SUPPLEMENTAL RETIREMENT PLAN II

Transcription

1 Summary Plan Description SUPPLEMENTAL RETIREMENT PLAN II Plan Highlights 2015

2 Table of Contents INTRODUCTION... 1 Qualified Versus Nonqualified Retirement Plans... 1 Governmental Limits... 1 ELIGIBILITY... 2 CONTRIBUTIONS... 2 Categories I and II... 2 Annual Reallocation of Category I and II Contributions... 3 Category III... 4 Category IV... 5 PARTICIPATION... 5 DISTRIBUTION PAYMENT OPTIONS... 6 OTHER IMPORTANT PROVISIONS... 8 Interest... 8 Vesting... 8 Beneficiary Designation... 8 If You Transfer to an Ineligible Status... 9 TAX AND LEGAL INFORMATION... 9 Nonqualified Plan Status... 9 Assignment of Your Benefits... 9 Plan Continuation... 9 Plan Documents... 9 Tax Considerations During Oxy Employment Withholding Once Vested Withholding in the Year That You Become Vested Tax Considerations Following Separation from Service Denial of Claim and Benefit Appeal Process ADDITIONAL INFORMATION FOR PHIBRO EMPLOYEES DEFINITIONS This booklet highlights the major provisions of the SRP II. The terms of the Plan are subject to change without advance notice. In all matters concerning Plan interpretation and benefits, the Plan s legal document will govern. The Plan Administrator has discretionary authority to determine eligibility for benefits and interpret the provisions of the SRP II. 10/2013 ii SRPII

3 INTRODUCTION The Occidental Petroleum Corporation Supplemental Retirement Plan II ( SRP II or Plan ) is a non-qualified retirement plan that restores company contributions that would have been made to Oxy s qualified plans the Personal Savings Account (PSA) and the Personal Retirement Account (PRA) that are reduced due to governmental limits. Your participation in SRP II is determined by whether you meet one or more of the eligibility criteria below, participation is not voluntary. All contributions made to the SRP II are made by Oxy. This booklet explains when you are eligible for the SRP II, the contributions that are made on your behalf, the distribution options that are available to you, the tax consequences of being a participant, and other important information concerning the Plan. Qualified Versus Nonqualified Retirement Plans A qualified retirement plan, such as a 401(k) or Oxy s PSA or PRA, is designed to offer employees a tax-deferred retirement benefit. Balances in qualified plans from one employer can, generally, be rolled to an IRA or to a qualified plan with another employer and remain tax deferred. Nonqualified retirement plans, such as the SRP II, are not eligible for those same tax-deferred benefits. Balances cannot be rolled to an IRA or to a qualified plan. Federal and State income taxes are due at the time that benefits are distributed, generally at the time that an employee separates from service. The SRP II is an unfunded nonqualified plan and benefits are paid from the Company s general assets at the time of payment. While the Company is under no obligation to fund the SRP II or to segregate assets to pay benefits under the SRP II, it has committed to paying benefits when they are due to Plan participants. Governmental Limits SRP II is in place to restore Oxy contributions that would otherwise be lost due to these two governmental limits: Annual Addition Limit: Each year, employee contributions to the PSA plus company contributions to qualified plans like the PSA and PRA on behalf of an employee are limited. The contributions, or Annual Additions, that are included in this limit are (1) before-tax and after-tax employee contributions to the PSA, excluding catch-up contributions; (2) matching company contributions to the PSA; and (3) company contributions to the PRA. In 2013 this limit is the lesser of $51,000 or 100% of an employee s annual compensation. See eligibility Category I and II below. Annual Compensation Limit: Each year, the amount of an employee s compensation (Base Pay of Record plus Annual Bonus Paid) that may be used for determining the amount that an employee and the company contribute to qualified plans like the PSA and PRA is limited. Once an employee s compensation reaches the limit, no further contributions can be made by either the employee or the employer to the PSA or the PRA. In 2013 this limit is $255,000. See eligibility Category III below. 10/ SRPII

