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AMERICAN ELECTRIC POWER SYSTEM EXCESS BENEFIT PLAN

Employee Benefits Plan Agreement

AMERICAN ELECTRIC POWER SYSTEM EXCESS BENEFIT PLAN | Document Parties: APPALACHIAN POWER CO | AMERICAN ELECTRIC POWER SYSTEM | SERVICE CORPORATION You are currently viewing:
This Employee Benefits Plan Agreement involves

APPALACHIAN POWER CO | AMERICAN ELECTRIC POWER SYSTEM | SERVICE CORPORATION

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Title: AMERICAN ELECTRIC POWER SYSTEM EXCESS BENEFIT PLAN
Date: 2/27/2009

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AMERICAN ELECTRIC POWER SYSTEM

EXCESS BENEFIT PLAN

 

(As Amended and Restated as of January 1, 2008)

 

 

ARTICLE I

Purposes and Effective Date

 

1.1            Purpose .  The American Electric Power System Excess Benefit Plan is maintained to provide Supplemental Retirement Benefits for eligible employees whose retirement benefits from the Retirement Plan (as defined below) are restricted due to limitations imposed by provisions of the Internal Revenue Code or who are entitled to Supplemental Retirement Benefits under the terms of an employment agreement between the eligible employee and an Associated Company.

 

1.2            Effective Date .  The original effective date of this Plan was January 1, 1990, and the effective date of the changes made by this amended and restated Plan document is January 1, 2008, unless otherwise specified.

 

ARTICLE II

Definitions

 

The following terms shall have the meanings set forth in this Article II.  Any undefined capitalized term in this Plan shall have the meaning set forth in the Retirement Plan.

 

2.1           “ Accredited Service ” means the period of time taken into account under the terms of the Retirement Plan for the purpose of computing a Retirement Plan benefit under the Final Average Pay Formula.

 

2.2           “ Actuarial Equivalence ” or “ Actuarially Equivalent ” will be determined using the assumptions and methods that are used in connection with the Cash Balance Formula under the Retirement Plan, regardless of whether the benefits under this Plan are determined under the Cash Balance Formula.

 

2.3           “ Base Compensation ” means a Participant's regular base salary or base wage Earned through the date of the termination of employment of the Participant with the Associated Companies.  Base Compensation shall be determined (i) without adjustment for any salary or wage elections made pursuant to Sections 125 (regarding cafeteria plans, including pre-tax contributions for premiums and flexible spending accounts) and 402(e)(3) (regarding elective deferrals, including before-tax contributions under a Section 401(k) retirement savings plan) of the Code, (ii) without reduction for any contributions to the Supplemental Savings Plan; and (iii) excluding bonuses (such as, but not limited to, project bonuses and sign-on bonuses), compensation paid pursuant to the terms of an annual compensation plan, performance pay awards, severance pay, relocation payments, or any other form of additional compensation that is not part of regular base salary or base wage.

 

2.4           “ Beneficiary ” means the person or entity designated in accordance with the provisions of Section 7.3, to receive the distribution of death benefits provided for in Article VII.

 

2.5           “ Cash Balance Formula ” means the formula under the Retirement Plan by which Participants accrue benefits through credits to his or her Cash Balance Account (as defined in the Retirement Plan).  The Cash Balance Formula is effective for Plan Years commencing after December 31, 2000.

 

2.6           “ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

 

2.7           “ Committee ” means for the period ending May 26, 2004, the Employee Benefit Trusts Committee of the Company. Effective beginning May 27, 2004, the Committee shall be the committee designated by the Company (or by a person duly authorized to act on behalf of the Company) as responsible for the administration of the Plan.

 

2.8           “ Company ” means the American Electric Power Service Corporation.

 

2.9           “ Corporation ” means the American Electric Power Company, Inc., a New York corporation, and its affiliates and subsidiaries.

 

2.10           “ Determination Date ” means the first day of the month immediately following the Participant's Termination.

