Understanding Your Pfizer Benefits Package in 2023

Louis J. Butera, CFP® | December 14, 2022

At Butera Wealth Management, we specialize in helping Pfizer employees make the most of their benefits packages. You’ve worked hard for your benefits and we believe you should take advantage of all that’s offered to you. That’s why we’ve put together this guide to help you understand the key components of your retirement package and how they can be integrated into a full financial plan. Read on to learn more about how you can maximize your benefits in 2023.

Pfizer Retirement & Pension Plans

Pfizer offers several types of retirement plans, both qualified and non-qualified. Here is an overview of the plans most of our clients receive.

Pfizer Savings Plan (PSP)

This is a qualified 401(k) retirement savings plan that allows you to contribute funds either as before-tax, Roth, after-tax, or some combination of all three. This is an important point to consider when making your annual selections as it can have a big effect on your tax liability.

Generally speaking, before-tax contributions will reduce your current year’s tax liability, but you will owe tax when you withdraw the funds in retirement. Conversely, after-tax contributions will have no effect on your current tax liability, but you will be able to withdraw the funds tax-free in retirement (contributions only). Roth contributions are similar to after-tax contributions, but you will be able to withdraw both contributions and earnings tax-free in retirement as long as you meet the qualifications.

Other points to consider with this plan:

Employee contributions are 100% vested: You have complete ownership over the amount contributed even if you leave Pfizer.
Pfizer matches 4.5% on every 6% of income contributed to this plan: These contributions are considered 100% vested.
The maximum salary eligible for this plan is $330,000 for 2023: If you make more than this amount, it will trigger the Pfizer Supplemental Savings Plan (PSSP).

Pfizer Supplemental Savings Plan (PSSP)

This is a non-qualified plan meant for highly compensated executives at Pfizer. It is triggered once the maximum salary is reached for PSP, but there is no salary cap on the PSSP. Employee contributions to this plan are always considered before tax and 100% vested. As with PSP, Pfizer will match 4.5% on every 6% of income contributed to the plan.

Since this is a non-qualified plan, income tax will be owed on both contributions and earnings upon withdrawal in retirement.

Retirement Savings Contributions (RSC)

This is a supplemental retirement contribution that helps older employees with more years of employment save more for retirement. The contributions are calculated as a percentage of your eligible pay throughout the year (for both the PSP and PSSP plans). The percent contribution ranges from 5%-9% and is calculated as a combination of your age plus your years of service to Pfizer. These contributions become fully vested after 3 years of employment.

Maximize Employer-Matching Contributions

As mentioned, Pfizer matches 401(k) contributions dollar for dollar, up to 4.5% on $330,000 of income. This means that if you make $$330,000 , Pfizer will match up to $14,850 of contributions.

This is an excellent company match. If you haven’t already, consider adjusting your paycheck withholdings so you’re contributing enough to get the full employer match. Essentially free money from your employer

Maxing Out Your Pfizer 401(k) Completely

For 2023, employees can contribute up to $22,500 ($30,000 for employees over 50) before tax to their 401(k) plan. But the limit on all contribution types (before-tax, after-tax, and employer contributions) is $66,000, or $73,500 for employees over 50.

Maxing out your 401(k) is one of the easiest ways to reduce your taxable income for the year, if all of your contributions are made pre-tax. It also gives a nice boost to your retirement savings. Be sure to increase your contribution limit when you turn 50 in order to take advantage of the increased threshold.

Consider Roth Contributions

Roth accounts can play a large part in helping you minimize taxes and maximize your retirement savings. Depending on your financial situation, it may make sense to contribute to your PSP plan using Roth contributions, or even a backdoor Roth IRA.

This step is more difficult to complete than the others, so you may need help from an expert to figure out if Roth contributions are something you should consider. Backdoor Roth IRAs in particular require precise timing to avoid taxes and, due to new tax bills being considered, may not be available much longer. Our team can help you figure out if they should be a part of your overall wealth plan.

Review Your Pfizer Stock Incentive Plans

If you’re a highly compensated Pfizer employee, you may have access to a long-term incentive compensation plan. If you hold any of the stock incentive plans, it may be beneficial to go over the details of each with an experienced professional.

For our clients, we typically come up with a multi-year strategy to diversify out of company stock and mitigate investment risk. We also maintain a detailed record of the terms of each award, its vesting schedule, and any potential tax consequences. We then strategize ways to minimize these taxes and even estimate taxes due so there are no surprises.

How We Help Pfizer Employees

At Butera Wealth Management, our goal is to streamline and simplify your financial life. We have experience navigating the Pfizer benefit package, and we can help employees like you maximize your compensation. If you’re ready to stop leaving money on the table, or you would like to learn more about our 2nd Opinion Service, schedule a free, no-obligation phone call by contacting us at 484-455-2661 or louis@buterawm.com.

About Louis

Louis Butera is the founder and president of Butera Wealth Management, LLC, an independent wealth management firm operating out of Newton Square, Pennsylvania. With over 30 years of experience in the financial services industry, Louis specializes in serving pre-retirees who hold management or executive roles, particularly in the pharmaceutical industry. In 2015, he started his own firm with the express goal and vision of fostering meaningful relationships with clients to help them pursue financial independence and prepare for retirement. Louis and the Butera team provide a customized process to help their clients plan for every aspect of their financial life. Trust has always been key for Louis, and with this foundation, he has helped guide his clients through many different market cycles and life milestones.

Louis is a CERTIFIED FINANCIAL PLANNER™ professional and has a bachelor’s degree in business management from Ithaca College. When he’s not working with his clients, Louis enjoys being outside, playing golf, skiing, and leading an active life with his wife, Michelle. They are both great supporters of local charities and their community. To learn more about Louis, connect with him on LinkedIn.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.