4 ELIGIBILITY You are eligible to participate in the SRP II if you fall into one or more of four categories: I. You are eligible to participate in both the PSA and PRA and your Base Pay of Record is equal to or greater than the Annual Threshold Amount. In 2013, the Annual Threshold Amount is $150,000. II. You are eligible to participant in both the PSA and PRA and your Base Pay of Record plus your Annual Bonus Paid as of May 1 of the current year is equal to or greater than $200,000. III. You are eligible to participate in the PSA and your Base Pay of Record plus your Annual Bonus Paid exceeds the Annual Compensation Limit. In 2013, the Annual Compensation Limit is $255,000. IV. You are eligible to participate in the Modified Deferred Compensation Plan (MDCP) and the PSA, and you make a base salary or a bonus deferral election under the MDCP. CONTRIBUTIONS Contributions to the SRP II are based on your eligibility category. You may be eligible for, and receive contributions under, more than one eligibility category. Contributions under each of the eligibility categories are described below. Categories I and II: You are eligible to participate in both the PSA and PRA and your Base Pay of Record is equal to or greater than the Annual Threshold Amount or you are eligible to participate in both the PSA and PRA and your Base Pay of Record plus your Annual Bonus Paid as of May 1 of the current year is equal to or greater than $200,000. If you are eligible for the SRP II because you fall into either Category I or II, Oxy s PRA contribution amount will be credited to the SRP II. Contribution amounts to the SRP II mirror contribution amounts to the PRA and equal a percentage of your base pay and annual bonus below and above the government s annually adjusted Social Security Wage Base (SSWB) as shown in the table below. For 2013, the SSWB is $113,700. Age Attained Oxy s Contribution as of 12/31 Up to SSWB Over SSWB Up to Age 35 4% 8% Age 35 & Older 7% 12% 10/ SRPII

5 For example, Oxy will credit the following contribution for a participant over age 35 whose base pay is $160,000 and who received an annual bonus of $40,000 in 2013 for total annual SRP II eligible earnings of $200,000. 7% of $113,700 $7,959 12% of $86,300 $10,356 Annual Contribution $18,315 Exception: If you receive an annual bonus under a plan other than the VCP, ICP or EICP you are not eligible to receive a PRA or SRP II contribution on your bonus. Annual Reallocation of Category I and II Contributions Oxy s goal is to maximize the amount contributed each year to the tax-qualified PRA with only excess contributions and interest remaining in the SRP II. Since it is not possible to determine the exact amount that could be contributed to the PRA without exceeding governmental limits until the end of the year, a reallocation process has been developed. At each year end, a calculation is performed to determine an approximate amount that could have been contributed to the PRA on your behalf, and that amount is moved from the SRP II to the PRA on the last business day in January. The calculation assumes that you contributed the maximum amount allowable to the PSA (currently 15%). Note that you must be actively employed on December 31 of the calendar year to be eligible for the annual reallocation. Below is an example of a reallocation calculation assuming a participant over age 35 who receives annual compensation of $200,000, comprised of $160,000 in base pay and a $40,000 annual bonus. 1. Calculate the Annual Addition Limit. The limit is the lesser of 100% of your annual compensation (base pay + bonus) of $200,000 or $51,000 (in 2013). 2. Calculate the assumed (1) before-tax and after-tax employee contributions to the PSA, excluding catch-up contributions and (2) matching company contributions to the PSA. PSA Employee Contribution: Per federal regulations, Oxy must assume that the employee is contributing the maximum of 15% of Base Pay of Record and 6% of Annual Bonus Paid to the PSA. (The calculation cannot use a participant s actual contribution amount.) So, assume 15% of $160,000 plus 6% of $40,000 for a total of $26,400. PSA Matching Company Contribution: 6% of $200,000 or $12, Subtract the PSA employee and matching company contributions from the Annual Addition Limit to determine the amount remaining for PRA contributions. 10/ SRPII

