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.
May Segment Rate Summary
The segment rates for May are 3.23%, 4.59%, and 4.69%. This brings the three-month average to 2.89%, 4.17%, and 4.27% for an August 2022 benefit start date. For Chevron employees hired before 2008, we estimate the lump sum benefit to decrease about 2.0% for an average vested 65-year-old in August versus July; though please check your benefit calculator for your actual calculation.
All three segment rates rose significantly again in May. The “back-heavy” rate pattern continues and will make it more likely for future lump sum reductions in coming months until yields stabilize. We estimate that the average July lump sum for a 65-year-old has dropped just over 8% since the calculation for a January 2022 lump sum. We expect future reductions to continue going forward but likely not as quickly.
To read more about how to spot patterns in the segment rates to predict movement in the lump sum, please visit the updated link below.
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. This calculation applies only to Chevron employees hired before January 1, 2008.
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