Retirement Savings Options for Chevron Employees
Chevron offers two primary employer-sponsored retirement savings plans. Each designed to help you prepare for your financial future.
*We are an independent financial planning firm and are not affiliated with BP, Chevron, CITGO, ConocoPhillips, ExxonMobil, Halliburton, Shell, or Schlumberger. We help former employees of these companies with retirement planning and investment strategies.
Chevron Retirement Plan (CRP) - A Pension Plan
The CRP is a fully company-funded, defined benefit plan designed to provide you with consistent income during retirement.
Company Funded
Unlike the ESIP, the CRP requires no employee contributions. Chevron funds 100% of this plan.
Automatic Benefit Accrual
No need to enroll; benefits automatically accrue based on your length of service, salary, and age.
Vesting
Employees become vested after five years of service, ensuring you have a secure foundation for your retirement.
Distribution
When you are ready to receive your benefit, you can choose to take it as a single lump sum or in the form of an annuity.
Chevron Retirement Plan (Hired Before January 1, 2008)
If you were hired, rehired, or first became eligible for the Chevron Retirement Plan before January 1, 2008, you are covered by specific provisions of the plan. Your retirement benefit is determined using a formula that incorporates your Highest Average Earnings, the years of Benefit Accrual Service, and a Social Security offset. This means your benefit grows as your years of service, age, and salary (including base pay and Chevron Incentive Plan (CIP) pay) increase.
Social Security Offset: The plan uses an “offset” method, integrating your pension benefit with Social Security. When starting your benefit, you can choose to provide documentation of your actual Social Security earnings history for a more precise offset calculation or have Chevron estimate the earnings. Review the Social Security Offset section in the plan description for important details to help make your decision.
Traditional Pension with Social Security Integration: your CRP benefits follow the traditional Social Security integrated approach – a time-tested formula that coordinates your pension with expected Social Security benefits.
Formula: based on your Highest Average Earnings and years of service. We multiply your highest average salary by 1.6% and then by your total years of service. From that, we subtract a Social Security offset. For example, if your Highest Average Earnings are $100,000 and you have 30 years of service, the calculation is 1.6% times 100,000 times 30, giving you $48,000 per year before the offset. Key things for this group: early retirement may reduce the benefit if you start before age 60
How Your Benefits Build
Note: Early retirement is available starting at age 55 with 15+ years of service, though benefits are significantly reduced. These reductions are permanent and affect your lifetime income, so careful consideration of the financial impact is essential before making this decision.
Chevron Retirement Plan (Hired On or After January 1, 2008)
If you are an eligible employee hired, rehired, or who first became eligible for the Chevron Retirement Plan on or after January 1, 2008, your retirement benefits fall under specific plan provisions.
Your benefit is determined by a formula that combines a percentage of your Highest Five-Year Average Earnings with your years of Benefit Accrual Service. As a result, your benefit will increase as your years of service, age, and salary (including both base pay and Chevron Incentive Plan (CIP) pay) grow over time.
Age-Enhanced Accrual System: your CRP benefits follow a simplified, age-enhanced accrual system, providing clear and predictable growth without coordination with Social Security.
Formula: Here, it’s a cash balance style. We take 11% of your Highest Five-Year Average Earnings multiplied by your years of service before age 60, and 14% for years after age 60. This gives a lump sum, which you can convert into an annuity. For example, $100,000 average earnings, 25 years before 60, and 5 after—11% times 25 plus 14% times 5 gives a lump sum total. Key points: early retirement could have a different reduction factor.
How Your Benefits Build
Employee Savings Investment Plan (ESIP) - A 401(k) Plan
The ESIP is a defined contribution plan that allows you to build your retirement nest egg while benefiting from Chevron’s matching contributions.
Chevron Matching Contributions
Chevron will match 100% of your contributions of at least 2% of basic pay to a maximum of 8% of your basic pay. Take full advantage of this benefit to boost your retirement savings.
Additional Opportunity for High-Earners
For high-earning employees, the Chevron Employee Savings Investment Restoration Plan (ESIP RP) supplements the regular ESIP to maximize savings beyond standard limits.
Investment Options
You choose how to invest your contributions from a variety of options tailored to meet different risk tolerances and goals.
Employee Contributions
You can contribute a portion of your salary on a pre-tax, after-tax, or Roth basis. This flexibility allows you to tailor your contributions based on your individual financial goals.
If you contribute 2 percent of your regular pay, Chevron contributes an amount equal to 8 percent of your regular pay.
If you contribute 1 percent of your regular pay, Chevron contributes an amount equal to 4 percent of your regular pay.
Automatic Contribution Increase
This feature lets you schedule future increases in the percentage of your contributions. You control your savings growth by:
- Choosing a target contribution rate (for example, 14%).
- Selecting an annual increase amount (such as 2% each year).
- Deciding when during the year your automatic increase will occur.
Your contributions will automatically increase each year based on your chosen settings, continuing until you log in and change or stop your election. Please note: you can’t set a limit or cap to these annual contribution increases. It’s important to keep track and access your account to stop the increases once your target rate is achieved.
