AMENDMENT AND RESTATEMENT OF THE SEMPRA ENERGY CASH BALANCE RESTORATION PLAN

 

 

Exhibit 10.16

 

AMENDMENT AND RESTATEMENT OF THE
SEMPRA ENERGY

CASH BALANCE RESTORATION PLAN

 

 

 

 

 

 

Table of Contents

 

1.

EFFECTIVE DATE

2.

PURPOSE

3.

ADMINISTRATION

4.

ELIGIBILITY; PARTICIPATION

5.

AMOUNT OF BENEFITS

6.

PAYMENT OF BENEFITS

7.

EMPLOYEE’S RIGHTS

8.

AMENDMENT AND DISCONTINUANCE

9.

DEFINITIONS

10.

EMPLOYEES OF SEMPRA ENERGY TRADING CORPORATION
AND SEMPRA ENERGY SOLUTIONS LLC

11.

SECTION 409A OF THE CODE

12.

CLAIMS PROCEDURE

13.

MISCELLANEOUS

 

 

 

 

 

1.

EFFECTIVE DATE

The Sempra Energy Excess Cash Balance Plan (the “ Plan ”) was effective as of July 1, 1998.   

The Plan was amended and restated effective as of November 5, 2007.  The name of the Plan was changed to the Sempra Energy Cash Balance Restoration Plan effective June 16, 2008.

Sempra Energy hereby amends and restates this Plan in its entirety effective as of December 31, 2008, except as otherwise provided herein.  This amendment and restatement of the Plan is intended to comply with the requirements of Sections 409A(a)(2), (3) and (4) of the Code (as defined below) and the Treasury Regulations thereunder.  The elections and amendments made in accordance with the transitional relief under Internal Revenue Service Notice 2005-1, the Proposed Regulations under Section 409A of the Code and Internal Revenue Service Notices 2006-79 and 2007-86 shall be effective for the relevant periods on or before December 31, 2008.

2.

PURPOSE

This Plan serves two purposes. First, it provides benefits for certain Employees in excess of the limitations on benefits under the Basic Plan (as defined below) imposed by Section 415 of the Code (as defined below). The portion of the Plan providing these benefits is intended to be an "excess benefit plan" as defined in Section 3(36) of ERISA (as defined below). Second, it provides benefits for certain Employees in excess of the limitations on benefits under the Basic Plan imposed by Section 401(a) (17) of the Code.

3.

ADMINISTRATION

This Plan shall be administered by the Compensation Committee of Sempra Energy (" Compensation Committee ") in a manner consistent with the administration of the Basic Plan.  However, the portion of this Plan which is an unfunded "excess benefit plan" as defined in Section 3(36) of ERISA shall be administered as such and is exempt from the provisions of Title I of ERISA pursuant to Section 4(b) (5) of ERISA, and the rest of this Plan shall be administered as an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees.  The Compensation Committee's decisions in all matters involving the interpretation and application of this Plan shall be final.  Sempra Energy’s Senior Human Resources Officer shall have discretionary authority with respect to administrative matters relating to this Plan, except when exercise of such authority would materially affect the cost of the Plan to the Company, materially increase benefits to Participants, or affect such Senior Human Resources Officer in a manner materially different from other Participants.

4.

ELIGIBILITY; PARTICIPATION

(A)

All Employees whose pension benefits under the Basic Plan are limited by the compensation and benefits limitations imposed by Sections 401(a)(17) and 415 of the Code shall be eligible for benefits under this Plan. In no event shall an Employee who is not entitled to benefits under the Basic Plan be eligible for a benefit under this Plan.  An Employee who is a participant in the Basic Plan shall first become an Eligible Employee on the first date on which such Employee’s benefits under the Basic Plan are limited by the provisions of Section 415 of the Code, or such Employee’s benefits under the Basic Plan are limited by the covered compensation limitations of Section 401(a)(17) of the Code.

(B)

An Eligible Employee shall be a Participant and shall be entitled to benefits in accordance with Section 5.

5.

