Suit aims at Phillips’ 401(k)

Re­tirees say they should have had a wider ar­ray of in­vest­ment of­fer­ings

Houston Chronicle - - BUSINESS - By L.M. Sixel

Three re­tirees sued the re­tire­ment plan in­vest­ment com­mit­tee of Phillips 66 for al­legedly fail­ing to pro­vide them a wider ar­ray of in­vest­ment of­fer­ings in the com­pany’s 401(k) re­tire­ment plan — of­fer­ings that still in­clude stock in its pre­de­ces­sor com­pany, Cono­coPhillips.

Re­tire­ment plan spon­sors have a fidu­ciary re­spon­si­bil­ity to pro­vide a di­ver­si­fied mix of in­vest­ment op­tions. The three re­tirees, who are seek­ing to rep­re­sent about 12,000 other plan par­tic­i­pants, ac­cuse se­nior ex­ec­u­tives of Phillips 66 man­ag­ing the re­tire­ment plan of con­tin­u­ing to of­fer an in­vest­ment op­tion that al­lows par­tic­i­pants to buy the stock of Cono­coPhil-lips, ac­cord­ing to the law­suit that was filed this week in fed­eral court in Hous­ton.

The stock of­fer­ing was a holdover from 2012 when Cono­coPhillips trans­ferred its re­fin­ing, mar­ket­ing and trans­porta­tion op­er­a­tions to Phillips 66, which was spun off as an in­de­pen­dent com­pany. About 12,000 em­ploy­ees of Cono­coPhillips be­came em­ploy­ees of Phillips 66, ac­cord­ing to the law­suit.

Com­pa­nies can in­clude their own com­pany stock as part of a 401(k) re­tire­ment plan with­out vi­o­lat­ing di­ver­si­fi­ca­tion rules. That rule, how­ever, doesn’t ex­tend to the stock of un­re­lated com­pa­nies, ac­cord­ing to the law­suit.

Phillips 66 said it would

not com­ment on the law­suit.

Plan par­tic­i­pants have fun­neled more than $1 bil­lion into Cono­coPhillips stock, rep­re­sent­ing about 25 per­cent of the plan’s to­tal as­sets, the suit said.

Many more have in­vested their re­tire­ment sav­ings in Phillips 66 stock. Taken to­gether, plan par­tic­i­pants have put more than half their re­tire­ment as­sets into the stock funds of the two en­ergy com­pa­nies, the suit said.

It’s risky to put so much of em­ploy­ees’ re­tire­ment as­sets into one industry, es­pe­cially one as volatile as en­ergy, said Robert Izard, the Con­necti­cut lawyer rep­re­sent­ing the Phillips 66 re­tirees.

The Phillips 66 in­vest­ment com­mit­tee should have but did not launch an in­de­pen­dent re­view af­ter Cono­coPhillips spun off Phillips 66, a fail­ure that cost the plan par­tic­i­pants mil­lions of dol­lars dur­ing the times when the price of Cono­coPhillips stock fell, ac­cord­ing to the law­suit.

The re­tirees al­lege that Phillips 66 breached its fidu­ciary duty by al­low­ing the plan to hold mas­sive amounts of Cono­coPhillips stock.

The re­tirees are seek­ing un­spec­i­fied lost prof­its.

lm.sixel@chron.com twit­ter.com/lm­sixel

Lisa Poole / Associated Press file

Phillips 66 was spun off as an in­de­pen­dent com­pany from Cono­coPhillips in 2012.

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