Sunoco 2013 Annual Report Download - page 125

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The Sunoco, Inc. Retirement Plan
The SCIRP is a qualified defined benefit retirement plan that covers most salaried and many hourly employees, including
the NEOs. The SCIRP provides for normal retirement at age 65. The plan includes two benefit formulas:
(1) Final Average Pay formula
• The benefit equals (A) 1- 2/3 percent of Final Average Pay (the average earnings during the 36 consecutive
months of highest earnings in the last ten years prior to retirement, or until June 30, 2010, whichever is
sooner) multiplied by the credited service up to 30 years, plus 3/4 percent of Final Average Pay multiplied by
the credited service over 30 years.
• The benefit is then reduced by (B) an amount equal to 1- 2/3 percent of the estimated Social Security Primary
Insurance amount multiplied by the credited years of service up to a maximum of 30 years.
• The (A) portion of the benefit is reduced by 5/12 percent for each month that retirement precedes age 60
(down to age 55), with the early retirement benefit at age 55 being 75 percent of the unreduced benefit. The
(B) portion of the benefit is reduced by 7/12 percent for each month that retirement precedes age 65 and an
additional 7/24 percent for each month that retirement precedes age 60, with the reduction at age 55 being
47.5% of the unreduced benefit.
(2) Career Pay (cash balance) formula
• The retirement benefit is expressed as an account balance, comprised of pay credits and indexing
adjustments.
• Pay credits equal seven percent of pay for the year up to the Social Security (FICA) Wage Base ($110,100 in
2012 and $113,700 in 2013) plus 12 percent of pay that exceeds the Wage Base for the year.
• The indexing adjustment equals the account balance at the end of each month multiplied by the monthly
change in the All-Urban Consumer Price Index, plus 0.17 percent. However, if in any month the adjustment
would be negative, the adjustment would be zero for such month.
For employees, including NEOs, hired before January 1, 1987 (Mr. Hennigan), the benefits under the SCIRP are the
greater of the Final Average Pay or Career Pay formula benefits. An employee may retire at the Normal Retirement Age of 65
regardless of years of service, or may retire as early as age 55 with 10 years of service. All employees hired before January 1,
1987 are 100 percent vested in their benefits. For employees, including NEOs, hired on or after January 1, 1987 (Ms. Shea-
Ballay and Messrs. Lauterbach and Chalson), retirement benefits are calculated under the Career Pay formula only. An
employee may retire at the Normal Retirement Age of 65, or may retire as early as age 55 with 10 years of service. An
employee hired before January 1, 2008 is 40 percent vested in his or her benefit after completing two years of eligible service,
and 100 percent vested after completing three years of eligible service. Employees hired on or after January 1, 2008 are 100
percent vested after three years of eligible service.
The normal form of benefit under the SCIRP is an annuity for the life of the employee, with 50 percent of that annuity
paid for the life of the employee’s surviving spouse (50 percent Joint and Survivor Benefit). This 50 percent Joint and Survivor
benefit is free for participants who benefit under the Final Average Pay formula, but the participant’s monthly annuity is
reduced actuarially for those who benefit under the Career Pay formula. Other forms of payment are also offered such as a
lump sum and other annuity options. Under the Career Pay formula, the lump sum is equal to the value of the employee’s
account, and under the Final Average Pay formula, the lump sum is the actuarial equivalent of the annuity benefit, based on
Internal Revenue Service prescribed interest rates and mortality tables.
The SCIRP is subject to qualified plan Code limits on the amount of annual benefit that may be paid, and on the amount
of compensation that may be taken into account in calculating retirement benefits, under the plan. For 2011, the limit on the
compensation that may be used was $245,000. The limit on annual compensation that could be considered in calculating
benefits in 2012 and 2013 was $250,000 and $255,000, respectively. Benefits in excess of those permitted under the statutory
limits are paid from the Pension Restoration Plan, as described below.
The amounts presented in the table above are actuarial present values based on accrued annual benefits, using pay and
benefit service through June 30, 2010.
If the benefit is paid in a lump sum, the actual amount distributed would vary from the amount provided in the table
depending on the actual interest rate and the mortality assumptions used to calculate the distribution at the time of retirement.
The mortality table and interest rates to be used in determining a lump sum are set in accordance with the Pension Protection
Act of 2006 (“PPA”). Under the PPA, the method for computing the lump sum interest rate was completely phased-in for 2013.