AMOUNT OF BENEFITS

(A)

415 Make-Up

The benefits payable under this subsection (A) to a Participant whose benefits under the Basic Plan are limited by the provisions of Section 415 of the Code incorporated in the Basic Plan, or to his beneficiary(ies), shall equal the excess, if any, of:

(i)

the benefits which would be paid to such Participant or on his behalf to his beneficiary(ies) under the Basic Plan, if the provisions of such Plan were administered without regard to the benefit limitations under Section 415 of the Code set forth in the Basic Plan, over

(ii)

the benefits which are paid to such Participant or on his behalf to his beneficiary(ies) under the Basic Plan.

(A)

401(a) (17) Make-Up

The benefits payable under this subsection  (B) to a Participant whose benefits under the Basic Plan are limited by the covered compensation limitations of Section 401(a)(17) of the Code incorporated in the Basic Plan, or to his beneficiary(ies), shall equal the excess, if any, of:

(i)

the benefits which would be paid to such Participant or on his behalf to his beneficiary(ies) under the Basic Plan, and, if applicable, to the Participant, under subsection (A), if the provisions of such Plan were administered without regard to the covered compensation limitations under Section 401(a)(17) of the Code set forth in the Basic Plan (and, with respect to covered compensation paid or payable in plan years beginning on or after January 1, 2007, with a maximum compensation limit for each plan year of Two Million Dollars ($2,000,000)), over

(ii)

the benefits which are paid to such Participant or on his behalf to his beneficiary(ies) under the Basic Plan and, if applicable to the Participant, under subsection (A).

(C)

Conformance with Treasury Regulations

The benefits payable under subsections (A) and (B) are determined under the formula determining benefits under the Basic Plan, and the benefits payable under subsections (A) and (B) are determined as an amount offset by the benefits provided under the Basic Plan.  The benefits payable under this Plan shall be determined in a manner consistent with Treasury Regulation Sections 1.409A-2(a)(9) and 1.409A-3(j)(5) (relating to nonqualified deferred compensation plans linked to qualified employer plans).  Any amendment of the Basic Plan shall be taken into account under this Plan only to the extent permitted under Treasury Regulation Sections 1.409A-2(a)(9) and 1.409A-3(j)(5).  Any reference to the interest and mortality factors (or actuarial methods and assumptions) specified in the Basic Plan shall mean the applicable interest and mortality factors (or actuarial methods or assumptions) specified under the terms of the Basic Plan as in effect on December 31, 2008.  

6.

PAYMENT OF BENEFITS

(A)

Distribution Options for Certain SERP Participants

(i)

In the case of a Participant who is an Eligible Employee, and is a participant under the SERP (as defined below) as of December 31, 2005, the payment of benefits to such Participant under this Plan shall be made in accordance with this subsection (A).

(ii)

Unless the Participant exercises the Lump Sump Option and receives a lump sum distribution from the Basic Plan, the payment of such Participant’s Pre-Section 409A Benefit under this Plan shall be in the same payment form and at the same time as the payment of benefits to the Participant or on his behalf to his beneficiary(ies) under the Basic Plan. In the event a Participant receives a lump sum distribution from the Basic Plan, payment of such Participant’s Pre-Section 409A Benefit under this Plan will be made in the form of a straight life annuity. However, the Participant may request, in writing, payment of such Participant’s Pre-Section 409A Benefit under one of the following alternatives provided such request is filed with Sempra Energy  at least three months prior to his Retirement Date or Termination under the Basic Plan:

(a)

The Participant may request payment of such Participant’s Pre-Section 409A Benefit under any of the other annuity options for which he is eligible under the Basic Plan. The amount of such optional annuity benefit with respect to his or her Pre-Section 409A Benefit under this Plan shall be computed as specified in Section 5 of this Plan using the interest and mortality factors specified in the Basic Plan. The request will be subject to approval of the Company's Senior Human Resources Officer and, if approved, will be irrevocable as long as the Participant receives a lump sum distribution from the Basic Plan.

