Profit Sharing Announcement & FAQs
Chevron Phillips Chemical is pleased to announce that it has awarded its employees with a 5% Profit Sharing payout, and a 7% Variable Annuity Benefit enhancement for 2009. We believe that these benefits are an important part of your overall compensation package and have provided the following Q&As to help you better understand these benefits. These profit sharing enhancements are applicable to all Chevron Phillips Chemical employees; salaried Performance Pipe employees; and Performance Pipe employees paid on an hourly basis at Reno and Knoxville hired prior to January 1, 2004.
Profit Sharing Q&A
Q: What is Profit Sharing?
A: Profit Sharing is a performance-based component of the Chevron Phillips Chemical 401(k) Plan. This feature allows employees to share in the success of Chevron Phillips. Generally, the same metrics that drive the overall EIP payout (please refer to the EIP Web site for more information regarding these metrics) are also considered in determining the Profit Sharing payout.
Q: Who is eligible to receive Profit Sharing?
A: To be eligible to receive a Profit Sharing payout, you must have been an active participant in the 401(k) plan on December 31 of the previous plan year. Employees are typically eligible to join the Chevron Phillips Chemical 401(k) plan on their first day of employment. Profit Sharing is also allocated to the accounts of employees who have retired, became totally disabled, or died during the plan year.
Q: How much is the Profit Sharing payout?
A: The regular annual employer-matching contribution to the 401(k) plan equaled 75% of the first 6% of an employee’s eligible pre-tax and/or Roth after-tax contributions. Company performance can increase this benefit through Profit Sharing. Under this feature, profit-sharing contributions can equal up to 8% of an employee’s eligible pay, rather than the 6% limit for regular employer matching contributions.
Profit-sharing contributions will vary from year to year depending upon Chevron Phillips Chemical’s performance and its ability to support additional contributions, based on that performance. There may be years in which there is no profit-sharing match.
The Profit Sharing payout is based on your 401(k) pre-tax and/or Roth after-tax contributions made throughout the plan year. The following chart shows the basic Chevron Phillips Chemical employer match plus the 5% Chevron Phillips Chemical profit-sharing contribution for the 2009 plan year (see table on next page).
| Example – 401(k) Savings and Profit-Sharing Contributions |
| Employee Pre-Tax and/or Roth After-Tax Contribution Rate (% of Eligible Earnings) |
Basic Chevron Phillips Chemical Match |
Chevron Phillips Chemical Profit-Sharing Contribution |
Total Employee + Chevron Phillips Chemical Contributions* |
| 1% |
.75% |
1% |
2.75% |
| 2% |
1.5% |
2% |
5.5% |
| 4% |
3% |
4% |
11% |
| 5% |
3.75% |
5% |
13.75% |
| 6% |
4.5% |
5% |
15.5% |
| 7% |
4.5% |
5% |
16.5% |
| 8% |
4.5% |
5% |
17.5% |
| 10% |
4.5% |
5% |
19.5% |
| *Subject to annual Internal Revenue Service contribution limits. 2009 Maximum allowed by IRS is the lesser of 100% or $49,000 of eligible pay. |
Q: When will I receive my Profit Sharing payout?
A: The Profit Sharing payout is typically posted to your 401(k) account at the end of the first quarter following the calendar year-end.
Q: In what form will I receive the Profit Sharing payout?
A: Any Profit Sharing contributions will be posted to your 401(k) account soon after the Profit Sharing award is determined. The contributions will be invested according to your current 401(k) plan investment elections. You can view your 401(k) account on the Fidelity NetBenefits website at http://netbenefits.com/.
Retirement Enhancement Benefits
There are two components in the Chevron Phillips Chemical Company Retirement Plan. These two components are the Career Average Pay Benefit and the Variable Annuity Benefit. The receipt of an EIP payout enhances the amount payable under both benefits, as the EIP bonus amount is includable as covered earnings under the Retirement Plan. Generally, the same metrics that drive the overall EIP payout are also considered in determining the Variable Annuity enhanced benefit. Please read the Summary Plan Description, found on the Benefitium Web site, for additional details on the Retirement Plan.
Retirement Enhancement Q&A
Q: What is the Career Average Pay Benefit?
