For Shell executives utilizing the investment options within the Provident Fund or Provident Fund Benefit Restoration Plan (BRP), changes are coming to the list of investment options available. These updates take effect on September 28, 2020 and could have substantial impacts on your retirement savings if no action is taken beforehand.
What Changes are Occurring in the Shell Provident Fund?
Starting in September, there are some significant changes to the way you are able to invest within the Provident Fund including:
- New menu of investment fund options
Prior to this year, the Shell Provident Fund and Provident Fund BRP featured hundreds of fund options for employees to select from within their account. As of September 2020, these options are being narrowed down significantly. Notably, Shell is narrowing down the Core Fund options, eliminating the Fund Window altogether, and adding two new funds. Additionally, the expense ratios for the Lifecycle Funds and Core Funds are decreasing as of July 1, 2020.
- New per participant plan fee
Beginning in January of 2021, a quarterly fee will be charged to each participant account in the Shell Provident Fund. This means that if you have an account in the Provident Fund as well as an account in the Shell Provident Fund BRP, you will see a fee charged to each account, reflected on their respective quarterly account statements. The exact fee hasn’t been announced, so be on the lookout for additional information from Shell later this year as it’s expected to be communicated in Q4 of 2020. The per participant fees do not impact your take-home pay and are auto-deducted from your Provident Fund and Provident Fund BRP accounts.
Who Is Impacted By These Changes in Investment Options?
Most Shell executives will need to take immediate action in changing their investment selections within the Provident Fund and the Provident Fund BRP.
For those who are working with an advisor who actively manages their Provident Fund and Provident Fund BRP through BrokerageLink, action may not be necessary, but you should check with your advisor to confirm. At Willis Johnson & Associates, we’re working with our Shell clients to ensure they can maintain the asset allocations within their accounts that will help them reach their long-term goals.
Did You Know Waiting 15 Days to Retire May Save You $50,000 in Taxes on Your BRP Payouts? Learn More Here
How Will These Investment Option Changes Impact Shell Employees?
If you currently have a 401(k) with Shell, some or all of your current investment selections in it may no longer be available to you. Once these changes go into effect, you will have fewer investment options in certain asset classes, which can adversely impact your current asset allocations and long-term performance. Notably, the Tier II and Tier III funds, including the Royal Dutch Shell Stock Fund, will be reinvested by default into a LifePath® Fund once these changes take effect. If you don’t make the changes to your current allocations in your NetBenefits portal before September 9, 2020, those elections will be made for you and may not fit your needs.
Many investment funds will still be available through BrokerageLink if employees wish to still invest in them. However, with the new changes taking place, investing in these funds may incur additional fees and higher expense ratios than in the past.
What You MUST Do To Protect Your Investments for Retirement:
To avoid your current allocations being replaced with the new ones offered in the Provident Fund, you have to make benefit elections within your NetBenefits portal by September 9th, 2020 before the changes go into effect later in September of this year. This is especially important if you are within 2-5 years from retirement or if you’re not working with an advisor with expertise in Shell benefits.
How will these changes impact retirement savings?
The streamlined list of funds available in the new Provident Fund options does not cover every asset class or asset subclass available. As we continue facing volatility in the market, being forced to sell funds from the old menu of available investments to reinvest in the new fund options (which may or may not suit your needs) can have substantial impacts on your desired asset allocation and overall performance.
Why are the Investment Options Changing in the Provident Fund?
Shell claims the primary reason for the sweeping change is that “studies have shown that too much choice may be overwhelming to certain savings plan participants. The new investment menu helps simplify investing decisions while maintaining alternatives for more hands-on investors.” However, the recent investment changes in the Provident Fund are a highly likely result of an ongoing class-action lawsuit involving Shell employees, Fidelity, and named Shell executives.
The main focus of the lawsuit is on Shell’s fiduciary obligation to Shell employees who participate in the Provident Fund. For context, the term “fiduciary” refers to an established level of trust within an existing relationship. In short, employees argued that Shell has a fiduciary responsibility to:
- Work in the best interest for those participating in the Provident Fund plan
- Monitor the funds being selected by Fidelity for the Provident Fund plan to ensure their quality and performance
- Negotiate lower administrative fees for participants in the Provident Fund plan given the number of participants and the sum of the assets within the 401(k) plan
- Protect employee’s sensitive data from being used for marketing purposes by Fidelity
This lawsuit echoes similar class-action claims filed against Trader Joes and other large employers. While there’s no verdict yet, it’s reasonable to believe that many of the upcoming changes are being made as a direct response to these allegations. The new funds being offered for the Provident Fund will feature lowered expense ratios and the menu of investment options being offered later this year has been streamlined to include fewer options.
Important Deadlines & Next Steps
There are two major dates to be aware of with the updates regarding your Provident Fund and Provident Fund BRP elections.
- September 9, 2020: Make investment elections within NetBenefits to avoid having your current and future investments in Tier II and Tier III funds reinvested into target LifePath® Funds
- September 28, 2020: New investment options take effect and outdated fund options become unavailable within the Provident Fund or Provident Fund BRP. Any accounts that haven’t made the necessary elections will be reinvested.
When you’re saving for retirement, your 401(k) is one of the best savings tools available to you. Ensuring that the investment elections in your 401(k) reflect your risk tolerance and long-term goals is of utmost importance, especially given the market volatility we’ve seen in 2020.
At Willis Johnson & Associates, we actively manage our Shell client’s investments using evidence-backed strategies to ensure they maintain asset allocations that will help them reach their long-term goals. If you’re interested in learning what services we provide for Shell professionals or how to optimize the investment selections within your Provident Fund, contact us to connect with one of our advisors.