Exhibit 10.5
RESTORATION PLAN OF BLACK HILLS CORPORATION
1. RECITALS
Black Hills Corporation, a South
Dakota corporation (“ Company ”) maintains a
nonqualified “top hat” plan for certain of its
management or highly compensated employees, which was last restated
effective the 6th day of November, 2001, known as the Pension
Equalization Plan of Black Hills Corporation (the “
Original PEP ”). The Original PEP provided two types
of benefits – a pension equalization or PEP benefit and a
pension restoration benefit.
Effective January 1, 2005, the
portion of the Original PEP that provides pension restoration
benefits to Participants is spun off into this separate plan known
as the Restoration Plan of Black Hills Corporation (“
Plan ”), which provides the pension restoration
benefits previously provided under the Original PEP.
The Plan is intended as an unfunded
plan to be maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly
compensated employees within the meaning of Sections 201(2),
301(a)(3) and 401(a)(1) of the Employee Retirement Income Security
Act of 1974, as amended (“ ERISA ”), and as such
it is intended that the Plan be exempt from the participation and
vesting, funding, and fiduciary responsibility requirements of
Title I of ERISA. The Plan is also intended to qualify for
simplified reporting under U.S. Department of Labor Regulation
Section 2530.104-23, which provides for an alternative method of
compliance for plans described in such regulation. The Plan is not
intended to satisfy the qualification requirements of Section
401(a) of the Internal Revenue Code of 1986, as amended (the
“ Code ”). The Plan is intended to comply in
good faith with the requirements of Code Section 409A and the
interim guidance issued thereunder for nonqualified deferred
compensation plans during the period from January 1, 2005 through
December 31, 2008 and is intended to comply in good faith with the
requirements of Code Section 409A and the final regulations issued
thereunder for nonqualified deferred compensation plans effective
January 1, 2009.
2. PURPOSE OF PLAN
The purpose of the Plan is to
provide to a select group of management or highly compensated
employees with certain retirement, disability and death benefits
which the Participants cannot receive under the Pension Plan of
Black Hills Corporation or the Black Hills Utility Holdings, Inc.
Pension Plan, as applicable, due to the Code’s limits on
compensation and annual benefits. The Plan is designed to aid the
Company in attracting and retaining its executive employees,
persons whose abilities, experience and judgment can contribute to
the well-being of the Company. It is the intention of the Company
that this Plan shall be administered as an unfunded benefit plan
established and maintained for a select group of management or
highly compensated employees.
The Plan consists of three Parts:
Part I, which contains general provisions applicable to all
Participants, Part II, which describes the Restoration Benefits
payable to or with respect to Participants whose qualified pension
benefits are determined under the Pension Plan of Black Hills
Corporation (without regard to whether such benefits are offset by
benefits payable under
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another qualified plan maintained by
Black Hills Corporation) and Part III, which describes the
Restoration Benefits payable to or with respect to Participants
whose qualified pension benefits are determined under the Black
Hills Utility Holdings, Inc. Pension Plan (without regard to
whether such benefits are offset by benefits payable under another
qualified plan maintained by Black Hills Corporation).
PART I
3. DEFINITIONS
The following terms shall apply for
purposes of this Plan:
“Active Participant”
shall mean a Participant who has not incurred a Termination of
Employment and whose participation hereunder has not been
discontinued by the Board of Directors.
“Actuarial Equivalent”
shall mean a benefit of equivalent value computed on the basis of
the Applicable Interest Rate and the Applicable Mortality
Table.
“Affiliate” shall mean
any business organization or legal entity that directly or
indirectly, controls, is controlled by or is under common control
with the Company. For purposes of this definition, the term
“control” (including the terms
“controlling”, “controlled by”, and
“under common control with”) includes the possession,
direct or indirect, of the power to vote 50 percent or more of the
voting equity securities, membership interest, or other voting
interest, or to direct or cause the direction of the management and
policies of such business organization or other legal entity,
whether through the ownership of voting equity securities,
membership interest, by contract, or otherwise.
“Annual Compensation
Limitation” shall mean the limitation on annual compensation
for tax qualified retirement plans as set forth in Internal Revenue
Code Section 401(a)(17) as the same may be amended hereafter from
time to time.