6 Reallocation Example Annual Addition Limit $51,000 Less PSA Employee Contribution ($26,400) Less PSA Employer Contribution ($12,000) Amount Eligible for PRA Contributions $12, Reallocate $12,600 from the SRP II to the PRA. The amount reallocated from the SRP II to the PRA will be invested in the PRA according to your PRA investment elections in place at the time of the reallocation. After the annual reallocation, your SRP II and PRA account balances will look like this (note that earnings on your SRP II contributions will not be reallocated): Contribution Summary SRP II PRA 7% of $113,700 $7, % of $86,300 $10, Total contributions before reallocation $18, Less reallocation to PRA ($12,600) $12,600 Total contributions after reallocation $5,715 $12,600 Category III: You are eligible to participate in the PSA and your Base Pay of Record plus your Annual Bonus Paid exceeds the Annual Compensation Limit. If your Base Pay of Record plus Annual Bonus Paid exceeds the Annual Compensation Limit at the end of the year, Oxy will credit an SRP II contribution equal to 6 percent of your Base Pay of Record plus Annual Bonus Paid in excess of the Annual Compensation Limit. This contribution, called the match make-up, is designed to restore the lost PSA Matching Company Contributions that could not be made due to the government s Annual Compensation Limit. An additional 5 percent of the match make-up is also contributed on December 31 (or the last business day in December) in lieu of interest earnings for that year. This Category III contribution, or match make-up contribution, is not included in the annual reallocation; it always remains in the SRP II. 10/ SRPII

7 Example: Assume your base pay is $200,000 and you received an annual bonus of $100,000 so that your Base Pay of Record plus Annual Bonus Paid is $300,000. The Annual Compensation Limit is $255,000. Pay in excess of Annual Comp Limit $45,000 Match make-up is 6% of excess $ 2,700 Interest make-up is 5% of match make-up $ 135 Total Contributed as of December 31 $ 2,835 Category IV: Eligible to participate in the MDCP and the PSA with a base pay or bonus deferral election under the MDCP. If you elect a base salary or bonus deferral under the MDCP that reduces matching company contributions to the PSA, a contribution will be made to a Savings Plan Restoration Account under the SRP II to restore those contributions. Example: Assume annual base pay of $200,000 and a base salary deferral election of $20,000. PSA matching contribution with no deferral election $200,000 x 6% = $12,000 PSA matching contribution with deferral election $180,000 x 6% = $10,800 Difference (Savings Plan Restoration) $1,200 Savings Plan Restoration contributions are calculated by taking the amount of your deferred base salary or bonus and multiplying it by 6%. Contributions are credited to your account at the same time, and vest in the same manner, as Oxy contributions to the PSA. You will see Savings Plan Restoration contributions as a separate entry on your SRP II statements. Savings Plan Restoration contributions are not a part of the annual reallocation calculation. PARTICIPATION When you first become eligible to participate in the SRP II, you have 30 days in which to make your distribution payment election (see Distribution Payment Options section). The 30 day window begins on the first day that you meet one of the eligibility criteria. Contributions cannot be credited to SRP II until this 30-day window is closed. Below is a summary of the most common new participant scenarios. For more information, contact OxyLink. Newly Hired Employees: If your Base Pay of Record is equal to or exceeds the Annual Threshold Amount on your day of hire, the first contribution to your SRP II account will be made beginning the first month following the close of the 30-day window. For example, if you are hired on May 15, your first contribution will be made to SRP II with your first pay check in July. From May 15 to June 30, any contributions will be made to the PRA. 10/ SRPII

8 Newly Eligible Current Employees: If you receive an increase that causes your Base Pay of Record to equal or exceed the Annual Threshold Amount, the start of your 30-day window is the date that your increased salary is effective and your first contribution to SRP II will be made beginning the first month following the close of the 30-day window. Until then you will continue to receive PRA contributions. Previously Eligible Current Employees: If you have previously been a SRP II participant but are not currently receiving category I contributions, and your Base Pay of Record increases to equal or exceed the Annual Threshold Amount, your SRP II category I contributions will begin as soon as your salary increase is effective. The 30 day window only occurs the first time that you are eligible to participate in the SRP II. Rehired Employees Who Were Previously Eligible: If you are rehired, your Base Pay of Record is equal to or exceeds the Annual Threshold Amount and you were previously eligible for SRP II, your SRP II contributions will begin on your rehire date. Further, your SRP II contributions will be subject to the distribution election that you made when you were first eligible for SRP II. Any contributions plus earnings made prior to your previous separation from service will continue to be paid out according to the terms of the Plan. New contributions to the SRP II will be triggered for distribution when you next incur a separation from service or reach the specified age, if you previously made a specified age election. DISTRIBUTION PAYMENT OPTIONS Oxy will pay to you your SRP II account balance beginning the first quarter of the year following your separation from service or the first quarter of the year following your attainment of a specified age, subject to your distribution election. Your distribution payment options are explained below. During the 30-day enrollment period after you first become eligible to participate in the SRP II you may choose how to receive your SRP II account balance. This 30-day period is a requirement under the Federal tax law that governs non-qualified plans like the SRP II. If you do not make an election within the required 30-day period, your election will default to a lump sum. You may only change this election subject to the restrictions detailed below in the section Distribution Payment Election Changes. Please remember that your distribution from the SRP II cannot be rolled into an IRA or another qualified plan and is subject to income tax as soon as it is paid to you. Your distribution election choice may have important tax consequences, and you may wish to consult a tax advisor before making your election or making a change to your election. There are two payment elections required under the SRP II a Distribution Election and a Specified Age Election. Distribution Election: You may elect to receive your vested SRP II balance in a lump sum or in installment payments over 5, 10, 15 or 20 years, beginning in the first quarter of the year 10/ SRPII