 

2.11           “ Earned

 

 

(a)

when referring to Base Compensation and Premium Pay, means the date such amount is paid, and

 

 

(b)

when referring to Incentive Compensation, means

 

 

(i)

for purposes of the Cash Balance Formula, the date such amount is paid or such earlier date it would have been paid by an Associated Company if the payment had not been effectively deferred according to the terms of the American Electric Power System Incentive Compensation Deferral Plan or such other applicable plan or agreement; or

 

 

(ii)

for purposes of the Final Average Pay Formula, the Incentive Compensation shall be considered Earned in equal monthly installments during the applicable period of the calendar year for which the awarded amount had been calculated, without regard to when such amount is paid, provided that the amount ultimately becomes payable to the Participant.

 

2.12           “ Employee ” means such persons employed by an Associated Company who are designated in the records of the Associated Company in a classification that is eligible to participate in the Retirement Plan.

 

2.13           “ Employment Contract ” means an agreement between an Associated Company and an Employee that provides the Employee with a non-qualified retirement benefit attributable to this Plan.

 

2.14           “ ERISA ” means the Employee Retirement Income Security Act of 1974 as amended from time to time.

 

2.15           “ Final Average Pay Formula ” means the formula designated as the final average pay formula by the Retirement Plan and by which Participants accrue normal retirement benefits by taking into account the Participant’s Accredited Service, average annual earnings and such other factors as are set forth in the Retirement Plan.

 

2.16           “ First Date Available ” or “ FDA ” means (a) with respect to a Participant who is a Key Employee as of the date of such Participant’s Termination, the first day of the month next following the date that is six (6) months after the Participant’s Termination; and (b) with respect to all other Participants, the first day of the month next following the Participant’s Termination.

 

2.17           “ HR Committee ” means the Human Resources Committee of the board of directors of the Corporation (or any successor to such committee).

 

2.18           “ Incentive Compensation ” means incentive compensation Earned pursuant to the terms of an annual incentive compensation plan, provided that Incentive Compensation shall not include non-annual bonuses (such as but not limited to project bonuses and sign-on bonuses and amounts earned under a long-term incentive plan), severance pay, relocation payments, or any other form of additional compensation that is not considered to be part of Base Compensation.

 

2.19           “ Key Employee ” means a Participant who is classified as a “specified employee” at the time of Termination in accordance with policies adopted by the HR Committee in order to comply with the requirements of Section 409A(a)(2)(B)(i) of the Code and the guidance issued thereunder.

 

2.20           “ Maximum Benefit ” means the vested retirement benefit payable from the Retirement Plan under either the Final Average Pay Formula or the Cash Balance Formula, as provided in Article IV and as calculated based upon the Participant’s marital status, Beneficiary, credited service, and earnings for services rendered to the Company, to the extent such are permitted by the Code and the Retirement Plan to be taken into account under the Final Average Pay Formula or the Cash Balance Formula, as applicable.

 

2.21           “ Maximum Disability Period ” means the last date any disability benefits may become payable under the terms of the American Electric Power System Long-Term Disability Plan in effect as of the later of December 31, 2008 or the last day on which the Participant’s initial payment election may be made in accordance with Section 6.3.

 

2.22           “ Next Date Available ” or “ NDA ” means the July 1 of the calendar year immediately following the calendar year in which falls the Participant’s Termination.

 

2.23           “ Participant ” means any exempt salaried Employee of an Associated Company who has entered the Plan in accordance with Article III of this Plan and has accrued a benefit under the Plan.

 

2.24           “ Associated Company ” means the Company and those of its subsidiaries and affiliates of the Corporation who are considered an “Associated Company” as defined under the Retirement Plan.

 

2.25           “ Plan ” means this American Electric Power System Excess Benefit Plan, as amended or restated from time to time.

 

2.26           “ Plan Year ” means the calendar year commencing each January 1 and ending each December 31.

 

2.27           “ Premium Pay ” means overtime pay and shift differential pay that is Earned during the relevant time period, but that is not a part of the Participant’s Base Compensation or Incentive Compensation.