“Applicable Interest
Rate” shall mean the interest rate (or rates) prescribed by
the Commissioner of Internal Revenue for purposes of Code Section
417(e), as in effect for the month of November preceding the first
day of the calendar year of distribution. Notwithstanding the
foregoing, for purposes of determining optional forms of payment
for annuity payments commencing after 2004 and before 2008, the
Applicable Interest Rate shall mean 6%.
“Applicable Mortality
Table” shall mean (i) in the case of a Participant, the
mortality table that is a blend of 75% of the male mortality table
and 25% of the female mortality table underlying the mortality
table prescribed by the Commissioner of Internal Revenue for
purposes of Code Section 417(e), regardless of the actual sex of
the Participant and (ii) in the case of a contingent annuitant, the
mortality table shall be a blend of 25% of the male mortality table
and 75% of the female mortality table underlying the mortality
table prescribed by the Commissioner of Internal Revenue for
purposes of Code Section 417(e), regardless of the actual sex of
the contingent annuitant. If the mortality table prescribed by the
Commissioner of Internal Revenue for purposes of Code Section
417(e) should be updated to a table that is not based on a blend
of
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underlying male and female mortality
tables, then the tables in effect immediately prior to such change
shall continue to be used by this Plan without change.
“Beneficiary” shall
mean, in the case of a Participant who elects to receive payment in
the form of a Period Certain Option, the beneficiary designated
thereunder.
“Board of Directors”
shall mean the Board of Directors of the Company.
“Calculation Date” shall
mean the earliest of (i) the date of the Participant’s
Termination of Employment, (ii) the date of the Participant’s
death and (iii) the date the Participant’s participation in
the Plan is discontinued.
“Code” shall mean the
Internal Revenue Code of 1986, as amended.
“Contingent Annuity
Option” shall mean a reduced monthly benefit payable for the
life of the Participant and, if the Participant is survived by his
designated contingent annuitant, a monthly benefit equal to one
hundred percent (100%), seventy-five percent (75%) or fifty percent
(50%) of the monthly benefit payable during the Participant’s
lifetime (as elected by the Participant) payable for the life of
the contingent annuitant. A Participant whose Restoration Benefit
is determined under Part III of the Plan may also elect a
Contingent Annuity Option that provides a monthly benefit to the
contingent annuitant equal to sixty-six and two-thirds percent
(66-2/3%) of the monthly benefit payable during the
Participant’s lifetime. The Contingent Annuity Option is the
Actuarial Equivalent of the Single Life Annuity. The Participant
may not change his designated contingent annuitant after payment
begins.
"Controlled Group Member" shall mean
any corporation which is a member of a controlled group of
corporations (as defined in Section 414(b) of the Code) which
includes the Company; any trade or business (whether or not
incorporated) which is under common control (as defined in Section
414(c) of the Code) with the Company; any organization (whether or
not incorporated) which is a member of an affiliated service group
(as defined in Section 414(m) of the Code) which includes the
Company; and any other entity required to be aggregated with the
Company pursuant to regulations under Section 414(o) of the
Code.
“Gross Monthly Benefit”
or “Gross Monthly Death Benefit” shall mean the benefit
determined under the terms of the Pension Plan of Black Hills
Corporation or the Black Hills Utility Holdings, Inc. Pension Plan,
as applicable, without regard to whether such benefits are offset
by benefits payable under another qualified pension plan maintained
by Black Hills Corporation.
“Key Employee” shall
mean a Participant who is a specified employee, as defined as in
Code Section 409A and the regulations and other official guidance
issued thereunder, and as determined in accordance with procedures
established by the Plan Administrator.
“Participant” shall mean
an employee or former employee of the Company or an Affiliate who
is designated as a Participant pursuant to Paragraph 4 and who is
or may become entitled to receive benefits under the
Plan.
