BP lower 48 non-qualified plan overview

Transcription

1 BP lower 48 non-qualified plan overview December 2015

2 What s inside About this overview...1 Introduction...2 Eligibility and participation...3 Distribution election deadline...3 Enrolling/changing elections...4 Beneficiary designation...4 How the BP L48 Non-Qualified Plan works...5 Excess benefit component...5 Excess compensation component...6 Separation from service...6 Vesting...7 Keeping track of your plan benefits...7 When you leave BP...7 Payment options under the plan...7 Distribution options...8 Changes to existing distribution elections (push-out distribution elections)...9 Hardship withdrawals...10 Involuntary distributions...10 If you die...11 Tax considerations...12 Internal Revenue Code Section 409A penalties...12 Investment choices...13 Your investment allocation...14 General information...15 Administrator...15 Claims and appeals...15 Amendment and termination...16 Additional information...16

3 About this overview This Overview provides you with a summary of the BP Lower 48 Non-Qualified Plan (the L48 nonqualified plan ). We encourage you to consult with your tax advisor concerning the tax implications of your participation in this plan and any subsequent distributions. This Overview summarizes the terms and conditions of the L48 non-qualified plan. Throughout this Overview, you generally refers to: You (the eligible employee) when describing elections (e.g., how to enroll; how to make a push-out distribution election); and You or your beneficiary(ies) when describing the notional investments and distribution provisions of the plan, as well as tax considerations. A notional investment is the amount that would be reflected in an account if the plan was funded. The sponsor of the L48 non-qualified plan is BP Corporation North America Inc., which is sometimes referred to in this Overview as BP. 1

4 Introduction BP offers the L48 non-qualified plan to enable you to earn additional retirement benefits after you reach the Internal Revenue Service ( IRS ) limits for the underlying qualified plan (BP Lower 48 Employee Savings Plan ( BP L48 ESP or L48 ESP )). There are some important differences between the BP L48 ESP and the L48 non-qualified plan. These differences include: Any accounts established for you under the L48 non-qualified plan are notional. This means that your account balances are represented by recordkeeping entries rather than actual funds set aside to pay your benefits. L48 non-qualified plan benefits are unfunded and payable from corporate assets when due, rather than from a funded trust. BP s obligation to pay the accrued benefit or account balance to you in the future is an unsecured corporate obligation. In the event of bankruptcy, you would have the same rights as any other BP creditor. Non-qualified plan distributions cannot be rolled into another qualified plan or into an Individual Retirement Account (IRA). L48 non-qualified plan benefits are not insured by the Pension Benefit Guaranty Corporation (PBGC) or any other entity. Therefore, your right to receive payment of the funds in the future is subject to the risk of plan sponsor insolvency. L48 non-qualified plan benefits are payable to plan participants and beneficiaries only. As a result, Qualified Domestic Relations Orders (QDROs) are not accepted by the plan. The L48 non-qualified plan incorporates by reference to the L48 ESP the definitions of compensation, eligible pay, earnings and similar terms as used in the L48 ESP. Please be aware that if you are employed in IST, or are employed as a trader, originator, charterer, freight trader or similar role in another L48 business unit, certain limits may apply to the amount of your bonus that is included in eligible compensation under the L48 non-qualified plan. For more details on these limits, see the Summary Plan Descriptions (SPDs) for the qualified pension and savings plans on Note: Benefits under the L48 non-qualified plan are not assignable and cannot be claimed by your creditors. Distributions from the L48 non-qualified plan are generally taxable at the time of distribution, although employment taxes are generally payable at the time compensation is deferred, or benefits are credited or accrued. All distributions will be made only in cash (by check) and will not be made in BP American Depository Shares ( ADSs ) or other securities. 2