(b)

The Participant may request payment of such Participant’s Pre-Section 409A Benefit in a lump sum. The amount of the distribution with respect to his or her Pre-Section 409A Benefit under this Plan shall be computed as specified in Section 5 of this Plan using the actuarial factors specified in the Basic Plan. In the event such a request is timely filed, the request shall be considered by the Senior Human Resources Officer who shall have the sole discretion, considering the best interests of the Company, to allow a lump sum distribution. The decision of the Senior Human Resources Officer shall be final. The Participant will be required to show good reason for receiving a lump sum distribution and, file the request at least three months prior to separation from service as a condition of having the request approved. If the lump sum pay out is approved, the lump sum form of pay out shall be irrevocable even if the Participant changes his election under the Basic Plan.

The Participant’s beneficiary(ies) with respect to his or her Pre-Section 409A Benefit under this Plan shall be exactly the same as his beneficiary(ies) under the Basic Plan unless he elects and receives a lump sum distribution from the Basic Plan. In this event, the following provisions will apply if such Participant’s Pre-Section 409A Benefit under this Plan is paid in the form of a joint and survivor annuity.

The joint and survivor annuity is only available with respect to such Participant’s Pre-Section 409A Benefit if the Participant designates his or her spouse as beneficiary or obtains spousal consent to the designation of another beneficiary in the same manner as under the Basic Plan. If the spouse, or beneficiary dies before the Participant’s Retirement Date under the Basic Plan, the joint and survivor annuity with respect to such Participant’s Pre-Section 409A Benefit is canceled and the benefit is paid in the form of a straight life annuity.

(iii)

The payment of such Participant’s Post-Section 409A Benefit under this Plan shall be in a lump sum upon the Participant’s Separation from Service, unless the Participant elects to receive an optional annuity form of payment under subparagraph (a).  The amount of the Participant’s lump sum distribution with respect to his Post-Section 409A Benefit under this Plan shall be computed as specified in Section 5 of this Plan using the actuarial factors specified in the Basic Plan.  

(a)

The Participant may elect, in writing, payment commencing upon the Participant’s Separation from Service under any of the following annuity options:  (I) a straight life annuity, (II) a joint and 50% survivor annuity, and (III) a joint and 100% survivor annuity.  The amount of such optional annuity benefit with respect to such Participant’s Post-Section 409A Benefit under this Plan shall be computed as specified in Section 5 of this Plan using the interest and mortality factors specified in the Basic Plan. The election will be subject to approval of the Company's Senior Human Resources Officer, in his or her discretion, and, if approved, will become effective and  irrevocable on the date of such approval (except as provided in subsection (B)).  The payment of such Participant’s Post-Section 409A Benefit in an annuity form shall commence upon the Participant’s Separation from Service.

(b)

A Participant’s election under subparagraph (a) may be made with respect to a Participant’s Post-Section 409A Benefit on or after January 1, 2006 and on or before December 31, 2008 in accordance with the transitional relief under Section 409A of the Internal Revenue Code and Internal Revenue Service Notices 2006-79 and 2007-86; provided, however, that a Participant’s election made in 2006 shall only apply with respect to payments that would not otherwise be payable in 2006, and shall not cause payments to be made in 2006 that would not otherwise be payable in 2006; and, provided, further, that a Participant’s election made in 2007 shall apply only with respect to payments that would not otherwise be payable in 2007 and shall not cause payments to be made in 2007 that would not otherwise be payable in 2007; and provided, further, that a Participant’s election made in 2008 shall apply only with respect to payments that would not otherwise be payable in 2008, and shall not cause payments to be made in 2008 that would not otherwise be payable in 2008.   A Participant’s election under subparagraph (a) shall be considered made when the election becomes irrevocable.  No election under subparagraph (a) may be made by a Participant unless such election becomes irrevocable on or prior to December 31, 2008.

(c)

The joint and survivor annuity is only available under clause (a)(II) or (III) if the Participant designates his or her spouse as beneficiary or obtains spousal consent to the designation of another beneficiary in the same manner as under the Basic Plan as part of the Participant’s election. If the spouse, or beneficiary dies before the Participant’s Separation from Service, the joint and survivor annuity is canceled and the benefit is paid in the form of a straight life annuity; provided, that the straight life annuity is actuarially equivalent, applying reasonable actuarial methods and assumptions, to the joint and survivor annuity in effect prior to such cancellation, as determined under Treasury Regulation Section 1.409A-2(b)(2)(ii).

