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4 Steps to Maximize What Goes Into Your EMSP in 2021 Thumbnail

4 Steps to Maximize What Goes Into Your EMSP in 2021

Doug Garrison, CFP, MBA - Senior Wealth Advisor

News that ExxonMobil will resume the company match to the ExxonMobil Savings Plan in October gives you a planning basis for maximizing after-tax dollars going into your account.

“Why,” you ask, “might I want to maximize after-tax dollars going into my account?”

Great question. We wrote a blog last year about five reasons to pump after-tax dollars into your account—check it out here.

If you’re inclined to max out, calculating the amount you can contribute as a Special Contribution with nearly half a year still ahead of you can be a bit tricky. You might get help from Voya on how much of a check you can write, or armed with some patience, you can follow along here.

Step 1:

Add up your own contributions over the entire year of 2021, recognizing that there are certain ExxonMobil and IRS-imposed limits.

Limit 1: You can’t contribute more than $19,500 this year on a before-tax basis or to the Roth 401(k) account or as the sum contributed between those two accounts. But if you opted to continue contributing on an after-tax basis, count all those extra contributions.

Limit 2: Once your compensation reaches $290,000, the IRS does not let you contribute any more to the EMSP. And ExxonMobil can’t contribute to the EMSP either. Their match of 7% on compensation above $290,000 accrues inside the Supplemental Savings Plan.

An example: Suppose you’re making $180,000/year and contribute 6% to the Roth 401(k) account, and you don’t expect a raise the rest of this year. The math works out that you’ll contribute $900/month x 12 months = $10,800 for the year.

Step 2:

Estimate how much the Company match will be for October, November, and December. They’ll match 7% of your pay, provided you’re contributing at least 6%. If you make $180,000 or $15,000 per month, they’ll contribute $1,050/month x 3 months = $3,150.

Step 3:

Add your contributions and those of the Company. Subtract that sum from $58,000. That $58k is the IRS limit on how much can go into the tax-deferred EMSP this year from both you and the company. And the difference is how much you can add to your account this year as a Special Contribution.

Using our example: Our example earns $180,000 per year. She makes participant contributions of $10,800 and gets a Company match of $3,150. That adds up to $13,950. Subtract that from $58,000, and if she’s fortunate enough to have the money, she could make a special after-tax contribution of $44,050, for a total addition to her account of $58,000.

As is often the case, there are a few additional technicalities.

  1. Any “catch-up” contributions you make this year because you’re 50 or older, up to $6,500, are excluded from this calculation. So, if you’re 50 or older, the maximum you can put into the EMSP is $58,000 plus $6,500, or a total of $64,500.

  2. A reminder: If you make both before-tax and after-tax contributions through payroll deduction, it’s that total that goes into Step 1, not just the contributions to the Before-Tax or Roth 401(k) accounts.

  3. It’s possible that your contributions and the Company’s contributions could reach $58,000 before the end of the year or you could reach the $290,000 compensation limit. If the former, you’ve maxed out. Congratulations! Sorry, there’s no room for a Special Contribution.

    If the latter, whether you can make a Special Contribution will depend on going through Steps 1-3. Just recognize that once you’ve reached $290,000 in compensation, the Company match goes to the Supplemental Savings Plan, and your contributions stop.

Step 4:

If you're inclined to make a Special Contribution for 2021, go online to the EMSP website, download a Special Contribution Form, and overnight your check to the Voya Financial office in Braintree, MA. Special Contributions must be received by December 15th. If you have questions, you can reach Savings Plan Services at 1-877-966-4015.

The EMSP is a well-designed 401(k), an excellent vehicle for accumulating assets for retirement. Participants who spend a career with ExxonMobil often end up with a million dollars or more in their EMSP account. But the EMSP has certain limits, and the IRS imposes several others.

Adding additional after-tax dollars to your account gives you options at retirement that we explained in this blog last December. Take time to consider what you want to accomplish with your investment in the EMSP (read our blog “4 Questions to Develop an ExxonMobil Savings Plan Strategy”) and make use of the tools available, including Special Contributions, to accomplish your goals.

And if you want help developing plans for meeting your goals for retirement, you’re within five years or so of retirement eligibility, and you’ll have $1M of investable assets at retirement, give us a call. Let’s talk!

Disclaimer: The information provided here is general and intended as educational in nature. It is not intended nor should it be considered as tax, accounting, or legal advice. Investec Wealth Strategies and its advisors do not provide tax, accounting, or legal advice. We recommend you seek the counsel of your attorney, accountant or other qualified tax advisor concerning your situation. Information about the ExxonMobil Savings Plan is believed to be accurate, but no guarantees can be made, as Plan details are subject to change by the Plan sponsor. The author is not an employee of ExxonMobil and his views are his own.