Company-Specific Retirement Planning
Sep 25, 2018

Chevron Employees, Timing Your Retirement Matters Pt. 1


Part One of a Two-Part Series

There are several key factors a Chevron employee must consider when timing their retirement. Sometimes these factors can work opposite of each other as well, creating the need for a balancing act of benefits. In part one of this two part series, we will discuss the Chevron Incentive Plan (CIP) bonus and the calculation of the lump sum.

The first factor is a commonly misunderstood concept relating to the CIP and how your bonuses are prorated. The CIP bonus for a retiree is prorated quarterly, meaning that if you qualify for one quarter of work in your retirement year, you get 25% of the CIP amount as a prorated bonus for that quarter, or 50% for two quarters, etc. The tricky part is that you must be on the payroll for one day the next month following the quarters worked in order to receive the most recent quarter’s CIP bonus.

There can be a big difference in your bonus for waiting a day or two longer, as in the below example:

  • Stan Chevroid wants to retire mid-way through the year, and is targeting on or about June 30th
  • If he were to retire June 30th, he would have worked two full quarters, but not at least one day in the following quarter, and would receive a prorated bonus for only one quarter when the CIP bonus is paid
  • If he would have retired July 2nd, he would have met the one-day payroll requirement and received his prorated CIP bonus for the first and second quarter when the CIP bonus is paid

Timing your Chevron Retirement Plan (CRP) lump-sum distribution can also be important. The segment rates that calculate the lump-sum for Chevron retirees hired pre-2008 are the average of the third, fourth, and fifth months preceding the benefit commencement date. This gives enough lead-time for a flexible Chevron retiree to make a quick retirement decision that could mean a larger lump-sum. Our previous article, How Will Changes in Interest Rates Affect Your Chevron Lump Sum? goes into detail about how to spot trends in the segment rates that can be used to predict movements in the lump-sum calculation.

Pushing your retirement into the next month for a CIP bonus would also push your benefit commencement date by a full month. This is when you must balance the benefits to see which situation makes the most sense. The lump sum rollover will be more tax- efficient than the CIP bonus, but could also potentially be a much smaller number. These are the types of decisions we help our Chevron clients make every day. Please contact Baird Retirement Management if you have any questions about your benefits.

Click here for part two, where we discuss the vesting of options, RSUs and PSUs, which can even have a larger impact on benefits than lump sum movement of your CIP bonus.

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