(d)

Except as provided in subsection (B), such Participant may not change the form and time of payment of such Participant’s Post-Section 409A Benefit under this Plan after December 31, 2008.

(iv) Notwithstanding the foregoing, in no event shall a distribution option be available or apply to a Participant’s Pre-Section 409A Benefit if such distribution option would result in a material modification of the Participant’s Pre-Section 409A Benefit, as determined under Section 409A of the Code and Treasury Regulation Section 1.409A-6.

(v)

A lump sum payment of a Participant’s Post-Section 409A Benefit under this subsection (A) shall be paid on such date as is determined by Sempra Energy within thirty (30) days following the Participant’s Separation from Service.  If an annuity payment is elected for purposes of the payment of such Participant’s Post-Section 409A Benefit under this subsection (A), such Post-Section 409A Benefit shall be paid monthly, beginning on the last day of the month of the Participant’s Separation from Service and shall continue to be paid monthly during the life of the Participant and the life of the Participant’s designated beneficiary, if any (if such beneficiary survives the Participant).  In all cases, the monthly benefit shall equal the annual benefit divided by 12.

(B)

Changes in Distribution Option for Certain SERP Participants

A Participant described in subsection (A) may elect to change the form of the payment of such  Participant’s Post-Section 409A Benefit under this Plan, as follows:

 

(i)

The Participant may elect, in writing, to change the form of  payment of such Participant’s Post-Section 409A Benefit to any of the following options:  (a) a lump sum, (b) a straight life annuity, (c) a joint and 50% survivor annuity, and (d) a joint and 100% survivor annuity.  The amount of such optional benefit under this Plan shall be computed as specified in Section 5 of this Plan using the interest and mortality factors specified in the Basic Plan.  The Participant’s election shall be subject to paragraphs (ii), (iii), (iv), (v), (vi) and (vii).  Except as provided in paragraph (vi), the Participant’s election under this paragraph (i) shall be irrevocable.  The joint and survivor annuity is only available under subparagraph (c) or (d) if the Participant designates his or her spouse as beneficiary or obtains spousal consent to the designation of another beneficiary in the same manner as under the Basic Plan as part of the Participant’s election.  If the spouse, or beneficiary dies before the Participant’s Separation from Service, the joint and survivor annuity elected under this paragraph (i) is canceled and the benefit is paid in the form of a straight life annuity; provided, that the straight life annuity is actuarially equivalent, applying reasonable actuarial methods and assumptions, to the joint and survivor annuity in effect prior to such cancellation, as determined under Treasury Regulation Section 1.409A-2(a)(2)(ii).  

(ii)

The Participant’s election under paragraph (i) must be made prior to the Participant’s Separation from Service.

(iii)

If the Participant’s form of payment, as in effect at the time of election under paragraph (i), is an annuity, such Participant’s election under paragraph (i)(b), (c) or (d) (an election of an alternative annuity form of payment) shall be effective immediately and paragraph (v) shall not apply to such Participant’s election; provided, that the alternative annuity form of payment elected by the Participant is actuarially equivalent applying reasonable actuarial methods and assumptions to the annuity form of payment, as in effect at the time of the election, as determined under Treasury Regulation Section 1.409A-2(b)(2)(ii).

 

(iv)

Except as provided in paragraph (iii), the Participant’s election under paragraph (i) shall not take effect until 12 months after his election is made, in accordance with Treasury Regulation Section 1.409A-2(b)(1)(i).  If the Participant has a Separation from Service before the election under paragraph (i) becomes effective, the election under paragraph (i) shall terminate and the Participant’s Post-Section 409A Benefit shall be paid in the form of payment as in effect at the time of the election under paragraph (i).

 

(v)

Except as provided in paragraph (iii), in the event the Participant’s election under paragraph (i) becomes effective, the payment of such Participant’s Post-Section 409A Benefit under the option shall be deferred for a period of five years from the date such payment would otherwise have been paid (or, in the case of a life annuity treated as a single payment, five years from the date the first amount was scheduled to be paid), in accordance with Treasury Regulation Section 1.409A-2(b)(1)(ii).

