BP p.l.c. (BP) 11-KAnnual report of employee stock purchases

The accompanying financial statements comprise employee savings plans sponsored by BP Corporation North America Inc. (the “Company”) that participate in the BP Master Trust for Employee Savings Plans (the “Master Trust”). The Company is an indirect wholly owned subsidiary of BP p.l.c. (“BP”).

The following description of the BP Employee Savings Plan, the BP Partnership Savings Plan, the BP DirectSave Plan and the BPX Energy Employee Savings Plan (the “Plans”) provides only general information. Participants should refer to the applicable Plan document and Summary Plan Description for additional information. The Plans are subject to and comply with the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).

The purpose of the Plans is to encourage eligible employees to regularly save part of their earnings and to assist them in accumulating additional financial security for their retirement. The Plans provide that both participant contributions and Company matching contributions be held in a trust by an independent trustee for the benefit of participating employees. All plan assets are held in the Master Trust. The trustee of the Master Trust is State Street Bank and Trust Company (“State Street”).

Fidelity Workplace Services, LLC ("Fidelity") is the recordkeeper for the Plans. The Company is the Plan sponsor and the Company’s Head of Pensions and Benefits, Americas is the Plan Administrator for the Plans.

The BP Employee Savings Plan (“ESP”) was established on July 1, 1955. Generally, an employee of the Company (or a participating affiliate) is eligible to participate in ESP immediately upon the date of hire. Employees who are represented by a labor organization that has bargained for and agreed to the provisions of ESP are also eligible.

Under ESP, participating employees may contribute up to 80 percent of their qualified pay on a pre-tax, after-tax and/or Roth 401(k) basis, subject to Internal Revenue Service (“IRS”) limits. Participants who attain the age of 50 before the end of the applicable plan year are eligible to make additional elective deferrals (catch-up contributions), subject to IRS limits. A specified portion of the employee contribution, up to a maximum of 7 percent of compensation, as defined under the Plan, is matched each pay period by the Company. Participants are permitted to rollover amounts into ESP representing distributions from other qualified plans.

The Plan includes an auto-enrollment provision whereby all eligible new hires and rehires are automatically enrolled in the Plan unless they affirmatively elect not to participate. Automatically enrolled participants have their pre-tax deferral rate set at 7 percent of eligible compensation and their contributions invested in a target date fund nearest the employee’s retirement date (assumed to be at age 65).

The benefit to which a participant is entitled is the benefit that can be provided by the participant’s vested account balance. Participants are immediately and fully vested in their participant contribution accounts. Full vesting in Company matching contribution accounts occurs with three years of vesting service. The Plan may use forfeitures to reduce future Company matching contributions or to pay plan expenses. During the 2020 plan year, $1,791,044 was used to reduce Company matching contributions. At December 31, 2020 and 2019, forfeited non-vested accounts totaled $45,660 and $199,254, respectively.

Under PSP, participating employees may contribute up to 80 percent of their qualified pay on a pre-tax, after-tax and/or Roth 401(k) basis, subject to IRS limits. Participants who attain the age of 50 before the end of the applicable plan year are eligible to make additional elective deferrals (catch-up contributions), subject to IRS limits.

A specified portion of the employee contribution, up to a maximum of 3 percent of compensation, as defined under the Plan, is matched each pay period by the Company. Participants are permitted to rollover amounts into PSP representing distributions from other qualified plans.

The Plan includes an auto-enrollment provision whereby all eligible new hires and rehires are automatically enrolled in the Plan unless they affirmatively elect not to participate. Automatically enrolled participants have their pre-tax deferral rate set at 3 percent of eligible compensation and their contributions invested in a target date fund nearest the employee’s retirement date (assumed to be at age 65).

Participants may convert eligible assets into Roth 401(k) accounts within the Plan.

The benefit to which a participant is entitled is the benefit that can be provided by the participant’s vested account balance. Participants are immediately and fully vested in their participant contribution accounts. Full vesting in Company matching contribution accounts occurs with three years of vesting service. The Plan may use forfeitures to reduce future Company matching contributions or to pay plan expenses. During the 2020 plan year, $9,500 was used to reduce Company matching contributions. At December 31, 2020 and 2019, forfeited non-vested accounts totaled $5,347 and $1,625, respectively.

The BP DirectSave Plan (“DSP”) was established on April 1, 1988. Employees of the Company and its subsidiaries who are employees at Company-operated retail locations are eligible to participate in the Plan after six months of service. Currently, there are no active employees contributing to the Plan.