5 Eligibility and participation You re eligible to participate in the BP Lower 48 Non-Qualified Plan if you are (or were prior to your separation from the BP Group) an active participant in the BP L48 ESP, and if any of the following apply: If your annual additions (which include all your contributions and the company s contributions, excluding catch-up) to the L48 ESP exceed the annual additions limit established under Section 415 of the Internal Revenue Code on the table below, you automatically participate in the excess benefit component of the L48 non-qualified plan. If you participate in the L48 ESP and your eligible pay exceeds the IRS qualified plan compensation limit, shown on the table below, in any given year, you automatically participate in the excess compensation component of the L48 non-qualified plan. Year Annual additions limit or 415 limit Compensation limit or 401(a)(17) limit Elective deferral limit or 402(g) limit* Over Age 50 catch-up limit 2016 $53,000 $265,000 $18,000 $6, $53,000 $265,000 $18,000 $6, $52,000 $260,000 $17,500 $5,500 * Includes both before-tax and Roth 401(k) contributions. Distribution election deadline If you wish to make a class year distribution election under any of the non-qualified savings plans with respect to amounts to be credited in the upcoming year, you must do so by December 31 of the prior year. 3

6 Enrolling/changing elections Be sure to read this section! It highlights the key points about the Lower 48 Non-Qualified Plan (the L48 non-qualified plan ), important plan deadlines and the actions you may be able to take. Any election under this plan must be made on the Fidelity NetBenefits website at The election window for the L48 non-qualified plan will be open all year for elections for the following year. Example: During 2020, you ll need to make distribution elections for benefits earned in If you don t make a distribution election during the annual election period, your class year account distribution for the following year will default to a lump-sum payment 14 months following your separation from service. You may be able to change your distribution election after the annual election period by making a push-out distribution election. A push-out distribution election will further delay payment. See page 9 for more information. You are able to make a single investment allocation for both your hypothetical savings match and nonelective employer contribution under this plan. If you don t designate an investment allocation, these accounts will be allocated by default into the age-appropriate Fund based on your date of birth and anticipated retirement at age 65. You may change your investment allocation at any time. Distribution elections for benefits under this plan are applied on a class year basis. Therefore, a distribution election you make during the 2020 annual election window will only apply to compensation earned and benefits credited during 2021 (and any associated notional earnings). You will need to make an annual election for each subsequent class year. Beneficiary designation When you participate in the L48 non-qualified plan, you should designate a beneficiary to receive any benefits that may be payable from your account in the event of your death. You can name one person, more than one person, or a trust or other legal entity as your primary beneficiary. You can also name a secondary (contingent) beneficiary, to receive your account in the event your primary beneficiary(ies) dies before you. If you name more than one primary beneficiary and one of those beneficiaries does not survive you, his/her benefits will be shared equally among any remaining beneficiaries of the same type (primary or contingent), except to the extent otherwise provided on the applicable beneficiary form. Payment will be made to your contingent beneficiary(ies) only if there is no surviving primary beneficiary(ies). To designate your beneficiary or change your designation, contact BP Retirement Services at Fidelity online or by phone. If required forms aren t completed properly or accepted by BP Retirement Services at Fidelity, your designation is not valid. Your beneficiary designation cannot be changed by anyone after your death. No beneficiary can refuse to accept his/her benefit. 4

7 How the BP L48 Non-Qualified Plan works Excess benefit component You automatically become eligible for benefits under the excess benefit component of the L48 nonqualified plan if you are eligible for the BP L48 ESP and the annual additions to your account exceed the IRS qualified plan annual additions limit (see table on page 3). Annual additions are the sum of your before-tax, after-tax, Roth 401(k) contributions (excluding before tax catch-up and Roth 401(k) catch-up contributions), company match, and non-elective employer contributions to your BP L48 ESP account. This total is then measured against the annual additions limit for the year (see table on page 3). Once you reach this limit, by law, no additional contributions can be made to the L48 ESP. You ll receive a notional company match and a notional non-elective contribution to your excess benefit component based on your eligible earnings and deferral election at the time of reaching the limit for each pay period. Action You may wish to make an investment election (see page 14 for details about default investment elections). Action You may wish to make a distribution election (see page 4). Action You should review your beneficiary designation for this plan and update, as needed. Your notional match rate under the excess benefit component and excess compensation component is based on your elected employee contribution rate under the L48 ESP at the time you exceed the limit. As a result, to receive the full value of the company s matching contribution (100% on the first 7% of eligible pay you contribute), you ll need to be contributing at least 7% at the time you reach the IRS limit. Your notional non-elective contribution of 7% of eligible pay will be credited to your account regardless of your contribution election under the L48 ESP. This notional company match and non-elective contribution will be notionally invested at your direction in one or more investment options that correspond with and track the performance of the investments in the L48 ESP (see Investment choices on page 13). Note: In the L48 ESP, before-tax and Roth 401(k) contributions automatically become after-tax contributions once the elective deferral limit (IRS 402(g) limit) (see table on page 3) is reached. Accordingly, unless you affirmatively elect to stop your employee contributions, you ll continue to receive company matching contributions under the L48 ESP (up to the limit). 5