 

2.28           “ Present Value ” means the current value of a future payment or future stream of payments, calculated using the Applicable Mortality Table and Applicable Interest Rate.

 

2.29           “ Retirement Date ” means the date the Participant terminates employment with all Associated Companies after the Participant has attained age 55 and completed at least five years of service with the Associated Companies.

 

2.30           “ Retirement Plan ” means the American Electric Power System Retirement Plan, as amended from time to time.

 

2.31           “ Supplemental Retirement Benefit ” means the basic retirement benefit determined under Article IV of this Plan.

 

2.32           “ Supplemental Savings Plan ” means the American Electric Power System Supplemental Retirement Savings Plan, as amended from time to time.

 

2.33           “ Termination ” means termination of employment with the Company and its subsidiaries and affiliates for any reason; provided that effective with respect to Participants whose employment terminates on or after January 1, 2005, determinations as to the circumstances that will be considered a Termination (including a disability and leave of absence) shall be made in a manner consistent with the written policies adopted by the HR Committee from time to time to the extent such policies are consistent with the requirements imposed under Code 409A(a)(2)(A)(i).

 

2.34           “ Unrestricted Benefit ” means the vested retirement benefit that would be payable from the Retirement Plan under either the Final Average Pay Formula or the Cash Balance Formula, as described in Article IV, assuming Sections 401(a)(17) (Compensation Limit) and 415 (Limitation on Benefits) of the Code are not applicable.  The calculation of the Unrestricted Benefit also shall take into account other adjustments specified in an Employment Contract.

 

 

ARTICLE III

Participation in the Plan

 

3.1            Eligibility .  All exempt salaried Employees of an Associated Company shall be eligible to participate in this Plan so long as such Employee is either (A) entitled to a Supplemental Retirement Benefit under the terms of an Employment Contract, or (B) both (1) a participant in the Retirement Plan, and (2) satisfies one of the following conditions below:

 

 

(a)

The Employee’s Base Compensation for the current or any prior Plan Year exceeds the limitation of Section 401(a)(17) of the Code,

 

 

(b)

The Employee was a Participant in this Plan as of December 31, 2000,

 

 

(c)

The Employee’s Base Compensation plus Incentive Compensation plus Premium Pay for the current or any prior Plan Year (that begins on or after January 1, 2000, in that such amounts were taken into account for the calendar year 2000 in calculating the opening balance for Participants under the Cash Balance Formula) exceeds the limitation of Section 401(a)(17) of the Code, or

 

 

(d)

Otherwise becomes entitled to a benefit under Article V of this Plan.

 

Additionally, an eligible Employee may become a Participant if he or she is designated to be a Participant by the Committee.  All such eligibility determinations generally shall be made by December 31 of each year or such other time as set forth in an Employee Contract.

 

3.2            Duration .  An Employee who becomes a Participant shall continue to be a Participant until his or her Termination or the date he or she is no longer entitled to receive a Supplemental Retirement Benefit under this Plan.

 

ARTICLE IV

Benefits

 

4.1            General Benefits .  Upon a Participant's Termination, the Participant shall be entitled to a Supplemental Retirement Benefit calculated as of the Participant’s Determination Date, as determined under this Article IV, to the extent vested, to be paid at the time and in the form determined in accordance with Article VI of this Plan.  Except as otherwise specified in Article X, a Participant’s Supplemental Retirement Benefit shall become vested at the same time and to the same extent as may be provided under the terms of the Retirement Plan.  Notwithstanding the foregoing, the amount, calculation methodology, or vesting of a Participant’s Supplemental Retirement Benefit may be reduced or otherwise modified in the manner described in an Employment Contract.  Additionally, if the Committee determines that a Participant has incurred a liability to, or otherwise damaged, the Corporation, the Company or any Associated Company, the Committee shall have the authority and power, in its sole discretion, to reduce any portion or all of the amounts that might otherwise become payable to such Participant under the terms of this Plan by the amount of such liability or damage, as reasonably determined by the Committee.

