withdrawal. You must have already taken out other plan money available to you, including other kinds of distributions and loans from this plan, before you can take a hardship withdrawal. How do I take money out of the plan after I ve left the company? You can take your money out of the plan at any time after your employment ends or if you re a beneficiary of a plan participant who died. This is called a distribution. If any portion of your distribution is eligible for a rollover but is instead paid to you, the distribution may be subject to: Mandatory 20% federal income tax withholding on the taxable portion. State tax withholding may also apply. A 10% early withdrawal penalty if you re under age 59½ at the time of the distribution. (Under current law, this 10% federal tax penalty would not apply if you end employment with the company during or after the year you reach age 55.) 22 PHILLIPS 66 BENEFITS FOR TOMORROW PHILLIPS 66 SAVINGS PLAN

25 You may be able to avoid withholding and penalties by making a direct rollover into another qualified plan or Individual Retirement Account (IRA), as described in How do I roll over my lump-sum distribution? on page 27. For more information, see the Special Tax Notice Regarding Plan Payments that s available from Vanguard. It s strongly recommended that you talk to your tax or financial advisor before choosing the way your benefit is paid. HOW DO I REQUEST A DISTRIBUTION? After your employment ends, Vanguard will mail a termination kit to your home address. This kit contains detailed information about your distribution options, tax consequences, rollover options, etc., including the Special Tax Notice Regarding Plan Payments. If your account value is greater than $1,000 You have a couple of options, as shown below. You can leave your money in the plan If you choose to leave your money in the plan after you leave the company: You ll be able to make changes to your investment elections, repay any loans (through electronic debit) and get other information about your account through Vanguard. You won t be able to contribute to the plan. By law, you ll have to begin taking money out of the plan no later than April 1 in the year after you reach age 70½. See Required minimum distributions starting at age 70½ on page 24. To request a distribution, contact Vanguard as shown in the kit. Payment will be made as soon as administratively possible. WHEN WILL MY DISTRIBUTION BE PAID TO ME? It depends on the value of your plan account. Regardless of your account value, you can roll all or part of your plan distribution into another tax-qualified plan or IRA. By doing so, you postpone paying taxes and avoid early withdrawal penalties. See How do I roll over my lump-sum distribution? on page 27 for details. If your account value is $1,000 or less If the value of your account is $1,000 or less after you leave the company, your benefit will be paid to you in a lump sum. No other form of payment is available. Note: Different rules apply if you have an outstanding loan from the plan. Contact Vanguard for details. PHILLIPS 66 SAVINGS PLAN PHILLIPS 66 BENEFITS FOR TOMORROW 23

26 You can take your money in a lump sum or in installment payments If you elect a lump-sum distribution, your money will be paid to you in one single cash payment, less a minimum of 20% estimated federal income tax withholding and any required state and local withholding. These payments can be made to you: In cash (via check); or In a combination of cash and/or Phillips 66, ConocoPhillips or DuPont stock. You can choose installment payments if you re a former employee or a surviving spouse beneficiary of a plan participant. There are two installment payment options: Fixed dollar installments Life expectancy installments A series of payments based on a dollar amount you select. Payments are made until your account balance is paid in full or you reach age 70½, at which time required minimum distributions may begin. See Required minimum distributions starting at age 70½ below. A series of payments that are based on your life expectancy or on the combined life expectancy of you and your beneficiary. Payments are calculated based on IRS life expectancy tables. With installment payments: You can elect monthly, quarterly, semiannual or annual payments. Taxes may be withheld from each payment. See Do I pay taxes? on page 25. Payments are taken pro rata from all your investment options. For example, if 90% of your money is in the Target Retirement 2020 Fund and 10% is in the Money Market Fund, 90% of your installment payment comes out of your Target Retirement 2020 Fund shares and 10% comes from your Money Market Fund shares. If you re rehired, your installment payments can continue, but your payments won t change due to any new contributions you make to the plan. (You ll make a new, separate distribution election for those contributions when you leave the company again.) You can change or revoke your installment election at any time. REQUIRED MINIMUM DISTRIBUTIONS STARTING AT AGE 70½ If you re not an active employee, you must start taking at least some of your money out of the plan no later than April 1 in the year after you reach age 70½ in order to comply with IRS rules. These payments to you are called required minimum distributions (RMDs). RMDs are payments based on your life expectancy or the combined life expectancy of you and your beneficiary using the Internal Revenue Service s life expectancy tables. If you re still an active employee when you reach age 70½, you re not required to take a distribution until April 1 following the calendar year in which your employment ends. Contact Vanguard for more information. 24 PHILLIPS 66 BENEFITS FOR TOMORROW PHILLIPS 66 SAVINGS PLAN