A: Each year, you earn a Career Average Pay Benefit equal to 1.5% of your compensation for that year in the Chevron Phillips Chemical Retirement Plan. The examples below show how the benefit would be calculated:
| Example – Career Average Pay Benefit |
| Year |
Salary
(Including EIP) |
Career Average Benefit @1.5% |
Accrued Benefit |
| 1 |
$60,000 |
$900 |
$900 |
| 2 |
$65,000 |
$975 |
$1,875 |
| 3 |
$70,000 |
$1,050 |
$2,925 |
| 4 |
$75,000 |
$1,125 |
$4,050 |
| 5 |
$80,000 |
$1,200 |
$5,250 |
Q: What is the Variable Annuity Benefit?
A: At the end of each month, Variable Annuity Benefit deposit credits are made to a bookkeeping account in the Chevron Phillips Chemical Retirement Plan set up in your name. The deposit credits equal 1% of your compensation for that month plus interest. Chevron Phillips will periodically review the Retirement Plan and consider increases to the Variable Annuity Benefit. The example below shows how an increase in the Variable Annuity Benefit is calculated.
Example – Variable Annuity Benefit Pension Enhancement
The following is a breakdown of your Chevron Phillips Chemical Retirement Plan benefit showing a 7% credit enhancement to the Variable Annuity Benefit (given the assumptions listed below). The Variable Annuity Benefit enhancement is added to the amount of a participant’s variable annuity account balance at December 31 of the previous year (2009). Please note that for participants who terminated during the year, the Variable Annuity Benefit is weighted based on the number of months actively employed during the year. The 7% credit enhancement plus 3% interest credit totals 10% for the 2009 Plan Year.
| Example – One Year’s Change In Variable Annuity Benefit Unit Account |
| Assumptions: |
Monthly Pay Rate at 1/1 is $5,000
EIP Bonus paid in March is $4,200
Monthly Pay Rate effective 7/1 is $5,200
Account Value at 1/1 is $1,000
3 % Interest Crediting Rate |
| Beginning of Month |
Pay in Month |
Account Value Beginning of Month |
Deposit Credit For Month |
Interest Credit for Month |
Account Value End of Month |
| 1 |
$5,000 |
$1,000.00 |
$50 |
$2.47 |
$1,052.47 |
| 2 |
$5,000 |
$1,052.47 |
$50 |
$2.60 |
$1,105.07 |
| 3 |
$9,200 |
$1,105.07 |
$92 |
$2.73 |
$1,199.80 |
| 4 |
$5,000 |
$1,199.80 |
$50 |
$2.96 |
$1,252.76 |
| 5 |
$5,000 |
$1,252.76 |
$50 |
$3.09 |
$1,305.85 |
| 6 |
$5,000 |
$1,305.85 |
$50 |
$3.22 |
$1,359.07 |
| 7 |
$5,200 |
$1,359.07 |
$52 |
$3.35 |
$1,414.42 |
| 8 |
$5,200 |
$1,414.42 |
$52 |
$3.49 |
$1,469.91 |
| 9 |
$5,200 |
$1,469.91 |
$52 |
$3.62 |
$1,525.53 |
| 10 |
$5,200 |
$1,525.53 |
$52 |
$3.76 |
$1,581.29 |
| 11 |
$5,200 |
$1,581.29 |
$52 |
$3.90 |
$1,637.19 |
| 12 |
$5,200 |
$1,637.19 |
$52 |
$4.04 |
$1,693.23 |
To calculate the Variable Annuity Benefit 7% Credit Enhancement, you perform the following calculation: $1,693.23 x 1.07 = $1,811.76, resulting in an increase of $118.53
Q: When will the Variable Annuity Enhancement be posted to my Retirement Account?
A: The Variable Annuity Enhancement is typically posted to your retirement account during the second quarter following the calendar year-end.
Q: Can I get an estimate of my Chevron Phillips Chemical retirement benefits?
A: You can receive an estimate of your Chevron Phillips Chemical retirement benefit by logging onto the Fidelity NetBenefits website at http://netbenefits.com/. Once logged in to your account, you can perform estimates based on different retirement scenarios you input (such as retirement date, salary projection, etc.), review frequently asked questions and request forms.
You can also view your 401(k) balances, process transactions — such as loans and withdrawals — and make 401(k) investment election and deferral changes. You can contact Fidelity directly by calling the Chevron Phillips Chemical Pension and Savings Service Center at 1-866-771-5225.