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.
Starting in September, there are some significant changes to the way you are able to invest within the Provident Fund including:
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.
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.
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.
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.
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:
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.
There are two major dates to be aware of with the updates regarding your Provident Fund and Provident Fund BRP elections.
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.