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“Period Certain Option”
shall mean a reduced monthly benefit payable as long as the
Participant lives, but guaranteed for a period of 10 years. If the
Participant dies before expiration of the guaranteed period
certain, payment shall be continued to a designated beneficiary,
or, in the absence of a surviving designated beneficiary, the lump
sum Actuarial Equivalent of such payments shall be paid to the
Participant's estate in a single lump sum. If the designated
beneficiary should die while further payments are due, and after
having received at least one payment, such further payments shall
be made to any person designated by the Participant as an alternate
surviving beneficiary or if no such person shall have been
designated or survives, the lump sum Actuarial Equivalent of such
payments shall be paid to the estate of the surviving beneficiary,
in a single lump sum. The Period Certain Option annuity is the
Actuarial Equivalent of the Single Life Annuity.
“Plan Administrator”
shall mean the Pension Administration Committee described in the
Pension Plan of Black Hills Corporation.
“Qualified Joint and Survivor
Annuity” shall mean a reduced monthly benefit payable for the
life of the Participant and, if the Participant is survived by the
Spouse to whom he was married when payment began, a monthly benefit
equal to 50% of the monthly benefit payable to the Participant is
payable for the life of the surviving Spouse. The Qualified Joint
and Survivor Annuity is the Actuarial Equivalent of the Single Life
Annuity.
“Restoration Benefit”
shall mean, as of any date prior to the date payment under this
Plan begins to or with respect to a Participant, the Restoration
Benefit determined (1) under the terms of Part II of the Plan if
the Participant is currently (or was most recently) an active
participant in the Pension Plan of Black Hills Corporation or (2)
under the terms of Part III of the Plan if the Participant is
currently (or was most recently) an active participant in the Black
Hills Utility Holdings, Inc. Pension Plan. If a Participant
transfers from active participation in the Pension Plan of Black
Hills Corporation to active participation in the Black Hills
Utility Holdings, Inc. Pension Plan or vice versa, his Restoration
Benefit shall be redetermined under the provisions of this Plan
that apply to Participants who are active participants in the
qualified plan to which he has transferred and the Restoration
Benefit, if any, determined prior to the transfer shall be
extinguished. Any election made by the Participant under
subparagraph 20(e) shall be deemed to have made under subparagraph
24(e) as well, and any election made by the Participant under
subparagraph 24(e) shall be deemed to have been made under
Paragraph 20(e) as well. As of the date payment begins to or with
respect to a Participant under this Plan, his Restoration Benefit
shall mean the Restoration Benefit payable to or with respect to
the Participant under Part II of the Plan if the Participant was
most recently an active participant in the Pension Plan of Black
Hills Corporation or Part III of the Plan if the Participant was
most recently an active participant in the Black Hills Utility
Holdings, Inc. Pension Plan.
“Single Life Annuity”
shall mean a monthly benefit payable for the life of the
Participant.
“Spouse” shall mean, in
the case of a Restoration Benefit commencing during the
Participant’s lifetime, the spouse to whom the Participant is
legally married when payment of the Participant’s Restoration
Benefit begins and, in the case of a pre-retirement death benefit,
the spouse to whom the Participant is legally married during the
one-year period ending on the date of the Participant’s
death.
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“Termination of
Employment” shall mean separation from service with the
Company and all Affiliates, in accordance with the provisions of
Code Section 409A. Pursuant to Code Section 409A, unless the facts
and circumstances indicate otherwise, a Termination of Employment
is presumed to have occurred where the Participant's level of bona
fide services performed decreases to a level equal to 20 percent or
less of the average level of services performed by the Participant
during the immediately preceding 36-month period, and a Termination
of Employment will be presumed not to have occurred where the
Participant's level of bona fide services performed continues at a
level that is 50 percent or more of the average level of service
performed by the Participant during the immediately preceding
36-month period. However, a Termination of Employment does not
occur while the Participant is on military leave, sick leave, or
other bona fide leave of absence if the period of such leave does
not exceed six months, or if longer, while the Participant retains
a right to reemployment with the Company or any Affiliate under an
applicable statute or by contract. A leave of absence constitutes a
bona fide leave of absence only if there is a reasonable
expectation that the Participant will return to perform services
for the Company or an Affiliate. If the period of leave exceeds six
months and the Participant does not retain a right to reemployment
under an applicable statute or by contract, a Termination of
Employment is deemed to occur on the day after the end of the
six-month period.