 

4.2            Calculation Methodology .  For purposes of calculating the Supplemental Retirement Benefit under Section 4.3 or 4.4 of this Plan, the following rules shall apply.  To the extent a Participant’s form of benefit under Article VI is a lump sum or installments, this calculation shall be based on the lump sum of the Unrestricted Benefit and Maximum Benefit.  To the extent a Participant’s form of benefit under Article VI is an annuity, this calculation shall be based on the single life annuity of the Unrestricted Benefit and Maximum Benefit.  If a Participant’s form of benefit under Article VI is a combination lump sum distribution and life annuity [as set forth in Section 6.2(b)(5)], both calculations shall be made and the appropriate elected percentage applied to each.

 

4.3            Amount of Benefit for Final Average Pay Participants .  A Participant in this Plan whose Retirement Plan benefit takes into account the Final Average Pay Formula shall be entitled to receive a benefit equal to the excess (if any) of the benefit determined under paragraph (a) below over the benefit determined under paragraph (b) below.

 

 

(a)

The greater of (i) if the Participant’s Base Compensation for the current or any prior Plan Year exceeds the limitation of Section 401(a)(17) of the Code, the Unrestricted Benefit calculated (A) using the Final Average Pay Formula and (B) based upon the sum of the rate of the Participant’s Base Compensation (as determined from month to month) and Earned Incentive Compensation, or (ii) the Unrestricted Benefit calculated (A) using the Cash Balance Formula and (B) based upon the sum of the Participant’s Earned Base Compensation, Earned Incentive Compensation, and Earned Premium Pay; provided however, that

 

 

(1)

such calculation shall not take into account any amounts Earned with respect to any period after the date of the Participant’s Termination with all Associated Companies; and

 

 

(2)

with regard to Participants who have an annual incentive opportunity in excess of 250% of Base Compensation for the Plan Year in which the Incentive Compensation is Earned (per Section 2.11(b)(ii)), the amount of Incentive Compensation that will be considered Earned with respect to that Plan Year for purposes of Section 4.3(a)(i) shall not exceed 100% of the highest annualized rate of the Employee’s Base Compensation that was in effect with respect to that Employee at any time during that Plan Year; provided, however, that this limitation shall not apply to the extent of any Incentive Compensation provided through the American Electric Power System Senior Officer Incentive Plan; and

 

 

(3)

for purposes of Section 4.3(a)(ii), the sum of compensation shall be limited to the greater of $1,000,000 or 200% of the Participant’s annualized rate of Base Compensation in effect on the last day of the Plan Year (or, if earlier, the date of Termination).

 

 

(b)

The greater of (1) the Maximum Benefit calculated using the Final Average Pay Formula, or (2) the Maximum Benefit calculated using the Cash Balance Formula.

 

4.4            Amount of Benefit for Cash Balance Participants .  A Participant in this Plan whose Retirement Plan benefit takes into account only the Cash Balance Formula shall be entitled to receive a benefit equal to the excess (if any) of the benefit calculated under paragraph (a) below over the benefit calculated under paragraph (b) below.

 

 

(a)

The Unrestricted Benefit calculated (A) using the Cash Balance Formula and (B) based upon the sum of the Participant’s Earned Base Compensation, Earned Incentive Compensation, and Earned Premium Pay.  This sum shall be limited to the greater of $1,000,000 or 200% of the Participant’s annualized rate of Base Compensation in effect on the last day of the Plan Year (or, if earlier, the date of Termination).

 

 

(b)

The Maximum Benefit, calculated using the Cash Balance Formula.

 

4.5            Disability Accruals .  Notwithstanding anything in the Plan to the contrary, if a Participant incurs a disability (under the terms of the Retirement Plan), the Participant may continue to accrue a benefit under this Plan from the date of such disability through the Maximum Disability Period to the extent the Participant is receiving such disability accruals under the Retirement Plan, as paid in accordance with Section 6.6.

 

4.6            Adjustments to Supplemental Retirement Benefit .

 

 

(a)

The amount of a Participant’s Supplemental Retirement Benefit shall be reduced or otherwise modified in the manner described in an Employment Contract (e.g., by any qualified or non-qualified retirement benefits the Participant may be entitled to receive from one or more prior employers).

