BP Pension Funding Status (2019)

BP EMPLOYEES, 

The annual funding report for your BP RAP was released recently and I felt it would be a good idea to spend some time to explain how it works. The question of the pension being restricted comes up quite a bit and I believe it is very important that you understand what it means because this is what allows you to take a lump sum, or not. If the funding level drops below certain levels, you lose your option to take a lump sum from your pension.

The good news is the current funding level is at 124.90%, which means there is no restriction on your pension lump sum option until September 1, 2020. While this figure is lower than last year’s level of 125.24%, it remains in a very strong position. Over the past 15 years, this is the second highest level I have seen, and the highest figure was last year.

But let’s examine what happens if the funding drops like it did in 2009 to 87%, or what happens if it goes even lower. If the BP RAP funding level is at or above 90%, the plan guarantees a full lump sum option up until September of the following year. If the funding level is between 89% – 80% then the lump sum is only guaranteed until March 1st of the following year. If funding falls between 79% – 60% the lump sum is restricted to 50% lump sum and 50% annuity. If the plan falls below 60% then all lump sums are restricted, and you are only able to take the annuity options.

Even if the plan drops below a certain threshold, BP still has the option to put cash into the fund to cover the shortfall and bring the funding level back up to a higher level. It’s highly unlikely BP would allow the funding to get to the point that they would restrict the pension lump sum because it would cause a mass exodus of its experienced workforce who generally have longer service history’s and have higher pension balances, they would be the most significantly affected.

If you would like to get more information about your BP RAP and how it works, please contact me at tyler@capstonewealthadvisors.com or call direct at 877-739-6007.

Tyler E Ryan

Capstone Wealth Advisors

877-739-6007

cwabellingham.com

 

Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. 

Stock investing involves risk, including loss of principal. International & Emerging Markets investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets. 

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

Confidentiality Notice: This email transmission and its attachments, if any, are confidential and intended only for the use of particular persons and entities. They may also be work product and/or protected by the attorney-client privilege or other privileges. Delivery to someone other than the intended recipient(s) shall not be deemed to waive any privilege. Review, distribution, storage, transmittal or other use of the email and any attachment by an unintended recipient is expressly prohibited. If you are not the named addressee (or its agent) or this email has been addressed to you in error, please immediately notify the sender by reply email and permanently delete the email and its attachments.

Capstone Wealth Advisors and its representatives are separate and apart from any other named entity.