AGU » Topics » New Program - Effective June 25, 2006

This excerpt taken from the AGU 6-K filed Mar 23, 2007.
New Program — Effective June 25, 2006
Effective June 25, 2006, the Named Executive Officers commenced participation in the new executive retirement program. The new executive retirement program was approved at the end of 2005 after a comprehensive review of North American market practice, with the goals of ensuring that:
  •  the Corporation’s executive retirement program is competitive in order to attract and retain executive talent needed to deliver on the organization’s business strategies;
  •  the pension provided to executives at retirement provides for an adequate level of income in retirement commensurate with their service with the Corporation; and
  •  the Corporation’s total liabilities in the event of the retirement or termination of an executive, including both pension and severance, are managed on an integrated basis.
Under the new executive retirement program, designated executives participate in:
  •  the registered DC Plan that was amended for all participating employees in Canada effective June 25, 2006, or the 401(k) Plan for designated executives in the U.S.; and
  •  the new defined benefit supplemental executive retirement plan (“DB SERP”) which covers earnings in excess of the limits imposed under the Income Tax Act (Canada).
The DB SERP has been designed to reflect best practice in executive pension governance, including the following plan provisions:
  •  limiting covered service to service as a designated executive of the Corporation (the DB SERP does not recognize service, if any, prior to becoming an officer of the Corporation; neither does it allow for accelerated service recognition);
  •  introducing a vesting schedule over 4 years (two years for executives in the prior program);
  •  limiting the inclusion of bonus in pensionable earnings (only up to target levels);
  •  applying a cap on pensionable earnings under the plan; and
  •  applying a cap on the overall amount of pension payable under the plan.
In order to participate in the new DB SERP, each designated executive must enter into an agreement with the Corporation that includes the following conditions:
  •  waiver of prior supplementary plan benefits; and
  •  phase out by age 60 (the normal retirement date under the DB SERP) of any severance benefits to which he or she would otherwise be entitled.
See the “Employment Contracts and Change of Control Arrangements” section for further details.
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