P&G's PST Plan Update: Farewell to Preferred Shares

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Procter & Gamble (P&G) has announced a significant update to its Profit Sharing Trust (PST) Plan, marking the end of an era for employee retirement benefits. After decades of allocating preferred shares to employee retirement accounts, P&G has now fully depleted its reserves of these shares. This change will impact how future PST contributions are made and carries important implications for employees at different stages of their careers.

What’s Changing?

Going forward, all PST contributions will be made exclusively in P&G common shares, replacing the previous mix of common and preferred shares. This transition is a direct result of the exhaustion of P&G’s preferred stock pool, finalized in 2024.

What Does This Mean for Tenured Employees?

For long-serving P&G employees, this update brings several key considerations: 

  • Net Unrealized Appreciation (NUA) Strategy: The NUA opportunity—which allows for potential tax savings by applying long-term capital gains rates to company stock appreciation—remains available. However, with no new preferred shares (which had a fixed $6.82 cost basis) being added, the tax advantage may be somewhat reduced as common shares (with a market-based cost basis) become the sole component.

  • Retirement Planning: The gradual shift to common shares will change the composition of PST accounts over time. This may prompt a review of retirement income strategies and diversification options to ensure your plan remains aligned with your goals.

What about newer employees?

For those earlier in their P&G careers, the effects are more pronounced:

  • Reduced NUA Appeal: With little or no preferred shares in their PST accounts, newer employees will see a diminished NUA benefit, making it less central to their tax planning strategies.

  • Long-Term Focus: Alternative tax-efficient strategies—beyond NUA—will become increasingly important, emphasizing traditional retirement planning tailored to common stock allocations.

Navigating the New Landscape

P&G’s move away from preferred shares reflects the evolving nature of retirement benefits. Staying informed and proactive is essential to ensure your financial plan adapts to these changes.

At Vaultis Private Wealth, we specialize in helping P&G employees navigate these unique benefits. Whether you’re a tenured employee seeking to maximize NUA or a newer hire exploring new strategies, our advisors provide tailored guidance.

Disclosures:

The information provided in this blog is for informational purposes only and does not constitute financial, tax, or legal advice. Please consult with a financial advisor or tax professional for advice specific to your situation. Past performance is not indicative of future results. The value of investments can go down as well as up, and you may not get back the amount you originally invested. Investing involves risk, including the potential loss of principal. Diversification does not guarantee a profit or protect against loss in a declining market. The tax implications of the NUA strategy and other retirement planning strategies can vary based on individual circumstances. It is important to consult with a tax professional to understand the specific tax implications for your situation. Vaultis Private Wealth is not affiliated with Procter & Gamble (P&G). The views expressed in this blog are those of the author and do not necessarily reflect the views of P&G.