8 Excess compensation component You automatically become eligible for benefits under the excess compensation component of the L48 non-qualified plan if you are eligible for the BP L48 ESP and your eligible compensation exceeds the IRS qualified plan annual compensation limit (see table on page 3). Once you reach this limit, by law, no additional compensation can be considered for purposes of the L48 ESP. You ll receive a notional company match and a notional non-elective contribution to your excess compensation component for each pay period in which your year-to-date eligible pay exceeds the IRS qualified plan limit. Action You may wish to make an investment election (see page 14 for details about default investment elections). Action You may wish to make a distribution election (see page 4). Action You should review your beneficiary designation for this plan and update, as needed. Your notional match rate under the excess benefit component and excess compensation component is based on your elected employee contribution rate under the L48 ESP at the time you exceed the limit. As a result, to receive the full value of the company s matching contribution (100% on the first 7% of eligible pay you contribute), you ll need to be contributing at least 7% at the time you reach the IRS limit. Your notional non-elective contribution of 7% of eligible pay will be credited to your account regardless of your contribution election under the L48 ESP. This notional company match and non-elective contribution will be notionally invested at your direction in one or more investment options that correspond with and track the performance of the investments in the L48 ESP (see Investment choices on page 13). Separation from service In most cases, your separation from service date will be the date you leave the BP payroll. However, you may be considered to have separated from service if you have not returned to active service after a leave of absence (other than a military leave or a medical leave) for six months. Garden leave is generally considered a separation from service because no services are being performed. Note: If you have been rehired and you have a non-qualified benefit based on your prior employment with BP, your re-employment will not affect your non-qualified plan benefit distributions, regardless of whether or not such distributions have commenced. 6

9 Vesting The vesting rules for the L48 non-qualified plan mirror the vesting rules for the L48 ESP. The L48 non-qualified plan benefit vests under the same circumstances as your company match and non-elective employer contribution accounts under the L48 ESP. Generally, this means that your L48 non-qualified plan benefit will vest after you have completed at least three years of vesting service. However, certain other provisions may apply as described in the L48 ESP plan document. Keeping track of your plan benefits BP Retirement Services at Fidelity is the recordkeeper for the L48 non-qualified plan. You can access information about your L48 non-qualified plan benefits online or by phone (see Additional information on page 16 for contact details). When you leave BP When you leave BP, the distribution of your L48 non-qualified plan benefits will be in accordance with your distribution election(s), if any. Otherwise, default election rules will apply. Payment options under the plan Because the L48 non-qualified plan payment options are different from those available under the L48 ESP, the payments may not coincide. Section 409A of the Internal Revenue Code governs non-qualified deferred compensation plans such as the L48 non-qualified plan. Your payment options for each class year include: Lump-sum payment: A one-time payment of the entire value of your benefit. Installments: Equal payments made monthly, quarterly or annually over a fixed period of up to 15 years. As described below, separate distribution elections for the L48 non-qualified plan apply to each class year. You may commence distribution of your benefit as early as six months following your separation from service. The plan requires that all benefit payments must be paid in full no later than 180 months following your separation from service. 7

