IBM SUPPLEMENTAL EXECUTIVE RETENTION PLAN

 

 

Table of Contents

 

Article 1 - Purpose	1
Article 2 - Definitions	1
Article 3 - Coverage and Effect	4
Article 4 - Management and Administration	5
Article 5 - Claims Procedure	6
Article 6 - Service Credit	7
A. Non-U.S. Service	7
B. Service Credit for Leaves of Absence	7
Article 7 - Eligibility for SERP Benefits	8
Article 8 - SERP Benefits	8
A. Formula	8
B. Reduction for SERP Benefits Payable Prior to Age 60	9
C. Form and Method of Payment	9
D. Effective Date of Election	9
E. Revocation of Election	9
F. SERP Benefit for Disabled Participants	10
Article 9 – Preretirement Survivor Annuity	10
Article 10 - Suspension of SERP Benefits for Re-Employed Participants	10
Article 11 - Forfeiture	11
A. Detrimental Activities	11
B. Forfeiture and Rescission	11
Article 12 - Information for SERP Benefit Calculations	12
Article 13 – Non-Alienation of SERP Benefits	12
Article 14 – Withholding Taxes	12
Article 15 – Distributions to Minors and Incompetents	12
Article 16 – No Right to Employment	13
Article 17 – Unfunded Plan	13
Article 18 - Miscellaneous	13
A. Construction	13
B. Severability	13
C. Titles and Headings Not to Control	13
D. Complete Statement of the Plan	14
E. Booklets and Brochures	14
Article 19 – Situs of Plan; Governing Law	14
Appendix A - Transition Rules	15

 

 

Appendix B - IBM Supplemental Executive Retirement Plan (the Prior Plan)	16
Article 1 - Purpose	17
Article 2 - Definitions	17
Article 3 – Coverage and Effect	19
Article 4 – Management and Administration	20
Article 5 – Claims Procedure	21
Article 6 – Service Credit	21
A. Foreign Service	21
B. Service Credit for Leaves of Absence	22
C. Other Service Credit	22
Article 7 – Retirement Date and Commencement of Benefits	22
A. Foreign Service	22
B. Early Retirement Date	22
C. Commencement of SERP Benefits	23
Article 8 – SERP Benefits	23
A. Normal Retirement Benefit	23
B. SERP Benefit	24
C. Form and Method of Payment	25
D. Effective Date of Election	26
E. Revocation of Election	26
F. SERP Benefits for Disabled Participants	26
Article 9 – Preretirement Spousal Annuity	27
Article 10 – Suspension of Benefits for Reemployed Retired Participants	27
Article 11 - Forfeitures	28
A. Competitive or Prejudicial Conduct	28
B. Disclosure of Confidential Information	28
C. Disclosure and Assignment of Rights	28
D. Forfeiture and Rescission	29
Article 12 - Information for Benefits Calculations	29
A. Incomplete or Incorrect Information	29
B. Overpayments	29
Article 13 – Alienation of Benefits	30
Article 14 – Withholding Taxes	30
Article 15 – Distributions to Minors and incompetents	30
Article 16 – No Right to Employment	31
Article 17 – Unfunded Plan	31
Article 18 - Miscellaneous	31

 

 

A. Construction	31
B. Severability	31
C. Titles and Headings Not to Control	31
D. Complete Statement of Plan	32
E. Booklets and Brochures	32
Article 19 – Situs of Plan; Governing Law	32
Appendix C – Heritage PwCC Partner Plan	33

 

 

ARTICLE 1 - Purpose

 

International Business Machines Corporation, a New York corporation, has established the IBM Supplemental Executive Retention Plan (the “SERP” or the “Plan”) with the intention of attracting and retaining executives whose skills and talents are important to IBM’s operations by providing a monthly post-employment income that supplements benefits under the IBM Personal Pension Plan.

 

ARTICLE 2 - Definitions

 

a.                                  Actuarial Equivalent - when comparing a benefit differing in time, period or manner of payment from another benefit, having the same value (as of the relevant Annuity Commencement Date unless otherwise specified in the Plan) as determined by the Plan Administrator based on the actuarial assumptions specified under the term “Actuarial Equivalent” in Section 2.1 of the IBM Personal Pension Plan.