Strategy Highlight: BrokerageLink
A BrokerageLink strategy inside Chevrons’s 401(k) uses the plan’s self‑directed brokerage window at Fidelity to build a more customized, diversified portfolio while keeping all the tax benefits of the 401(k). It is typically best suited for experienced investors or those working with an advisor who want access to a broader, often lower‑cost fund universe than the standard Chevron core options.
Special Tax Strategy: Net Unrealized Appreciation
If you hold Chevron stock in your retirement plan, you may qualify for the NUA tax advantage during distribution.
Net Unrealized Appreciation (NUA) refers to the growth in value of company stock held in your 401(k) from its cost basis (what you paid for it) to its current market value at distribution.
Rather than paying ordinary income tax on the total value of distributed Chevron stock, you only pay ordinary income tax on the original cost basis at the time of distribution.
The appreciation (NUA portion) is taxed at long-term capital gains rates if/when you later sell the stock, which is often significantly lower than ordinary income tax rates.
- Lump-Sum Distribution Requirement: To take advantage of NUA, you’ll need to take a lump-sum distribution of your entire vested balance from all qualified plans (e.g., all your 401(k) accounts with ConocoPhillips) within one tax year.
- Qualifying Events: Your distribution must align with a qualifying event. These events include separation from service, turning 59 ½, death, or disability.
- Transfer as Stock, Not Cash: To utilize NUA, you must transfer the company stock “in-kind” from your 401(k). This means taking the stock as shares, not as cash converted back into shares later.
example scenario
A couple is preparing for retirement after decades of careful savings and planning. The husband spent his career in the Oil and Gas Industry, while the wife worked in education. Together, they have built a substantial nest egg and are now considering their best options for handling the husband’s company stock as they transition into retirement.
Their Retirement Snapshot
- Total 401(k) Plan Value: $1,000,000
- Company Stock Value: $400,000
- Cost Basis of Stock: $100,000
- Other Retirement Assets: $600,000 (in mutual funds, target date funds, etc.)
They are weighing two strategies for the company stock portion of their retirement plan to maximize their after-tax savings.
Their Tax Situation
- While working, their household income places them in the 24% tax bracket.
- After the husband retires, their income will drop, and they expect to be in the 22% tax bracket for IRA withdrawals.
- Their current long-term capital gains tax rate is 15%.
NUA Eligibility Criteria for Chevron Stock
The NUA option is available when you take a lump-sum distribution after a qualifying event such as retirement, termination, disability, or reaching age 59½.
You must transfer Chevron stock “in-kind” (as stock, not cash) to a taxable brokerage account—NUA is lost if you first roll the stock to an IRA.
The rest of your plan investments can be rolled into an IRA or another retirement plan at the same time.
Your entire plan must be emptied in a single calendar year for NUA eligibility.
Important Tax Reminders
Taxation of the NUA after death.
- The NUA portion of the stock will not benefit from the Step-up in cost basis. It will still retain its long-term capital gain status once completed.
- Subsequent gains of the stock will, on top of the NUA, benefit from a step-up in cost basis.
The cost basis of the employer stock is subject to ordinary income.
The NUA is not subject to the 3.8% Net Investment Income tax associated with high earners.
NUAs before Age 59 ½ will be subject to a 10% Early Withdraw Penalty.
NUAs are better with low cost basis stocks vs high cost basis.
Planning Ahead with Tools and Resources
Retiring from Chevron involves making the most of both the Employee Savings Investment Plan (ESIP) and the Chevron Retirement Plan (CRP), each with its own features, contributions, and payout options. Navigating these complexities can feel overwhelming, but working with a financial advisor ensures you reap the full benefits of Chevron’s retirement plans while aligning your decisions with your unique financial goals
Maximize Contributions and Benefits:
We help guide you in optimizing your contributions—including strategies for high earners who may benefit from the ESIP Restoration Plan.
Customize Your Investment Strategy:
With a broad range of investment options within the ESIP, we help you select a diversified portfolio tailored to your risk tolerance, time horizon, and specific retirement objectives—while also providing ongoing management and adjustments as markets or personal circumstances change
Plan for Income and Payouts:
We simplify the transition from saving to drawing retirement income, by clarifying the differences between lump sum and annuity payouts from the CRP and help integrate these with Social Security strategies.
Avoid Costly Mistakes:
Chevron’s plans have unique rules (like the Social Security offset and automatic contribution features). We help prevent common mistakes that could cost you thousands, help you stay on track with important deadlines, and assist you in monitoring scheduled contribution increases so you remain in control of your plan.
Optimize Taxes and Estate Planning:
We offer guidance on minimizing taxes, handling your annual performance bonuses (CIP), and creating an estate plan. This holistic approach helps preserve your wealth for you and your beneficiaries.
Contact us
Get Started Today
Take control of your financial future with confidence. Contact Saxon Financial Group to schedule your consultation and learn how we can tailor a financial plan around your unique needs as an Oil & Gas professional. Together, we’ll guide you down the most strategic path to achieving financial security and peace of mind.
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