9 following your separation from service. This distribution election will apply as long as your SRP II balance is equal to or greater than the specified limit, currently $50,000, at the time of your first payment. If your SRP II balance is less than the specified limit of $50,000 at the time of your first payment, your entire account balance will be paid as a lump sum. Specified Age Election: In addition to a distribution election, you may also make a specified age election. The specified age election allows you to receive your SRP II account balance while you are an active employee, at any age you select that is age 60 or older. If you choose to make a specified age election, (1) you will receive a total lump-sum payment of your then existing SRP II balance in the first 90 days of the year after you attain your specified age, and (2) you will receive annual lump sum payments in the first 70 days of each subsequent year of the accrued contributions and earnings credited to your account since your last distribution. Your final distribution will be made in the first 70 days of the year after you separate from service. If you make a specified age election but separate from service prior to attaining that age, you will receive your SRP II balance following your separation from service according to your distribution election payment will not be delayed until you reach your specified age nor accelerated when you reach your specified age. In other words, if you separate from service first, your distribution election will control. If you reach your specified age first, your specified age election will control. Distribution Payment Election Changes: After your 30-day enrollment period, changes to your distribution elections are restricted and any change will delay the commencement of your SRP II payment, so make your elections carefully. Only two future changes can be made to your elections, subject to the following restrictions. Any change to a specified age election or to a distribution election must fulfill these requirements: The election will not be effective until 12 months after the election has been made The election must defer payment for a period of at least five years from the date that payment (or the start of installment payments) would otherwise have been made The election must be made at least 12 months prior to the beginning of the calendar year in which the payment (or the initial installment payment) is scheduled to be made. For example, if you originally make an election to receive your SRP II account over 10 years and you wish to change it to a lump sum distribution, the change would apply as follows. You submit a change form in April, 2013, changing to a lump sum The change is effective in April, 2014, provided that you do not separate from service on or before December 31, 2013 (effective after 12 months) You separate from service in 2020 You receive your lump sum distribution in the first quarter of 2026 instead of the first quarter of 2021 (5-year delay) 10/ SRPII

10 OTHER IMPORTANT PROVISIONS Interest Your SRP II account balance earns interest at the monthly equivalent of the 5-Year U.S. Treasury Bill rate plus 2%. Interest is allocated at the end of each month based on the opening balance in your account that month. Savings Plan Restoration account contributions earn an equivalent daily accrual from the day that they are credited to your account. Vesting Vesting refers to your non-forfeitable right to receive benefits from the SRP II. Your vesting service follows your vesting service under the PRA; it begins on the first day of the month in which you are hired and ends on the last day of the month in which you separate from service. You will be fully vested in the SRP II upon the earliest occurrence of one of the following events: You earn three years of vesting service; You attain age 60 while you are an active employee; You receive benefits under Oxy s Long-Term Disability (LTD) Plan for more than 18 consecutive months; You receive benefits under the Occidental Petroleum Corporation Notice and Severance Pay Plan or a similar Oxy severance arrangement; or You die while you are an active employee. If you separate from service before you are fully vested, you forfeit your entire SRP II account balance. If you are later rehired by Oxy, any forfeited balance will be restored. Beneficiary Designation A beneficiary designation is a legal document that names a beneficiary (one or more individuals or a trust) to receive your SRP II account balance upon your death. To make a beneficiary designation or to change your designation, you must complete, sign, and return an SRP II Beneficiary Designation form. Your beneficiary designation can be changed at any time by completing and submitting a new beneficiary designation form. If you do not designate a beneficiary, any balance remaining in your SRP II account upon your death will be distributed in accordance with your beneficiary designation under the PRA. If you do not have a beneficiary designation on file for the PRA, then your SRP II account will be distributed according to the PRA plan document. You can get a copy of the beneficiary designation form by contacting OxyLink at oxylink@oxy.com. 10/ SRPII