Under DSP, participating employees may contribute up to 80 percent of their qualified pay on a pre-tax, after-tax and/or Roth 401(k) basis, subject to IRS limits. Participants who attain the age of 50 before the end of the applicable year are eligible to make additional elective deferrals (catch-up contributions), subject to IRS limits. The Company makes matching contributions to the participant’s account equal to $0.50 for each $1.00 of employee contributions up to 4 percent of eligible compensation, as defined under the Plan, each pay period. Participants are permitted to rollover amounts into DSP representing distributions from other qualified plans.

A participant may convert eligible assets into Roth 401(k) accounts within the Plan.

The BPX Energy Employee Savings Plan (“BPX”) was established on January 1, 2015. Employees of the Company and its subsidiaries who are working in the BPX Energy unit are eligible to participate in the Plan. Participants were previously eligible to participate in ESP. Account balances may be moved from ESP to BPX at the participant’s direction.

Under BPX, participating employees may contribute up to 80 percent of their qualified pay on a pre-tax, after-tax and/or Roth 401(k) basis, subject to IRS limits. Participants who attain the age of 50 before the end of the applicable year are eligible to make additional elective deferrals (catch-up contributions), subject to IRS limits. A specified portion of the employee contribution, up to a maximum of 7 percent of compensation, as defined under the Plan, is matched each pay period by the Company. Participants are permitted to rollover amounts into BPX representing distributions from other qualified plans.

The Company will contribute as soon as reasonably possible to the Master Trust a nonelective employer contribution each pay period. The contribution will be allocated to the account of each participant who is an active participant during such pay period. The amount for investment is equal to 7 percent of such participant’s compensation during such pay period provided, however, that nonelective employer contributions made with respect to a calendar year on behalf of a participant may not exceed the IRS limitations.

A participant may convert eligible assets into Roth 401(k) accounts within the Plan.

The benefit to which a participant is entitled is the benefit that can be provided by the participant’s vested account balance. Participants are immediately and fully vested in their participant contribution accounts. Full vesting in the nonelective and Company matching contribution accounts occurs with three years of vesting service. The Plan may use forfeitures to reduce future Company matching contributions or to pay plan expenses. During the 2020 plan year, $189,920 was used to reduce Company matching contributions and $23,193 was used to pay eligible plan expenses. At December 31, 2020 and 2019, forfeited non-vested accounts totaled $12,853 and $38,790, respectively.

Investment options offered under the Plans include target date funds, equity and fixed-income (bond) index funds, a short-term investment fund, a stable value investment option ("Income Fund") and BP American Depository Shares (“BP ADS”) (the BP Stock Fund). The Income Fund invests in fully benefit-responsive investment contracts ("Synthetic Guaranteed Investment Contracts") that simulate the performance of a Guaranteed Investment Contract, whereby participants execute plan transactions at contract value.

Participants may change the percentage they contribute and the investment direction of their contributions daily. Company contributions are made in the form of cash contributions and are invested in funds selected by participants.

Participants may elect to sell any portion of their investment fund(s) and reinvest the proceeds in one or more of the other available investment alternatives. Except where the fund provider, the recordkeeper, or the Plan has restrictions or takes discretionary action responsive to frequent trading or market timing concerns, there are no restrictions on the number of transactions a participant may authorize during the year.

Fees related to the administration of participant loans and overnight delivery charges are deducted from the applicable participant’s account. All reasonable and necessary administrative expenses are paid out of the Master Trust or paid by the Company. Generally, fees and expenses related to investment management of each investment option are paid out of the respective funds. As a result, the returns on those investments are net of the investment management fees. The Plans offer a managed accounts service to participants, which is an investment management service provided by Fidelity. Advisory fees related to this service are paid by participants who elect to participate.

Although it has not expressed any intention to do so, the Company has the right under the Plans to discontinue its contributions at any time and to terminate the Plans subject to the provisions set forth in ERISA. In the event of a plan termination, participants would become 100 percent vested in their Company matching contribution accounts.

In connection with the Income Fund, the Master Trust invests in fully benefit-responsive investment contracts also known as Synthetic Guarantee Investment Contracts. See Note 5 (Master Trust). The Synthetic Guaranteed Investment Contracts are measured at contract value. Contract value is the relevant measurement attributable to fully benefit-responsive investment contracts, as contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plans.

Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on an accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation (depreciation) includes the Plan’s gains and losses on investments bought and sold as well as held during the year.

The IRS has determined and informed the Company by letters dated as shown below, that the Plans and related trust were designed in accordance with the applicable regulations of the IRC.

The Plans have been amended since receiving the determination letters. However, the Company and Plan Administrator believe that the Plans are currently designed and operated in compliance with the applicable requirements of the IRC, and the Plans and related trust continue to be tax-exempt. Therefore, no provision for income taxes has been included in the Plans' financial statements.