10 Note: When making a distribution election on the Fidelity NetBenefits website, the system will allow you to select a distribution date beyond the 180-month maximum. However, the plan rules only allow a maximum deferral of 180 months. If you elect a date beyond the 180-month maximum, any unpaid residual amount in your account will be paid in a lump sum in the 180th month after your separation from service. Distribution options See When you leave BP (page 7) and Involuntary distributions (page 10). How to elect a payment option You ll need to make a distribution election under the L48 non-qualified plan for company match and non-elective sources each plan year ( class year elections ). Distribution elections must be made no later than the end of December before the plan year in which the benefits are earned. If you don t make a distribution election each plan year (meaning a valid distribution election is not on record with BP Retirement Services at Fidelity by the deadline), the L48 non-qualified plan benefit for that plan year will be subject to the default provision of the plan and will be paid as a lump-sum distribution 14 months following your separation from service date. If you want to make changes to existing distribution elections (i.e., push-out distribution elections), please see Changes to existing distribution elections (push-out distribution elections) on page 9. Elections for the L48 non-qualified plan may be made only online at the NetBenefits website at To make your elections, proceed as follows from the Fidelity NetBenefits home page: 1. From the home page, select the BP L48 Non-Qualified Plan. 2. Click on the Distributions tab. 3. Choose the election you wish to change and click Change Elections. Note: Select Change Elections even if you re making an election for the first time. 4. On the next screen, review your current election and click Select Payment Options if you wish to proceed. 5. Choose your new election. (Keep in mind that all accruals must be distributed from the plan within 180 months following your separation from service.) 6. Click Continue. 7. Review your election and click Submit. 8. Print a copy of the confirmation screen for your records. Be sure that you have made all your decisions prior to starting your online election process as the system may timeout if your session remains inactive for a long period. 8

11 Changes to existing distribution elections (push-out distribution elections) In general, distribution elections are irrevocable at the end of the applicable enrollment period. One exception is that you re able to push-out or further delay existing distribution elections on file if each of the conditions listed below are met. This option is available even after you re no longer employed by BP: The payment must be deferred for a period of at least five years past the existing distribution date on file. Remember, no payment can be made later than 180 months after separation from service. The change must be made at least 12 months prior to the previously scheduled payment date or default payment date. Changes received after that deadline are invalid. Changes to a prior election may not take effect until at least 12 months after submission of the new election. Note: Any changes you make will have the effect of re-starting the measurement of this 12-month standard. Note: If your existing election calls for installments, the date of the first scheduled installment will be the measuring standard to determine whether the above conditions are satisfied. Example 1 Joe didn t make a distribution election for his L48 non-qualified plan benefit. As a result, his distribution is to occur under the plan default provision (14 months after separation from service). If Joe wants to make a push-out distribution election, he will need to make that election within two months after the date of his separation from service. Joe is allowed to make a push-out distribution election for a payment commencing between 74* months and 180 months following the separation from service date. All distributions must be paid within 180 months following separation from service. * 74 months is the original default of 14 months plus a minimum push-out of 60 months. 9

12 Example 2 During last year s election, Joe elected to receive a lump-sum distribution from his plan benefit six months after the date of his separation from service. Joe later decided to delay this distribution by 10 years and he logged onto the Fidelity NetBenefits website to push-out the distribution date for 10 years past his date of separation from service. However, Joe separated from service six months after making that push-out distribution election. Under these circumstances, he didn t satisfy the condition that the new election must be made at least 12 months prior to the originally scheduled date. In this case, the attempted push-out distribution election will be invalid and Joe will receive his distribution based on his prior election. Hardship withdrawals If you incur severe unanticipated financial hardship as determined by the Administrator in accordance with Internal Revenue Code Section 409A, you may apply to receive an accelerated distribution from your account to cover the hardship. This could include a severe financial hardship resulting from an illness or accident experienced by you, your spouse or your dependents. It also could include uninsured casualty losses to your property or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond your control. A hardship withdrawal application should be requested from BP Retirement Services at Fidelity. If your hardship withdrawal request is not granted and you disagree, you can file an appeal. To file an appeal, you must submit a written appeal to the claims administrator pursuant to the appeals process. See Claims and appeals (page 15). Involuntary distributions If at any time following your separation from service or death, your or your beneficiary s entire account balance is below the involuntary cash-out threshold and installment payments have not commenced, the entire account will be distributed as soon as practicable in a lump sum. The involuntary cash-out threshold is specified by law and/or the plan document and may change from year to year. The cash-out threshold is currently $10,