 

b.                                 Annuity Commencement Date - the first day of the month following a Participant’s termination of employment with IBM and members of the IBM controlled group within the meaning of Section 414(b) of the Internal Revenue Code, which is the date as of which SERP Benefits commence.

 

c.                                  Beneficiary - a person who is designated by a Participant or by the terms of the Plan to receive a SERP Benefit under the Plan in respect of a deceased Participant.  A Beneficiary shall not be considered a Participant by virtue of this definition.

 

d.                                 Benefit Service - an Executive’s Continuous Service while a Regular Employee or a Leave of Absence Employee and while accruing benefits under the IBM Personal Pension Plan or any predecessor plan, rounded to the next completed month, except that Benefit Service shall not exceed 35 years and shall not include periods of Continuous Service that occur prior to the latest date of hire or rehire with IBM except as provided in ARTICLE 6 hereof.

 

e.                                  Board - the Board of Directors of IBM.

 

f.                                    Choice 1 Employee - an individual who is defined as a Choice 1 Employee under the IBM Personal Pension Plan.

 

g.                                 Compensation - salary and recurring payments under any form of variable compensation plan (such as the Variable Pay Program and the Annual Incentive Program but not any Long-Term Incentive Plan) in the Plan Year when earned, even if such amounts are paid after the Participant terminates employment. Compensation includes additional compensation, including but not limited to payments for nonscheduled workdays, overtime and shift premium.

 

Effective on or after July 1, 1999, for a Participant who is a Sales Executive assigned commission targets (or similar results-based compensation targets, as designated by the Company), and effective on and after January 1, 2000 for any other Participant assigned commission targets (or similar results-based

 

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compensation targets, as designated by the Company), Compensation shall equal the sales plan target commission established for such a Participant based on the respective incentive plan payout tables, and is credited monthly on a pro rata basis.

 

Neither separation allowances, special termination incentives, payments under any individually-negotiated separation arrangement, special awards, cash in lieu of accrued unused vacation, nor deferred and accrued vacation payments to terminating Employees shall be considered Compensation. Compensation shall include only such additional items as are specifically approved by the Committee.

 

Otherwise eligible compensation deferred or reduced under the provisions of Section 125, 129, 132(f)(4), or 401(k) of the Internal Revenue Code and amounts deferred under the IBM Executive Deferred Compensation Plan, or any predecessor or successor plan thereto (in the year the amounts are deferred instead of being paid) are included in this definition.

 

Compensation shall not include amounts paid under the LTD Plan.

 

h.                                 Continuous Service - service that is defined as Continuous Service under the IBM Personal Pension Plan except as provided in ARTICLE 6 hereof.

 

i.                                     Domestic Partner - an individual who is defined as the Domestic Partner of a Participant under the IBM Personal Pension Plan.

 

j.                                     Domestic Subsidiary - a Subsidiary organized and existing under the laws of the United States or any state, territory or possession thereof, provided, however, that the Plan shall not be deemed to cover the employees of any Domestic Subsidiary unless so authorized by the chief human resources officer of IBM.

 

k.                                  Early Retirement Date - a date that is defined as an Early Retirement Date under the IBM Personal Pension Plan.

 

l.                                     Eligibility Service - an Executive’s Continuous Service while a Regular Employee or a Leave of Absence Employee, truncated to years and completed months, except that Eligibility Service shall not include periods of Continuous Service that occur prior to the latest date of hire or rehire with IBM except as provided in ARTICLE 6 hereof.

 

m.                               ERISA - the Employee Retirement Income Security Act of l974, as amended from time to time.

 

n.                                 Executive - a Regular Employee who is classified as an Executive in the sole discretion of the Company’s chief human resources officer.

 

o.                                 Executive Compensation and Management Resources Committee (also, the “Committee”) - the Executive Compensation and Management Resources Committee of the Board or such other persons or group as said Board may appoint to serve as the Committee.

 

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p.                                 IBM or Company - International Business Machines Corporation and its Domestic Subsidiaries, excluding foreign offices of IBM except as otherwise provided in these Articles.

 

q.                                 IBM Personal Pension Plan - the Plan which amends and restates the terms of the IBM Retirement Plan effective as of January 1, 1995.

 

r.                                    IBM Retirement Plan - the retirement plan established by IBM pursuant to a resolution of its Board effective December l8, l945, as amended from time to time which was amended and superseded by the IBM Personal Pension Plan.

