This spring, many Shell retirees have asked us questions about the recent transfer of their pension benefits to Prudential. To address these, we’re outlining the key changes, addressing common concerns, and highlighting the action items that can help ensure a smooth transition for you.
What's Happening with Your Shell Pension & Who’s Impacted?
As of May 1st, 2024, Shell transferred responsibility for paying pension benefits to Prudential Financial. This means Prudential will handle your monthly payments and manage the pension plan going forward.
Who’s affected? If you were already receiving annuity payments before August 31, 2023, you're directly affected by this transfer.
How Does The Shell Pension Transfer Impact You?
The changes to your Shell pension will likely not have a significant impact on your day-to-day life. The biggest change you'll notice is where your pension check comes from.
Starting May 2024, your payments will arrive from Prudential, not Fidelity. You'll also receive two 1099 tax forms for 2024 – one from Fidelity for the first four months and another from Prudential for the remaining months of the year. This is just an administrative difference, but it's important to be aware of it for tax filing purposes.
Another change involves how your healthcare premiums are handled. Previously, Fidelity deducted these premiums from your pension payment. However, now that Prudential manages the pension, these deductions will stop. You'll need to log in to Fidelity's NetBenefits platform to choose how you want to pay your healthcare premiums going forward.
Is My Shell Pension Safe with Prudential?
A common concern we heard immediately following the transfer announcement was one about the pension’s security under Prudential rather than Shell.
Both Shell and Prudential have strong credit ratings, indicating a low risk of default. However, the guarantee backing your pension has changed. Previously, the Pension Benefit Guarantee Corporation (PBGC), a federal agency, provided a safety net to ensure the benefits paid out to you. Now, the Texas Life and Health Insurance Guarantee Association (TLHIGA), a state-based organization, offers protection.
While the PBGC generally has a larger financial backing than TLHIGA, the chance of either guarantee being needed is extremely low. Both Shell and Prudential are financially stable companies with a long history of meeting their obligations.
What Will Change Under Prudential’s Pension Management?
Shell used to offer discretionary inflation adjustments to pensions, but these haven't been provided in over ten years. Unfortunately, this practice is unlikely to resume under Prudential's management.
There will also be some minor administrative adjustments. You may need to create a new login for Prudential to access your pension information. While this might be inconvenient, it shouldn't significantly impact your experience.
What Action Do You Need to Take
- Monitor your mail for tax documentation: You will receive two 1099s for 2024, one from Fidelity (first 4 months) and another from Prudential (last 10 months).
- Adjust tax withholdings through Prudential if desired: If you withhold tax from your pension, you’ll need to log in to Prudential to elect the same withholdings. The elections don’t transfer from Fidelity.
- Manage healthcare premium payments: Since Fidelity will no longer handle healthcare administration, you will need to log in to their NetBenefits platform to choose how you want to pay your healthcare premiums going forward.
Fiduciary Financial Planning for Shell Retirees
The Shell pension transfer to Prudential is a significant change, but it shouldn't be a cause for alarm. Your pension payments remain secure. If you have further questions or concerns, we recommend consulting with a financial advisor like those at Willis Johnson & Associates, who specialize in retirement and financial planning for Shell retirees. We can help you understand the implications of the transfer for your specific situation and ensure your retirement income remains on track.