11 If You Transfer to an Ineligible Status If you transfer to a nonparticipating Oxy entity (including, in certain circumstances, an entity in which OPC has a minority interest) and you no longer meet the SRP II eligibility requirements, your account will be placed in an inactive status. While your account is in an inactive status (1) no contributions will be made to the SRP II, (2) your account balance will remain in the SRP II and will continue to be credited with monthly interest allocations, and (3) you will continue to earn vesting service. TAX AND LEGAL INFORMATION Nonqualified Plan Status The SRP II is a nonqualified plan, the benefits under which are a liability of OPC and are payable, when due under the Plan, out of the company's general assets. The Company is under no obligation to fund the Plan or to segregate assets to pay benefits under the Plan. In the event of bankruptcy, benefits payable under the SRP II will be considered obligations to pay like OPC's other debts and financial liabilities. Assignment of Your Benefits You (or your beneficiary) may not assign or transfer amounts payable under the SRP II. Similarly, these amounts may not be used to pay participant debts or obligations of any nature, except to the extent that the SRP II is required to comply with IRS tax levies. Oxy will follow the directive of a Qualified Domestic Relations Order (QDRO) that assigns payment of benefits under the Plan to another person or person(s). Plan Continuation OPC expects and intends to continue the SRP II but reserves the right to modify, suspend, change, or terminate the Plan at any time. Any amendment to the SRP II will be effected through resolution adopted by the Board of Directors of OPC or, in certain circumstances, by the Plan Administrator. OPC does not guarantee the continuation of any benefit plan during any periods of active or inactive employment, nor does it guarantee any specific level of future benefits. The Plan is purely voluntary on the part of OPC, and OPC reserves the right to terminate it at any time. Benefits under the Plan are provided at OPC's discretion and do not create a contract of employment. Plan Documents This booklet highlights the key features of the SRP II. Complete details are contained in the official SRP II plan document that legally governs its operations. All statements made in this booklet are subject to the provisions and terms of that document. 10/ SRPII

12 Tax Considerations During Oxy Employment Your SRP II account is comprised exclusively of Oxy contributions. Generally, these contributions are subject to Social Security and Medicare tax at the time that they are credited to your account and subject to income tax at the time of distribution. However, Oxy does not withhold Social Security and Medicare taxes on contributions prior to the year in which you are fully vested in SRP II. Withholding Once Vested If you are vested, Social Security and Medicare taxes on SRP II contributions are reported and withheld from your paycheck with each pay period. When SRP II contributions are reported, your net pay is reduced by the amount of the required tax withholding. SRP II contributions are subject to Social Security tax only up to the Social Security wage base so once you meet this wage base each year, only Medicare tax will be withheld for the remainder of the year. Your withholdings are added to the Social Security and Medicare deductions, as appropriate, but they are not identified separately. Each January when you receive your Form W-2, your SRP II contributions will be included in your Social Security and Medicare wages but will not be included in your gross income for federal and state income tax purposes. Withholding in the Year That You Become Vested At the start of the year you become vested, Oxy will begin to withhold Social Security and Medicare taxes on ongoing SRP II contributions each pay period. In addition, Oxy will calculate all of the contributions made to SRP II from your hire or eligibility date, plus the earnings on those contributions, and withhold Social Security and Medicare taxes on that total. Note that depending on your base pay and annual bonus, this catch-up withholding may be significant. Tax Considerations Following Separation from Service Distribution payments from SRP II will be reported to the IRS on form W-2 and will be taxable as ordinary income and subject to applicable federal and state income tax withholding. Payments you receive from SRP II are not eligible to be rolled over to an IRA or to another employer's qualified or nonqualified plan. These considerations are provided for your information only and should not be considered tax advice. For tax information, please consult with a qualified tax advisor. Denial of Claim and Benefit Appeal Process In accordance with section 503 of Title I of ERISA, the Plan sponsor has designated a Plan Administrator under the Plan, with complete authority to review all denied claims for benefits under the Plan. In exercising its responsibilities, the Plan Administrator shall have discretionary authority to determine whether and to what extent covered Plan participants and beneficiaries are eligible for benefits. In addition, the Plan Administrator shall have full discretionary authority to construe and interpret the terms of the Plan, to supply all omissions from, correct any 10/ SRPII

