Changes to the P&G Profit Sharing Trust (PST)
Procter and Gamble’s generous compensation and benefits package is a big reason the company can attract and retain such an impressive group of employees. P&G’s Profit Sharing Trust (PST) is a cornerstone of this package, enabling employees to build a sizable nest egg for their retirement.
Each year, P&G makes profit-sharing contributions to qualified employees’ PST accounts. In the past, these contributions came in the form of preferred stock and cash, which was immediately used to purchase common stock. However, beginning with the PST’s 2025 fiscal year, these contributions changed, and the company is no longer distributing preferred stock to its employees.
What the End of Preferred Stock Means for You
Contributions to employees’ corporate-sponsored retirement accounts are capped by law. Referred to as the Section 415 Annual Contributions Limit, this cap includes contributions made by both the employer and the employee. In 2024, that annual limit is $69,000; in 2025, it is $70,000.1
Notably, preferred stock is excluded from the 415 limit. That means that when P&G made preferred stock contributions, they didn’t count toward this annual limit. Now that P&G is not issuing preferred stock to employees, all of the company’s contributions to your plan will be included in limit calculations.
This could significantly affect your annual retirement contributions. Previously, some employees received company contributions in excess of the Section 415 limit. For example, let’s assume P&G contributed $69,000 of cash and $20,000 of preferred stock into an employees account in 2024. Although the total, $89,000, exceeds the Section 415 cap, once the value of the preferred stock is excluded from the 415 calculation, their total contribution did not exceed the threshold. The employees in this example will now receive $11,000 less per year in contributions. That’s the equivalent of a pay cut!
Your Tax Bill Could Also Increase
Some employees will also discover that they can no longer contribute as much of their own money into their P&G Savings Plan. Their previously set contributions from their paychecks may now push them over the 415 limit for the year. Employees in this situation are not only putting less into their PST accounts, but their tax obligations could increase as well. That’s because their Savings Plan contributions were reducing their taxable income, and that money is now showing up in their paychecks again. Unless they find an alternative tax-protected vehicle for those dollars, their annual taxable income will increase, and their tax bill will go up.
How Do I Know if This Change Affects Me?
The elimination of preferred stock is already affecting P&G employees. If your pay stub indicates you are no longer contributing directly to your savings plan from your salary, that means P&G changed your contribution schedule to make sure you don’t overshoot the legal limit of $69,000 total for the year.
How Should I Adjust to the New Landscape
There may not be much you can do to address your retirement contributions or tax bill for 2024. But you should start preparing for next year immediately. Sign-ups are currently underway for plans and approaches that can help you make up for the loss of preferred shares. For example, you can enroll in P&G’s High Deductible Health Insurance and corresponding Health Savings Account to reduce your taxable income. Many of these options have limited sign-up windows, so you cannot afford to delay.
That said, there is not one single best response. The loss of preferred stock will affect each employee differently, and you should determine how to best use the unique set of levers available to you.
This is why working with an advisor who knows the technical details of P&G’s specific—and sometimes complex—plan can be so useful. They can help you navigate options both inside and outside of the company’s offerings and break down how your decisions will affect your long-term goals.
How Will P&G Address This Change
So far, P&G has not issued specific guidance about how or if they will make up for the loss of company contributions to the PST when Section 415 limits apply. While we wait to hear more from the company, we strongly recommend that you not carry on as if nothing has changed. When you look at the projections for your retirement plan, you can no longer use the same contribution assumptions, or you will overstate your savings, and your financial plan will no longer be accurate. Make sure to adjust your plan assumptions and also keep up-to-date with company plans, deadlines, and guidance.
