8-KMaterial Agreements

CHEVRON CORP 8-K Report, Material Agreement (Jul 5, 2006)

Filed July 5, 2006For Securities:CVX

Summary

This 8-K filing by Chevron Corporation (CVX) on July 5, 2006, details significant changes to its executive compensation and retirement plans, primarily related to the integration of Unocal Corporation's retirement plans following its acquisition. The Board of Directors approved the merger of the Chevron Supplemental Retirement Plan with Unocal's Nonqualified Retirement Plans into the Chevron Retirement Restoration Plan, effective July 1, 2006. This consolidated plan aims to provide nonqualified defined benefit retirement benefits to both Chevron and legacy Unocal employees that exceed limits imposed by the Internal Revenue Code on qualified plans. Furthermore, legacy Unocal employees were included in the Chevron ESIP Restoration Plan, effective January 1, 2006, which provides supplemental savings benefits. The new and merged plans incorporate provisions to ensure compliance with Section 409A of the Internal Revenue Code regarding distributions. These changes are primarily aimed at retaining key talent and ensuring competitive compensation packages post-merger by addressing limitations in qualified retirement plans.

Key Highlights

  • 1Chevron Corporation merged its Supplemental Retirement Plan with Unocal Corporation's Nonqualified Retirement Plans into the Chevron Retirement Restoration Plan, effective July 1, 2006.
  • 2Legacy Unocal employees are now eligible to participate in the Chevron ESIP Restoration Plan, effective January 1, 2006.
  • 3The merged Chevron Retirement Restoration Plan provides nonqualified defined benefit retirement benefits that supplement qualified plans, addressing IRS limitations on compensation and benefits.
  • 4The benefit calculation for the merged plan generally uses a 36-month average of salary and management bonuses, reduced by qualified plan benefits.
  • 5For legacy Unocal employees, the benefit from the merged plan will not be less than what they would have received under the separate Unocal plans.
  • 6The Chevron ESIP Restoration Plan offers a contribution of 8% of eligible pay above IRS limitations for participants meeting certain deferral requirements.
  • 7All plans include transition provisions for distributions to comply with Section 409A of the Internal Revenue Code.

Frequently Asked Questions

The main purpose is to integrate the retirement benefits of legacy Unocal employees into Chevron's existing structure following the acquisition. It also aims to provide enhanced nonqualified retirement benefits to key employees of both Chevron and former Unocal employees, compensating for limitations imposed by the IRS on qualified retirement plans.

The benefit is generally calculated using the average of a participant's highest 36 months of salary (including deferred salary) and highest three management bonuses (including deferred bonuses) in their last 10 years of employment. This amount is then reduced by the benefits provided under the qualified Chevron Retirement Plan (which now includes Unocal's qualified plan benefits).

Yes, the filing states that for legacy Unocal employees, the benefit payable under the merged Chevron Retirement Restoration Plan will not be less than the benefit that would have been provided if the merged Unocal plans had continued in effect after June 30, 2006.

The inclusion of legacy Unocal employees in the Chevron ESIP Restoration Plan means they are now eligible for supplemental savings benefits, specifically an 8% contribution on eligible pay exceeding IRS limitations, provided they meet certain deferral requirements. This is designed to provide a more competitive and comprehensive savings incentive.