 

s.                                  Leave of Absence Employee - an individual who commences a leave of absence granted under IBM’s various leave programs then in effect, who is a Regular Employee immediately before such leave of absence and who resumes the status of a Regular Employee for at least 30 consecutive days immediately following the completion of the leave of absence.  An individual who is on a bridge leave is not a Leave of Absence Employee.

 

t.                                    Non-U.S. Service - service with a Subsidiary other than a Domestic Subsidiary or with a branch of IBM or of a Domestic Subsidiary that operates principally outside the United States, its territories or possessions.

 

u.                                 Normal Retirement Date - the date that is defined as the Normal Retirement Date under the IBM Personal Pension Plan.

 

v.                                 Offset Amount - the annual single life annuity described in Section A of ARTICLE 8.

 

w.                               Participant - an Executive who meets the requirements of ARTICLE 3, or a former Executive who is receiving SERP Benefits pursuant to the provisions of the Plan.  A Participant in the Plan shall not be deemed a participant in any Plan amendment nor have standing to make a claim for benefits under any Plan amendment except to the degree any such amendment specifically grants benefits to such Participant.

 

x.                                   Pay - (i) the annual average of the Participant’s Compensation during the last 60 months in which Continuous Service is earned, or (ii) the highest annual average of the Participant’s Compensation during any five consecutive calendar years in which Continuous Service is earned, whichever is greater.

 

y.                                 Pay Threshold - $250,000; provided that effective January 1, 2000 and each subsequent January 1, the Pay Threshold in effect on the preceding December 31 shall be increased by 5%, rounded to the nearest $100. The Pay Threshold described in the preceding sentence may be increased by any additional amount, and effective as of any date, by IBM’s chief human resources officer in his or her sole discretion.

 

z.                                   Personal Pension Account - the account that is defined as the Personal Pension Account under the IBM Personal Pension Plan.

 

aa.                            Plan Administrator - a person or a committee appointed pursuant to ARTICLE 4 which shall be responsible for overseeing reporting, disclosure, record keeping, claims review and related administrative matters under the Plan.  If a committee is appointed to serve as the Plan Administrator, any one of the

 

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members of the committee may act individually on behalf of the committee to fulfill the committee’s duties as Plan Administrator.

 

ab.                           Plan Year - the calendar year.

 

ac.                            Prior Plan - the IBM Supplemental Executive Retirement Plan as in effect on June 30, 1999, a copy of which is appended as APPENDIX B and which remains in effect only as described in APPENDIX A.

 

ad.                           Regular Employee - an employee who is defined as a Regular Employee under the IBM Personal Pension Plan.

 

ae.                            SERP Benefit - a single payment or series of monthly payments made or due under the Plan.

 

af.                              Spouse - a person who, on the earlier of (i) the date of the Participant’s death while employed by IBM or (ii) the Participant’s Annuity Commencement Date, is the husband or wife of a Participant, according to the marriage laws of the state (or country) of the Participant’s domicile.

 

ag.                           Subsidiary - a corporation, or other form of business organization, the majority interest of which is owned, directly or indirectly, by IBM.

 

ARTICLE 3 - Coverage and Effect

 

A.                                   This Plan amends and restates the terms of the Prior Plan, effective as of July 1, 1999.  A Regular Employee who is an Executive employed by IBM on the United States payroll, and whose Pay after June 30, 1999 equals or exceeds the Pay Threshold shall be a Participant in the Plan.  A Regular Employee who is described in APPENDIX C (relating to certain former partners of PwC) shall also be a Participant in the Plan, but such a Regular Employee’s SERP Benefits under the Plan shall be described solely in APPENDIX C.

 

B.                                     Notwithstanding any other provision to the contrary, effective on and after May 1, 2004, an individual shall not be entitled to a SERP Benefit unless the individual would otherwise be entitled to a SERP Benefit under the terms of the Plan or any applicable appendix, and:

 

(1)                                  The individual is a former Executive who is receiving a SERP Benefit as of April 30, 2004 pursuant to the provisions of the Plan, or is a Participant who received a SERP Benefit that is suspended as of May 1, 2004 under ARTICLE 10,

 

(2)                                  The individual is entitled to a SERP Benefit under APPENDIX A and B, or C, or

 

(3)                                  The individual (a) is an Executive throughout the period commencing on April 30, 2004 and ending on his or her termination of employment with IBM, and (b) has Pay as of December 31, 2003 of at least $319,100, or has an annualized base salary and target incentive compensation as of May 1, 2004 of at least $319,100.