13 deficiencies in, and to resolve all ambiguities in the provisions of the Plan or this summary. The Plan Administrator shall be deemed to have properly exercised such authority unless it has abused its discretion hereunder by acting arbitrarily and capriciously. If you or your designated beneficiary(ies) makes a claim for Plan benefits and that claim is denied, you or your beneficiary will receive notification of the denial within 60 days, including the reason(s) for denial, specific reference to the Plan and additional information needed, if any. After receiving a written denial of the claim, you or your beneficiary will have 60 days to request a review of the reason for the denial. As a part of the review procedure, you or your beneficiary may examine any documents pertinent to the claim and submit in writing to the Plan Administrator any additional information or comments thought to be relevant to the claim. Within 60 days after the request for review of the claim has been received, you or your designated beneficiary will be notified in writing of the final decision regarding the claim and reason for the decision. You or your beneficiary usually will receive an indication of whether the claim will be paid within 60 days. However, the Plan Administrator cannot process the claim if it does not receive all the information necessary to evaluate the claim. If an incomplete claim is submitted, the 60-day period may not be a reasonable time frame for the Plan Administrator to make a decision regarding the claim. No legal action may be commenced prior to the completion of the benefits claims procedure described above. In addition, no legal action may be commenced after the later of (i) 180 days after receiving the written response of the Plan Administrator to an appeal; or (ii) 365 days after an applicant's original application for benefits. ADDITIONAL INFORMATION FOR PHIBRO EMPLOYEES If you are a participant in the Phibro LLC Management Bonus Plan, you are not eligible to receive an SRP II contribution on your Phibro bonus amount. Contributions under eligibility Category I and II are based solely on your Base Pay of Record. You are eligible to receive contributions under eligibility Category III if your Base Pay of Record and Annual Bonus Paid exceed the Annual Compensation Limit. You are not able to receive contributions under eligibility Category IV because you are not eligible to participate in the MDCP. 10/ SRPII

14 DEFINITIONS Here are a few words and phrases that have special meaning when used in this SRP II booklet. Annual Bonus Paid - Means up to $100,000 of a bonus paid under an Oxy annual incentive compensation plan, such as the VCP, ICP, or EICP. Annual Threshold Amount - Annual calculation of the base pay at which an employee s maximum contribution to the PSA, Oxy s PSA matching company contribution, and Oxy s PRA contribution would likely cause the government s Annual Addition Limit to be exceeded. Because the Social Security Wage Base (SSWB) changes annually, this threshold is an estimate and is generally adjusted annually. Base Pay of Record - Regular base pay of record excluding bonuses, awards and other nonrecurring forms of compensation (for PSA, excludes amounts deferred under the MDCP). ICP and EICP - Oxy annual incentive compensation plans, the Incentive Compensation Plan and the Executive Incentive Compensation Plan. MDCP - Occidental Petroleum Corporation Modified Deferred Compensation Plan. OPC - Occidental Petroleum Corporation, a Delaware corporation. Oxy - Occidental Petroleum Corporation and all subsidiary and affiliated companies. Plan - Occidental Petroleum Corporation Supplemental Retirement Plan II. Plan Administrator - Occidental Petroleum Corporation Pension and Retirement Plan Administrative Committee. PRA - Occidental Petroleum Corporation Retirement Plan, also known as the Personal Retirement Account or PRA. PSA - Occidental Petroleum Corporation Savings Plan, also known as the Personal Savings Account or PSA. Qualified Domestic Relations Order - A court order that meets the criteria specified in the Plan document and that directs benefits under the Plan to be paid, in part or in full, to someone other than the employee. SRP II - Occidental Petroleum Corporation Supplemental Retirement Plan II. VCP - An Oxy annual incentive compensation plan, the Variable Compensation Plan. 10/ SRPII

15 THIS PAGE WAS INTENTIONALLY LEFT BLANK 10/ SRPII