Investment securities held in the Master Trust are exposed to various risks such as interest rate, market risks and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.

The COVID-19 pandemic has affected economic activity globally, nationally and locally. The ultimate extent of any adverse impact of the COVID-19 pandemic on the Plans’ participants’ account balances and the amounts reported in the statements of net assets available for benefits will depend on future developments, including the duration of the COVID-19 pandemic and pace of economic recovery.

Included in investments at December 31, 2020 and 2019, are shares of BP ADS of $571 million and $1,025 million, respectively. This investment represents 6.96 percent and 12.28 percent of total investments at December 31, 2020 and 2019, respectively. A significant decline in the market value of the BP ADS would significantly affect the net assets available for benefits. During 2020, oil prices declined significantly, which negatively impacted the BP ADS share price.

The purpose of the Master Trust is the collective investment of assets of the Plans. Each Plan’s interest in the Master Trust is based on account balances of the participants and their elected investment options. The Master Trust assets are allocated among the Plans by assigning to each Plan those transactions (primarily contributions, benefit payments and plan-specific expenses) that can be specifically identified and by allocating among all Plans, in proportion to the fair value of the assets assigned to each Plan, income and expenses resulting from the collective investment of the assets of the Master Trust.

Investment income and administrative expenses related to the Master Trust are allocated to the individual Plans on a daily basis based on each participant’s account balance within each investment fund option.

The contracts provide for the payment of a stated interest crediting rate for a specified period of time. The underlying fixed income assets that support the interest crediting rate are owned by the Master Trust. Under the contracts, investment gains and losses on the underlying assets are not reflected immediately in the interest crediting rate. Rather, the gains and losses are amortized, usually over time to maturity or the duration of the underlying assets, through adjustments to future interest crediting rates. These adjustments generally result in contract value, over time, converging with the market value of the underlying fixed income assets. Factors affecting future interest crediting rates include the current yield, duration and the existing difference between market value of the underlying fixed income assets and contract value. Interest crediting rates, which cannot be less than zero percent, are generally reset monthly. The issuers of the contracts guarantee that all qualified participant withdrawals occur at contract value, subject to certain limitations described below.

Contract termination occurs whenever the contract value or market value of the underlying assets reaches zero or upon certain events of default. If the contract terminates due to a contract issuer default or if the market value of the underlying portfolio reaches zero, the contract issuer will generally be required to pay any excess contract value at the date of termination. If the Plans default in their obligation under the agreements and the default is not cured within the time permitted, the Plans will receive the market value as of the date of termination. Contract termination also may occur by either party upon election and notice.

Certain events may limit the ability of the Plans to transact at contract value with an issuer. Such events include (i) amendments to Plan documents or the Plans’ administration (including complete or partial plan termination or merger with another plan); (ii) changes to the Plans’ prohibition on competing investment options or deletion of equity wash provisions; (iii) the failure of the Plans or the Master Trust to qualify for exemption from federal income taxes or any required prohibited transaction exemption under ERISA; (iv) bankruptcy of the Plan sponsor or other Plan sponsor event (for example, divestitures or spin-offs of a subsidiary) that cause a significant withdrawal from the Plans; and (v) the delivery of any communication to plan participants designed to influence a participant’s

behavior in the investment option. At this time, management does not believe that the occurrence of any such event, which would limit the Plans’ ability to transact at contract value with participants, is probable.

In addition, certain events allow the issuer to terminate the contracts with the Plans and settle at an amount different from contract value. Those events may be different under each contract. Such events may include (i) an uncured violation of the Plans’ investment guidelines; (ii) a breach of material obligation under the contract; (iii) a material misrepresentation; and (iv) a material amendment to the agreements without the consent of the issuer.

The net assets of the Master Trust and the Plans' interest in the Master Trust as of December 31, 2020, are as follows:

The changes in net assets of the Master Trust for the year ended December 31, 2020, are as follows:

In measuring fair value, the Plans and the Master Trust use valuation techniques that maximize the use of observable inputs. The valuation techniques used by the Plans and Master Trust are summarized as follows:

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Plans and Master Trust believe their valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Certain of the Master Trust investments are managed by the investment division of State Street and by Fidelity Management and Research Company, an affiliate of the Plans’ recordkeeper. The BP Stock Fund holds investments in BP ADS. Purchases and sales of BP ADS during 2020 amounted to $200 million and $197 million, respectively. These transactions qualify as exempt party-in-interest transactions under ERISA. The BP ADS held within the BP Stock Fund earned dividends of $52 million for the year ended December 31, 2020.

The Plans also issue loans to participants, which are secured by the vested balances in the participants' accounts.