Understanding the Chevron Retirement Plan Lump Sum Rates - February 2018

This monthly newsletter aims to track the interest rates that calculate the lump sum in the Chevron Retirement Plan and give an estimate of how it might affect your retirement benefit.

January Segment Rate Summary The segment rates for January are 2.48%, 3.65%, and 4.15%. This brings the three-month average to 2.34%, 3.59%, and 4.17% for an April 2018 benefit start date. We estimate a very slight decrease of around .1% in the lump sum benefit for an average vested 65-year old Chevron employee in April versus March; though please check your benefit calculator for your actual calculation. All three rates increased in January. The October segment rates, which were the least favorable of the March lump sum's three-month average, fell out of the calculation this month, causing only a slight drop in the lump sum calculation. We now have a "back-heavy rate" situation forming in the first and second segment rate averages. This means that if rates were to remain unchanged next month, there could still be a drop in the lump sum for May. Please read our article "How Will Changes in Interest Rates Affect Your Chevron Lump Sum?" attached below for more information on back-heavy rates.

"How Will Changes in Interest Rates Affect Your Chevron Lump Sum?"

How Does this Affect Me?

The Chevron Retirement Plan offers a substantial benefit to Chevron employees over many other companies’ plans. It is one of the few remaining retirement pension plans that still offers a lump sum benefit. Since the Pension Protection Act of 2006, the calculation of the lump sum has become more complicated now relying on corporate bond yield curves, known as segment rates, instead of the 30-year treasury rate that was used in the past. In a low interest rate environment, it is important for Chevron employees to understand how their lump sum is calculated and how quickly the benefit can change. As interest rates lower, the lump sum increases, and vice-versa. If rates increase 1% across the board, it could lower your lump sum by almost 10% depending on your age and length of service.

Baird Retirement Management provides highly specialized retirement planning expertise for business professionals nearing retirement. Our perspectives are backed by our extensive experience, comprehensive industry knowledge and immersion in the latest retirement, income and tax planning strategies. By focusing on select companies and industries, we can tailor our retirement planning advice to help meet the specialized planning needs and considerations of employees within a company or industry.

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The PL Group from Baird Retirement Management has not been hired by Chevron and is not affiliated with Chevron in any fashion. Please visit our website www.bairdretirementmanagement.com for more timely insights.