(vi)

The Participant may elect to change the annuity option elected under paragraph (i) to another annuity option specified under paragraph (i) and such election shall become effective immediately, provided, that such change is made prior to the commencement of the payment of such Participant’s Post-Section 409A Benefit under this Plan; and, provided, further, that the annuity form of payment is actuarially equivalent, applying reasonable actuarial methods and assumptions, to the annuity form of payment, as in effect at the time of the election, as determined under Treasury Regulation Section 1.409A-2(b)(2)(ii).

(vii)

Any change in a Participant’s form of payment under this subsection (B) shall be made in accordance with Treasury Regulation Section 1.409A-2(b).

(C)

Distribution Options for other Participants

Except as provided in subsection (A), in the case of a Participant who first became an Eligible Employee (as determined under Section 4) on or before December 31, 2005, the payment of benefits under this Plan shall be made in a lump sum in accordance with this subsection (C) upon the Participant’s Separation from Service, unless the Participant elects to receive an optional annuity form of payment under paragraph (i).  The amount of the Participant’s lump sum distribution under this Plan shall be computed as specified in Section 5 of this Plan using the actuarial factors specified in the Basic Plan.

(i)

Such a Participant may elect, in writing, payment commencing upon the Participant’s Separation from Service under any of the following annuity options:  (a) a straight life annuity, (b) a joint and 50% survivor annuity, and (c) a joint and 100% survivor annuity.  The amount of such optional annuity benefit under this Plan shall be computed as specified in Section 5 of this Plan using the interest and mortality factors specified in the Basic Plan. The election will be subject to approval of the Senior Human Resources Officer of Sempra Energy, in his or her discretion, and, if approved, will become effective and irrevocable on the date of such approval (except as provided in subsection (D)).  The payment of such Participant’s benefits under this Plan in an annuity form shall commence upon the Participant’s Separation from Service.

(ii)

A Participant’s election under paragraph (i) may be made with respect to such Participant’s benefit under this Plan on or after January 1, 2006 and on or before December 31, 2008 in accordance with the transitional relief under Section 409A of the Internal Revenue Code and Internal Revenue Service Notices 2006-79 and 2007-86; provided, however, that a Participant’s election made in 2006 shall apply only with respect to payments that would not otherwise be payable in 2006, and shall not cause payments to be made in 2006 that would not otherwise be payable in 2006; and, provided, further, that a Participant’s election made in 2007 shall apply only with respect to payments that would not otherwise be payable in 2007, and shall not cause payments to be made in 2007 that would not otherwise be payable in 2007; and provided, further, that a Participant’s election made in 2008 shall apply only with respect to payments that would not otherwise be payable in 2008, and shall not cause payments to be made in 2008 that would not otherwise be payable in 2008.  A Participant’s election under paragraph (i) shall be considered made when the election becomes irrevocable.  No election under paragraph (i) may be made by a Participant unless such election becomes irrevocable on or prior to December 31, 2008.

(iii)

The joint and survivor annuity is only available under subparagraphs (i)(b) or (c) if the Participant designates his or her spouse as beneficiary or obtains spousal consent to the designation of another beneficiary in the same manner as under the Basic Plan as part of the Participant’s election. If the spouse, or beneficiary dies before the Participant’s Separation from Service, the joint and survivor annuity is canceled and the benefit is paid in the form of a straight life annuity; provided, that the straight life annuity is actuarially equivalent, applying reasonable actuarial methods and assumptions, to the joint and survivor annuity in effect prior to such cancellation, as determined under Treasury Regulation Section 1.409A-2(b)(2)(ii).

(iv)

Except as provided in subsection (D), such Participant may not change the form and time of payment of benefits under this Plan after December 31, 2008.

(v)

A lump sum payment under this subsection (C) shall be paid on such date as is determined by Sempra Energy within thirty (30) days following the Participant’s Separation from Service.  An annuity under this subsection (C) shall be paid monthly, beginning on the last day of the month of the Participant’s Separation from Service and shall continue to be paid monthly during the life of the Participant and the life of the Participant’s designated beneficiary, if any (if such beneficiary survives the Participant).  In all cases, the monthly benefit shall equal the annual benefit divided by 12.  