 

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C.                                     Notwithstanding any other provision to the contrary other than the last paragraph of ARTICLE C5.A. (relating to the PwC SERP Participants with Prior C&L Legacy Annual SERP Benefits under Exhibit II), effective as of the close of business on December 20, 2005:

 

(1)                                  No individual shall accrue any SERP Benefits under the Plan after December 31, 2007.  Thus, no individual shall experience an increase or decrease in any SERP Benefit he or she had already earned or accrued under the Plan as of December 31, 2007, except as provided in this paragraph.   The amount of an individual’s SERP Benefit shall be determined without regard to any change after December 31, 2007, in the individual’s Pay, the individual’s service, the Pay Threshold, the Earnings Threshold or the Breakpoint, provided, however, that any change in the individual’s age and service shall be taken into account for purposes of determining the individual’s eligibility to receive a SERP Benefit.  An individual is not considered to experience an increase or decrease in any SERP Benefit for purposes of this paragraph merely because the SERP Benefit (including the determination of any offset for the benefit payable under the IBM Personal Pension Plan) is adjusted because of the time or form of payment.  Notwithstanding the foregoing, an individual’s SERP Benefit on or after January 1, 2008, may decrease to the extent that the offset for benefits under the IBM Personal Pension Plan is increased because of additional accruals under the IBM Personal Pension Plan after December 31, 2007.  Notwithstanding the third sentence of this A., if a Participant’s SERP Benefit is determined under ARTICLE 8, the amount of the Participant’s SERP Benefit shall not be less than what the SERP Benefit would be if the Participant’s Pay, the Participant’s Benefit Service, and the Pay Threshold were equal to the Participant’s Pay, the Participant’s Benefit Service, and the Pay Threshold on December 31, 2006.

 

(2)                                  If the SERP Benefit begins to be paid during 2006, the Pay Threshold shall be $386,100 and if the SERP Benefit begins to be paid after 2006, the Pay Threshold shall be $405,400.  With respect to the formula in APPENDIX B, if the SERP Benefit begins to be paid during 2006, the Breakpoint shall be $296,600 and the Earnings Threshold shall be $160,000, and if the SERP Benefit begins to be paid after 2006, the Breakpoint shall be $311,400 and the Earnings Threshold shall be $160,000.

 

ARTICLE 4 - Management and Administration

 

The Plan may be amended from time to time for any purpose permitted by law or terminated at any time by written resolution of the Board or the Committee, but only if the Committee’s action is not materially inconsistent with a prior action of the Board.  The authority to amend or terminate the Plan shall include the authority to amend the procedure for amending or terminating the Plan and the authority to amend or terminate any related instrument or agreement.

 

The following persons and groups of persons shall severally have the authority to control and manage the operation and administration of the Plan as herein delineated:  (a) the Board, (b) the Committee, (c) IBM’s chief human resources officer, and (d) the Plan Administrator and each person on any committee serving as the Plan Administrator.  Each person or group of persons shall be responsible for discharging only the duties assigned to it by the terms of the Plan.

 

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The Board shall be responsible only for designating those persons who will serve on the Committee and for approving any resolution to terminate the Plan.

 

The Committee may, pursuant to a duly adopted resolution, delegate to IBM’s chief financial officer, chief human resources officer, or Treasurer, the Plan Administrator and/or any other officer or employee of IBM, authority to carry out any decision, directive or resolution of the Committee.

 

The Committee shall appoint one or more executives employed by IBM to serve as Plan Administrator or as a committee to fulfill the function of Plan Administrator.  The Plan Administrator shall have the full power and authority, in its sole discretion: (a) to promulgate and enforce such rules and regulations as it shall deem necessary or appropriate for the administration of the Plan; (b) to adopt any amendments to the Plan that are required by law; (c) to interpret the Plan consistent with the terms and intent thereof; (d) to resolve any possible ambiguities, inconsistencies and omissions in the Plan; and (e) to determine eligibility for SERP Benefits and the form, amount, and timing of SERP Benefits in accordance with the provisions of the Plan.  All such actions shall be conclusive provided they are in accordance with the terms and intent of the Plan and the Plan Administrator shall on a regular basis report such actions to the Committee.