13 If you die The designated beneficiary(ies) on record at BP Retirement Services at Fidelity for your L48 nonqualified plan will receive the full value of your benefits remaining in that plan if you die before you received them. If you don t have a beneficiary election on record, your benefits will be paid to your surviving spouse (same sex or opposite sex) if applicable, otherwise to your estate. The benefits will be paid to your designated beneficiary(ies) according to your most recent distribution election on record. Effectively, your beneficiary will assume any valid distribution election you have made, even if installment payments have already commenced. Exceptions to this rule are: If your beneficiary is your estate, payment will be made in a lump sum as soon as administratively practicable. Your beneficiary may not push-out the distribution election. If you make a push-out distribution election and you die before it becomes effective, it will not be valid and your prior election will apply. Under some state community property laws, if you re married at the time of your death, your surviving spouse (same sex or opposite sex) may be entitled to a portion of the benefit even if your spouse is not your designated beneficiary. In that event, the benefits otherwise payable to any of your other designated beneficiaries may be reduced by the amount payable to your spouse. If you die, your beneficiary(ies) may designate beneficiaries. 11

14 Tax considerations All distributions from the plan are regular income for federal income tax purposes and are subject to federal income tax withholding, generally at 25%. However, if your taxable income from supplemental wages has exceeded $1 million for the year, federal income tax will be withheld at 39.6%. Distributions may also be subject to state and/or local income taxation, depending on your personal circumstances and the jurisdictions involved. Withholding requirements and procedures may also vary for any state or local taxable amounts. Your interests under the plan are also generally subject to Social Security/Medicare ( FICA ) taxes. In general you re subject to FICA taxes annually as contributions accrue and vest in your accounts under the plans. A true-up calculation will be made after your separation from service. You should be aware that future tax law changes could adversely affect your deferrals and could subject you to earlier taxation and/or penalty taxes. Note: You re strongly encouraged to consult with your tax advisor concerning the tax implications of your participation in and any distributions from the plan. Internal Revenue Code Section 409A penalties Benefits under this plan are subject to penalties under Section 409A of the Internal Revenue Code. If a plan is deemed not to be in compliance in design or operation, significant penalties may be assessed. If a penalty were assessed, the penalties could apply to your accruals and may include an immediate income tax assessment, plus a federal penalty tax of 20% plus interest. For purposes of these penalties, there is a mandated aggregation among like plans. Section 409A noncompliance penalties may be imposed on you even if you had no part in the plan s noncompliance or if the plan s noncompliance was attributable to a BP Group entity or to a plan administrator. No BP Group entity will indemnify participants for penalties. 12

15 Investment choices Your L48 non-qualified plan will be notionally invested at your direction in one or more investment options that correspond with and track the performance of the investment options available in the BP L48 ESP. The BP Investment Options Guide, and any updates to the Guide describing the investment options for the BP L48 ESP, are available on Fidelity s NetBenefits website and BP s LifeBenefits website. You may view the guide online via NetBenefits at or you may contact BP Retirement Services at Fidelity to request a copy (see Additional information on page 16 for contact details). While each of the notional investment options offers the opportunity for investment gain, each also presents a risk of investment loss. You ll bear all investment risk with respect to your account and the investment elections you make. You could lose all or a portion of any amounts deferred under the L48 non-qualified plan. The investment options currently available are shown in the chart below. These options are subject to change at any time. ASSET CLASS Short-Term Stable Value U.S. Fixed Income International Fixed Income U.S. Equity Global Equity Company Stock INVESTMENT OPTIONS Retirement Fund 2020 Fund 2025 Fund 2030 Fund 2035 Fund 2040 Fund 2045 Fund Short-Term Investments Fund Income Fund U.S. Fixed Income Fund U.S. Fixed Income Fund Short Duration U.S. Treasury Inflation Protected Securities (TIPS) Bond Fund World Government Bond Index Fund ex U.S. S&P 500 Index Fund Equity Index Fund Value Equity Index Fund Growth Russell 2000 Index Fund International Equity Index Fund Emerging Markets Index Fund BP Stock Fund (unitized) 2050 Fund 2055 Fund 2060 Fund 13

16 Your investment allocation You may elect or change your investment allocation (also known as your investment direction ) for current balances or future contributions credited to the L48 non-qualified plan at any time. Any amount credited to your account will be notionally invested according to the allocation election on file for that plan and that class year. When no investment allocation is submitted for a class year, the amount credited is notionally invested in the default investment option used in the L48 ESP at that time currently the age-appropriate Target Date Fund. Exchange requests confirmed before the close of market on business days normally 4 p.m. Eastern time will be processed at that day s closing prices. Exchange requests confirmed after the close of market or on weekends or holidays will be processed at the next available closing prices. In certain situations, the Administrator, in his discretion, may impose restrictions on transactions in any of the notional investment options available. If an exchange transaction is delayed, it will be priced according to the prices in effect on the day the transaction is completed. To make or change your notional L48 non-qualified plan investments, go online to the NetBenefits website at or call BP Retirement Services at Fidelity directly at or (outside the U.S.). For more information, see the election guide available on NetBenefits. 14