(D)

Changes in Distribution Option for other Participants

A Participant described in subsection (C) may elect to change the form of the payment of such Participant’s benefit under this Plan, as follows:

 

(i)

The Participant may elect, in writing, to change the form of  payment of such Participant’s benefit to any of the following options:  (a) a lump sum, (b) a straight life annuity, (c) a joint and 50% survivor annuity, and (d) a joint and 100% survivor annuity.  The amount of such optional benefit under this Plan shall be computed as specified in Section 5 of this Plan using the interest and mortality factors specified in the Basic Plan.  The Participant’s election shall be subject to paragraphs (ii), (iii), (iv), (v), (vi) and (vii).  Except as provided in paragraph (vi), the Participant’s election under this paragraph (i) shall be irrevocable.  The joint and survivor annuity is only available under subparagraph (c) or (d) if the Participant designates his or her spouse as beneficiary or obtains spousal consent to the designation of another beneficiary in the same manner as under the Basic Plan as part of the Participant’s election.  If the spouse, or beneficiary dies before the Participant’s Separation from Service, the joint and survivor annuity is canceled and the benefit is paid in the form of a straight life annuity; provided, that the straight life annuity is actuarially equivalent, applying reasonable actuarial methods and assumptions, to the joint and survivor annuity in effect prior to such cancellation, as determined under Treasury Regulation Section 1.409A-2(b)(2)(ii).  

(ii)

The Participant’s election under paragraph (i) must be made prior to the Participant’s Separation from Service.

(iii)

If the Participant’s form of payment, as in effect at the time of the election under paragraph (i), is an annuity, such Participant’s election under paragraph (i)(b), (c) or (d) (an election of an alternative annuity form of payment) shall be effective immediately and paragraph (v) shall not apply to such Participant’s election; provided, that the alternative annuity form of payment elected by the Participant is actuarially equivalent applying reasonable actuarial methods and assumptions to the annuity form of payment, as in effect at the time of the election, as determined under Treasury Regulation Section 1.409A-2(b)(2)(ii).

 

(iv)

Except as provided in paragraph (iii), the Participant’s election under paragraph (i) shall not take effect until 12 months after the date his or her election is made in accordance with Treasury Regulation Section 1.409A-2(b)(1)(i).  If the Participant has a Separation from Service before the election under paragraph (i) becomes effective, the election under paragraph (i) shall terminate and the Participant’s benefit shall be paid in the form of payment as in effect at the time of the election under paragraph (i).

 

(v)

Except as provided in paragraph (iii), in the event the Participant’s election under paragraph (i) becomes effective, the payment of such Participant’s benefit under the option be deferred for a period of five years from the date such payment would otherwise have been paid (or, in the case of a life annuity treated as a single payment, five years from the date the first amount was scheduled to be paid), in accordance with Treasury Regulation Section 1.409A-2(b)(1)(ii).

(vi)

The Participant may elect to change an annuity form of payment elected under paragraph (i) to another annuity form of payment specified under paragraph (i)(b), (c) or (d), and such election shall be effective immediately; provided, that such change is made prior to the commencement date of the payment of benefits under this Plan; and, provided, further, that the annuity form of payment is actuarially equivalent applying reasonable actuarial methods and assumptions to the annuity form of payment, as in effect at the time of the election, as determined under Treasury Regulation Section 1.409A-2(b)(2)(ii).

(vii)

Any change in a Participant’s form of payment under this subsection (D) shall be made in accordance with Treasury Regulation Section 1.409A-2(b).

(E)

Pre-Section 409A Benefit; Post-Section 409A Benefit .

(i)

In the case of a Participant described in subsection (A), such Participant’s “ Pre-Section 409A Benefit ” means the portion of such Participant’s benefit under the Plan, if any, to which such Participant had a legal binding right, and which was earned and vested, as of December 31, 2004, determined in accordance with Section 409A of the Code and Treasury Regulation Section 1.409A-6.  Such Participant’s “ Pre-Section 409A Benefit ” shall be determined by the terms of the Plan and the Basic Plan, as in effect as of October 3, 2004.

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