Sounds like a good news piece to me. Thousands of us are facing the unemployment line and they keep cruising around in their lap of luxury. How serious can they be if they don't want to give up their planes?
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Thank you for the detailed explanation
The annuity can start as soon as the month following your termination (retirement) date. You tell Chevron when you wish to begin taking your pension. You can run retirement estimstor scenarios on the Chevron Benefits Center to see how the values change dependant on the commencement date you choose. Keep in mind the retirement calculations are based on variabilities in the 3-month averaging of the corporate bond interest rates and the date you choose to retire. There is an Early Retirement Factor also involved in the calculation. Chevron's full retirement age is 60. If you choose to retire before age 60, there is a reduction of 5% taken from the calculation formula for each year you retire early. The 5% is prorated by month. This doesn't mean you take a direct loss for taking your pension before age 60. Look at it this way... when you take your lump sum early, you begin investing it earlier as well. So the loss you take before age 60 can be offset by earning returns earlier. Same thing with the annuity , where you begin collecting a guaranteed monthly annuity income earlier, thus offsetting the smaller amount you get for starting it earlier. This also applies to collecting Social Security at age 62. Actuarially, things work out the same (on average there's no loss or no gain which way you choose).
Does the Annuity pmt start immediately or only after a certain age ?
@hjf is right. Both pension options are actuarially the same based on the most current mortality table published by the IRS. Although there are subtle variations one can consider, for the most part, if you believe you can live beyond the month and year the mortality table says you have left on earth, it's better to take the annuity over the lump sum. Your worst enemy in taking the annuity is the inflation rate. Rampant inflation in the future will diminish the purchasing power of your fixed annuity. But on the flip side, you can't anticipate the rate of return on your investments if you invest your lump sum in the market. If you have a sizable 401k balance, why not keep that part invested and rely on a fixed annuity from a stable and secure company like Chevron. Never out all your eggs in one basket, I say.
@Gk6RPRI-gua awesome story, however that is the exception rather than the norm. Chevron's pension and lump sump have been determined to be "actuarily equal" using the standard established lifetime expectancy for annuity calculations. Those are updated regularly. It makes no sense for a company to make one a better deal than the other, in which case the company would lose money. There is enough accounting know-how on these boards alone to pick it apart and it already has been in an earlier thread. There are conditions which would make one favorable for you personally or the other, but there is no one-size-fits all better choice.
My 94-year old grandmother is still receiving an annuity from her deceased husband's employer. At the rate she is going she could live to 110. I can see why the companies now prefer to give out the pension as a lump sum and be done with it.
Great post @obp. I retired in 2015 with a severance. I decided to take my pension as a 100% Joint and Survivor annuity. My monthly amount from Chevron is $4,389. My understanding is Chevron is obligated to pay me and my spouse this monthly amount until we both die. An annuity is a binding contract and no court will allow Chevron to ever stop or reduce this amount, unless for dire circumstances such as bankruptcy. In this remote chance this event occurs, the Chevron Retirrment Plan is covered by the Pension Benefit Guarantee Trust (the Federal Government, aka US Taxpayer) to a certain maximum amount. That amount currently is set around $4500 per month. So, it seems I am covered.
I assume if any changes made , chevron will still allow for a grace period to allow folks to opt out if they choose to, i.e. No immediate implementation ?
Before everyone panics ... Chevron can discontinue contributions to the pension plan anytime it wants, but any benefit you have earned (your Accrued Benefit) is yours to keep. They can also remove the lump sum option (pre-2008 plan) or limit some of the other options to a certain extent. And of course if you're already receiving an annuity they are obliged to continue paying that in full unless they can convince a court that they can't possibly afford it anymore.
However, it is extremely unlikely that Chevron will eliminate the lump sum option. The trend for the last 30 years is for US companies to move away from offering annuities due to the uncertainty caused by lengthening lifespans. That is why the post-2008 plan is a lump sum by default. I wouldn't expect Chevron to suddenly decide to change course now even if we are having a short term cash crunch. Lifespans are still lengthening. However, they might change the plan going forward in some way, e.g. stop having people accrue years in the pre-2008 plan and put everyone on the post-2008 plan for future years, effectively giving pre-2008 two retirement plans, with the pre-2008 part frozen at its current level.
Even if they stop offering a pension plan, for those of us who have retired, we still get to keep what we have accrued , correct ? . If so, The worst case for us is we may lose the option of the lump sum, although wonder if they would still give us a certain amount of time to take the lump sum before they close that option out ? Agree with most of the folks that it is in Chevron's benefit to keep the lump sum option open.
Lump sum. They can if they want, but it is to their advantage to cash you out. If everyone chose an annunity in a 100 year old plus company, that is a ton of money. A company can also stop offering a pension plan as many have done already. Just a 401k. Nothing is ever certain.
Chevron's pension plan is theirs to change or eliminate at any time. Certainly they can eliminate the lump sum option if they wanted to. It's not to mean an employee would lose anything. Your accrued benefit is not lost. I think the rumor about lump sums being eliminated is false. Chevron would prefer to pay you off with a lump sum after retirement rather than carry you on a guaranteed annuity for the rest of your life.
can chevron stop lump sum distributions any time they want ?
Are there any laws around that issue or is it completely up to the company ?
@Gk6RPRI-hox "word going round" is a stupid rumor that you've tried to start before on this site. until you get actual information, put a lid on it, please. The same rumor was going around about 8 years ago and it never happened. You've been charged many times to start your own thread on this, why don't you? Because you are spreading water cooler gossip with no basis in reality.
Who is "They" that you keep referring to?
Yeah, there must be a huge security risk for the passengers who fly from Ellington Field in Houston to Midland and back every day. Smh. Ask yourself why these people can't take an airline to Midland?
Like it or not, corporate jets are used as much for security as convenience. Many corporations use jet sharing services rather than owning their own jets.
Word going around that there will no longer offer Lump sum on Pensions, They would rather hold onto your millions and make money off of it. going strictly Annuity. We all seen this coming.....