17 General information Administrator The Administrator of the plan is the Head of Pensions and Benefits, Americas, and may be changed from time to time. The Administrator has sole discretionary authority to (among other things): Establish and interpret rules and regulations regarding the plan. Determine eligibility of participants. Handle enrollments and calculations. Decide, in his/her discretion, whether benefits should be paid. Enter into administrative service agreements. Select and contract with a claims administrator. Interpret the plan. Resolve and clarify inconsistencies, ambiguities and omissions in or between the plan document and other related documents. Operate and administer the plan. Claims and appeals If you believe that you re due benefits under the plan, you may file a claim. See the BP Lower 48 Employee Savings Plan section of the Benefits Handbook available at for information regarding the claim and appeal process. The same procedures that apply for making a claim or appeal under the L48 ESP will apply for purposes of making a claim or appeal under the L48 non-qualified plan. Note: The L48 non-qualified plan is not subject to the fiduciary standards of the Employee Retirement Income Security Act of 1974 (ERISA). If following exhaustion of the plan s appeal procedure you still believe that you are entitled to a benefit under the plan, you may file a civil action. You may not file a civil action unless you have exhausted the plan s claims and appeals procedure. Any civil action for benefits that is not timely filed may be dismissed by the court for that reason. In any lawsuit you file, you must comply with both the statute of limitation applicable pursuant to ERISA (or applicable state law) and with the specific provisions of the plan that govern when lawsuits must be filed. The plan has a provision which governs when lawsuits must be brought. Any civil action for benefits must be brought no later than two years following: (i) in the case of any lump sum payment, the date on which the payment was made, (ii) in the case of a periodic payment, the date of the first in the series of payments, or (iii) for all other claims, the date on which the action complained of occurred. Any civil action for benefits under the plan must be brought in the United States District Court for the Southern District of Texas, Houston Division, as required by the provisions of the plan. 15

18 Amendment and termination BP may amend or terminate its plan at any time and without prior notice. Except with respect to amendments required to comply with applicable law, no amendment or termination may adversely affect a benefit to which you re entitled prior to the date of the amendment or termination without your consent. Additional information The Administrator has contracted with Fidelity Investments Institutional Operations Company (FIIOC, also known as BP Retirement Services at Fidelity) to provide recordkeeping services with respect to the plan, including: Maintaining plan records and participant accounts, Producing participant statements and confirmations, Processing plan withdrawals and distributions according to plan rules, and Providing telephone and online services for the plan. You can obtain up-to-date information on your non-qualified benefits by contacting BP Retirement Services at Fidelity. You have two ways to obtain information online or by phone. The Fidelity online website, NetBenefits, offers many advantages, including decision support tools, and it s available virtually at any time of the day or night. Whichever method you decide to use, here s what you ll need to do: Online Log on to NetBenefits at By phone Call (toll-free within the U.S.). Participant Services Representatives are available Monday Friday, 7:30 a.m. 11:00 p.m., Central time. Outside the U.S., dial the AT&T access number of the country you are in. When prompted, dial , or call collect at Hearing-Impaired, dial You ll need a Personal Information Number (PIN) to access your personal information through either of these resources. The first time you access these services, you ll be asked for personal information that will be needed to establish your PIN. 16

19 This brochure is presented as a matter of information and contains a summary of the L48 non-qualified plan. More complete rules addressing the benefits summarized in this brochure are contained in the governing plan documents. If there are any differences between this brochure and the applicable plan documents, the plan documents will govern. BP expects to continue its benefit plans indefinitely. Nonetheless, BP reserves the right to change or end a plan at any time for any lawful reason and without prior notice. Obtain copies of the governing plan documents by contacting BP Legal through one of the channels listed below. A reasonable fee for copying may be assessed. BP Legal Benefit Plan Documents P.O. Box Houston, TX BPBenefitsHandbook@bp.com The information contained in this brochure has been provided by BP and is the sole responsibility of BP. 17

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