4. PARTICIPATION
Management or highly compensated
employees of the Company or its Affiliates who are participants in
the Pension Plan of Black Hills Corporation or members of the Black
Hills Utility Holdings, Inc. Pension Plan and who are designated by
the Board of Directors of the Company upon recommendation of the
Chief Executive Officer of the Company shall be Participants in the
Plan.
Each employee of the Company or its
Affiliates who was a Participant in the Plan on December 31, 2004,
who remains an employee on January 1, 2005 and whose participation
is not discontinued by the Board of Directors before January 1,
2005 shall be a Participant as of January 1, 2005. Each Participant
of the Plan who was not actively employed with the Company on
December 31, 2004 but who had a vested right to restoration
benefits under the Plan shall be a Participant in this Plan as of
January 1, 2005 but only with respect to their vested restoration
benefit.
An employee who was not a
Participant on December 31, 2004 will become a Participant on the
first day of the calendar month beginning after the date the
employee is designated as a Participant by the Board of Directors
(or, if later, the participation date specified in the
designation). An employee ceases to be an Active Participant upon
his Termination of Employment or, if earlier, the date his
participation is discontinued by the Board of Directors. If a
Participant or former Participant is reemployed by the Company or
its Affiliates following a Termination of Employment, such employee
will not become an Active Participant again unless he is again
designated by the Board of Directors of the Company.
The Board of Directors may in its
discretion discontinue the participation of any Participant in the
Plan at any time. Such discontinuance shall not reduce the
Participant’s vested Restoration Benefit, determined as of
the date of such discontinuance.
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5. SPECIAL PURPOSE
DISTRIBUTIONS
Notwithstanding any provision of
this Plan to the contrary, the Plan Administrator may, in its
discretion, distribute a portion of the Participant’s vested
Restoration Benefit to the extent necessary to:
(a) Satisfy
the terms of a domestic relations order, as defined under Code
Section 414(p)(1)(B), provided that in no event shall payment under
such order be made in a form not otherwise available to i) a
Participant under this Plan or ii) an alternate payee, as defined
under Code Section 414(p)(8), under the BHC Pension Plan or the
BHUH Pension Plan, as applicable; or
(b) Pay
the Participant’s share of employment taxes imposed under
Code Sections 3101, 3121(a) and 3121(v) on Restoration Benefits
(including the income tax at source or state, federal or local
income tax withholding due on such distribution).
The Participant’s vested
Restoration Benefit shall be reduced by the Actuarial Equivalent of
the portion of the Participant’s vested Restoration Benefit,
if any, distributed in accordance with this paragraph.
6. SMALL BENEFITS
Notwithstanding any provision of
this Plan to the contrary, the Plan Administrator may, in its
discretion, distribute the lump sum Actuarial Equivalent of the
Participant’s entire vested Restoration Benefit within 60
days after the Participant’s death or Termination of
Employment provided that (1) the Participant’s entire vested
benefit in any other nonqualified non-account balance plan of the
Company or any Controlled Group Member that is treated, with this
Plan, as a single nonqualified deferred compensation plan under
section 1.409A–1(c)(2) of the Income Tax Regulations shall
also be paid in a lump sum within 60 days after the
Participant’s death or Termination of Employment and (2) the
total lump sum Actuarial Equivalent of the Participant’s
vested Restoration Benefit and such other vested benefits does not
exceed the applicable dollar amount under Code Section 402(g)
(1)(B) (e.g., $15,500 for 2008) for the calendar year in which the
distribution is made.
7. LOSS OF
BENEFITS
Notwithstanding any other provisions
in this Plan, if a Participant is terminated on account of
misconduct or dishonesty, the Participant shall forfeit all right
to any benefit payable under this Plan, including vested accrued
benefits.
8. FUNDING OF PLAN
All benefit payments under the Plan
will be made from the general assets of the Company. Participants
and their beneficiaries who are entitled to be paid benefits under
this Plan are unsecured general creditors of the Company. The
Company may, but shall not be required to, invest corporate assets
in life insurance or annuity contracts to assure that the Company
will have a source of funds for the payment of benefits required to
be paid under this Plan. Any such insurance or annuity contract
shall constitute assets of the Company and the Participant
shall
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have no right, title or interest in
any such insurance or annuity contract. The Company reserves the
right to refuse participation in the plan to any Participant who,
if requested to do so, declines to supply information or to
otherwise cooperate as necessary to allow the Company to obtain
insurance on the Participant’s life.