 

 

(b)

If the Participant’s Unrestricted Benefit under Section 4.3(a) was the amount payable under the Final Average Pay Formula, the following shall apply as of the date Incentive Compensation is awarded to the Participant, to the extent such Incentive Compensation is attributable to the calendar year that includes the Participant’s date of Termination:

 

 

(1)

The Participant’s Determination Date Supplemental Retirement Benefit shall be recalculated to take into account the amount of such Incentive Compensation that is considered Earned during the period ending on such Participant’s Termination Date; then

 

 

(2)

The amount(s) payable to the Participant in accordance with the payment schedule applicable to the Participant as set forth in Section 6.2 shall be increased to reflect the Supplemental Retirement Benefit as recalculated pursuant to paragraph (1); and

 

 

(3)

To the extent the adjustment to the amount(s) payable to the Participant pursuant to paragraph (2) relates to any amount that had already been paid to the Participant under the applicable payment schedule, the amount of the increase of each such payment shall receive interest credits at the interest rate then being credited for the Cash Balance Formula from the date such original payment had been made through the date of the recalculation, and the aggregate amount of the increases, plus interest, shall be paid in a single sum as soon as administratively practicable.

 

4.7            Freeze of Benefits .  No Participant shall accrue any additional Maximum Benefit or Unrestricted Benefit under the Final Average Pay Formula after December 31, 2010.

 

ARTICLE V

Enhanced Vested Lump Sum Benefit

 

5.1            Severance Benefit .  The benefits set forth in this Article V shall be treated as a severance benefit under ERISA.

 

5.2            Eligibility .  An Employee who incurs a Termination before age 55 due to a restructuring, consolidation, or downsizing of the Corporation shall be eligible for a special benefit under this Article V if he or she, at the time of Termination, (i) has completed 25 or more years of Accredited Service under the Retirement Plan, or (ii) has attained age 50 and has completed 10 or more years of Accredited Service under the terms of the Retirement Plan.

 

5.3            Enhanced Supplemental Plan Benefit .

 

 

(a)

If (i) a Participant described in Section 5.2 has Base Compensation in excess of the limitation under Section 401(a)(17) of the Code for any current or prior Plan Year, (ii) such Participant is entitled to a Supplemental Retirement Benefit calculated under Section 4.3, and (iii) such Participant elects to receive at least some portion of his or her Supplemental Retirement Benefit in the form of an annuity, the Participant shall receive an enhanced vested lump sum benefit equal to the Annuity Portion of the Present Value of the excess (if any) of the benefit determined under paragraph (1) below over the benefit determined under paragraph (2) below, calculated as of the Determination Date.

 

 

(1)

The Participant’s monthly Unrestricted Benefit calculated as a single life annuity under the Final Average Pay Formula using the early retirement reduction factors from age 65 to age 55 and, if necessary, calculated with a full actuarial reduction from age 55 to the Determination Date, reduced by (but not to an amount less than zero) the Participant’s monthly Unrestricted Benefit calculated under Section 4.3(a).

 

 

(2)

The Participant’s monthly Maximum Benefit calculated as a single life annuity under the Final Average Pay Formula with a full actuarial reduction from age 65 to the Determination Date, reduced by (but not to an amount less than zero) the Participant’s monthly Maximum Benefit calculated under Section 4.3(b).

 

 

(b)

For purposes of this Section 5.3, the term “Annuity Portion” means the percentage of the Participant’s Supplemental Retirement Benefit that the Participant has elected under Article VI to receive in the form of an annuity.

 

 

(c)

The special benefit payable hereunder shall be payable in a lump sum as soon as practicable after the annuity benefit under this Plan commences as provided under Article VI.  The amount of the lump sum shall be credited with interest at the rate at which Interest Credits are applied under the Retirement Plan from the Determination Date to the date such lump sum is distributed.  If the Participant dies before the date


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