9. PLAN MAY BE MODIFIED OR
DISCONTINUED
The Company reserves the right to
amend, modify or discontinue the Plan at any time. Any modification
or discontinuance of benefits shall not reduce accrued benefits
which become vested prior thereto.
Notwithstanding any provision of the
Plan to the contrary, in no event shall the Plan be amended,
modified or discontinued in a manner that would have the impact,
whether or not intended, of causing the Plan or any Participant in
the Plan to violate the provisions of Code Section 409A. Any such
amendment, modification or discontinuance shall be void and of no
effect.
10. ASSIGNABILITY
Except to the extent permitted under
Paragraph 5(a), no right to receive payments under this Plan shall
be subject to voluntary or involuntary alienation, assignment or
transfer.
11. ADMINISTRATION OF THE
PLAN
The Plan shall be administered by
the Plan Administrator. The Plan Administrator shall have
discretionary authority to conclusively interpret the provisions of
the Plan, decide all claims, and to make all determinations under
the Plan. If the Plan Administrator is a committee, it shall act by
vote or written consent of a majority of its members. The Plan
Administrator may appoint or employ any agents it deems advisable,
including legal and actuarial counsel. When making a determination
or calculation, the Plan Administrator shall be entitled to rely
upon information furnished by a Participant, Spouse, or
Beneficiary, the Company, and the legal or actuarial counsel of the
Company. The Plan Administrator may delegate to any person, entity
or committee all or any portion of the authority allocated to the
Plan Administrator under this Plan. Any such delegation may be
revoked at any time. Delegations and revocations thereof shall be
in writing.
Notwithstanding any provision of the
Plan to the contrary, this Plan shall at all times be administered
in compliance with Code Section 409A.
12. CLAIMS
PROCEDURE
All claims for benefits under the
Plan shall be made to the Plan Administrator. If the Plan
Administrator denies a claim, the Plan Administrator shall provide
notice to the Participant or beneficiary, in writing, within 90
days after the claim is filed unless special circumstances require
an extension of time for processing the claim, not to exceed an
additional 90 days. If the Plan Administrator does not notify the
Participant or beneficiary of the denial of the claim within the
time period specified above, then the claim shall be deemed denied.
The notice of a denial of a claim shall be written in a manner
calculated to be understood by the claimant and shall
set
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forth (1) the specific reason or
reasons for the claim denial; (2) specific references to the
pertinent Plan provisions on which the denial is based; (3) a
description of any additional material or information necessary for
the claimant to perfect the claim and an explanation as to why such
information is necessary; and (4) a description of the Plan’s
review procedures, including any time limits for such
procedures.
Within 60 days after receipt of the
above material, the claimant shall have a reasonable opportunity to
appeal the claim denial to the Plan Administrator for a full and
fair review. The claimant or his duly authorized representative may
(1) request a review within the foregoing sixty-(60) day period
upon written notice to the Plan Administrator; (2) upon request and
free of charge, have reasonable access to and copies of all
documents, records, and other information relevant to the claim;
and (3) submit written comments, documents, records, and other
information relating to the claim for benefits. The foregoing
review shall take into account all comments, documents, records,
and other information submitted by the claimant relating to the
claim, without regard to whether such information was submitted or
considered in the initial benefit determination.
If a claimant fails to request a
review within sixty (60) days after receipt of the notice of claim
denial, the Plan Administrator’s initial determination will
be final and binding on all parties.
A decision on the review by the Plan
Administrator will be made not later than 60 days after receipt of
a request for review, unless special circumstances require an
extension of time for processing (such as the need to hold a
hearing), in which case a decision shall be rendered as soon as
possible, but not later than 120 days after receipt of a request
for review. The decision on review shall be in writing and shall
include (1) the specific reason or reasons for the determination on
review; (2) reference to the speci
