MO » Topics » Retirement Benefits

This excerpt taken from the MO DEF 14A filed Apr 9, 2009.

Retirement Benefits

 

Almost all of our employees are covered by funded tax-qualified pension and/or profit-sharing plans. We also maintain supplemental retirement plans and arrangements which compensate employees for the difference between the full pensions or full profit-sharing contributions they would receive under our tax-qualified plans, if those plans were not subject to tax law limitations, and the benefits that in fact can be provided after taking those limits into account. In limited instances, these plans provide additional benefits. See “Plans Maintained by Altria” below.

 

Generally, employees hired prior to January 1, 2008 (including all of our named executive officers) are eligible to participate in the Retirement Plan for Salaried Employees, which we refer to as our “Retirement Plan,” as well as the supplemental plans and arrangements described below as they relate to the Retirement Plan. These plans and arrangements are generally intended to provide our salaried employees with pension benefits, or their equivalent, in an amount equal to:

 

   

1.75% of the employee’s highest average annual compensation (annual salary plus annual incentive) during a period of 60 consecutive months during the last 120 months of employment, minus

 

   

0.30% of such compensation up to the applicable Social Security covered compensation amount, times

 

   

years of credited service (up to a maximum of 35).

 

27


Table of Contents

For an employee who completes 30 years of service, this translates into providing payments equivalent to a pension of approximately 52.5% of five years annual average salary and incentive compensation. For an employee with the maximum credited service of 35 years, this “replacement ratio” is approximately 61.25%.

 

During 2006, the Compensation Committee decided to limit pension benefits for executives in salary bands A and B. This decision altered pension benefits as follows: The annual incentive compensation considered for purposes of pension determinations as described above was limited to the lesser of either (i) actual annual incentive or (ii) annual incentive at a business rating of 100 and individual performance rating of “Exceeds.” This limitation does not apply to any executive who was age 55 or older at December 31, 2006. The current named executive officers subject to this limit are: Mr. Beran, Mr. Barrington and Ms. Keane. The 2008 annual incentive awards paid in 2009 were $950,000 for Mr. Beran, $825,000 for Mr. Barrington and $825,000 for Ms. Keane. Of these amounts, $727,650 for Mr. Beran, $668,250 for Mr. Barrington and $668,250 for Ms. Keane will be recognized for purposes of future pension calculations. Also, in January 2008, the Compensation Committee provided that the present value of Mr. Szymanczyk’s accrued pension (tax-qualified and supplemental) would not exceed a maximum of $30,000,000. Mr. Szymanczyk’s accrued pension at December 31, 2008 is not affected by this maximum.

 

After termination of employment, pension benefits can commence at age 55, though generally with a reduction in benefits for commencement before age 65. For employees who work until age 55, the annual reduction factors for early commencement decrease significantly. For employees who retire at or above age 55 with 30 years of service or at or above age 60 with five years of service, there is no reduction for early commencement. The retirement benefits we provide are described in greater detail in the discussions following the Pension Benefits table and the Non-Qualified Deferred Compensation table.

 

This excerpt taken from the MO DEF 14A filed Apr 24, 2008.

Retirement Benefits

 

Almost all of our U.S.-based employees are covered by funded tax-qualified pension and profit-sharing plans. We also maintain supplemental retirement plans and arrangements which compensate employees for the difference between the full pensions or full profit-sharing contributions they would receive under our tax-qualified plans, if those plans were not subject to tax law limitations, and the benefits that in fact can be provided after taking those limits into account. In limited instances, these plans provide additional benefits. See “Plans Maintained by Altria” below. These arrangements are generally intended to provide our U.S.-based salaried employees with pension benefits, or their equivalent, in an amount equal to 1.75% of the employee’s highest average annual compensation (annual salary plus annual incentive) during a period of five consecutive years, minus 0.30% of such compensation up to the applicable Social Security covered compensation amount, times years of credited service (up to a maximum of 35). For an employee who completes 30 years of service, this translates into providing payments equivalent to a pension of approximately 52.5% of five years annual average salary and incentive compensation. For an employee with the maximum credited service of 35 years, this “replacement ratio” is approximately 61.25%.

 

After termination of employment, pension benefits can commence at age 55, though generally with a reduction in benefits for commencement before age 65. For employees who work until age 55, the annual reduction factors for early commencement decrease significantly. For employees who retire at or above age 55 with 30 years of service or at or above age 60 with five years of service, there is no reduction for early commencement. The retirement benefits we provide are described in greater detail in the discussions following the Pension Benefits table and the Non-Qualified Deferred Compensation table.

 

Prior to the spin-off, our employees based outside of the U.S., including Mr. Calantzopoulos, participated in various retirement plans that were substantially similar to the ones described above. Employees located in Switzerland, for example, were generally covered by the Pension Fund of Philip Morris in Switzerland, or the Swiss Pension Fund, a broad-based, contributory, funded pension plan established in accordance with the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans that provided retirement, death and disability benefits for employees and their

 

27


Table of Contents

beneficiaries. Retirement benefits are determined under a formula similar to the formula in Altria’s tax-qualified U.S. pension plan. As is the case under our tax-qualified U.S. plans, benefits under the Swiss Pension Fund were subject to tax regulatory limits on the amount of compensation that can be taken into account in determining benefits. Our former employees covered by the Swiss Pension Fund, but whose benefits were affected by these limits, were also covered by additional Swiss plans designed to provide benefits equivalent to the incremental benefits that would be provided if the Swiss Pension Fund were not subject to these limits. Where an employee was also entitled to benefits under a pension plan in another country, benefits were coordinated through offsets in order to assure that the employee received full career benefits while avoiding duplication in benefits.

 

During 2006, the Compensation Committee decided to limit compensation for purposes of pension determinations for U.S.-based executives in salary bands A and B. This decision limited annual incentive compensation considered for purposes of pension determinations to the lesser of either (i) actual annual incentive or (ii) annual incentive at a business rating of 100 and individual performance rating of “Exceeds.” This limitation does not apply to any executive who was age 55 or older at December 31, 2006, or to any executive who is not a participant in our U.S.-based pension plan. Mr. Camilleri was the only executive who was subject to this limitation in 2007. Mr. Camilleri was awarded an annual incentive award of $4,750,000 for 2007. Of this amount, $2,887,500, which reflects the above ceiling, was recognized as pensionable earnings for the purposes of his pension calculation.

 

This excerpt taken from the MO DEF 14A filed Mar 23, 2007.

Retirement Benefits

 

During 2006, the Compensation Committee decided to limit compensation for purposes of pension determinations for executives in salary bands A and B. This decision will limit compensation considered for purposes of pension determinations to the lesser of (i) base salary plus annual incentive and (ii) base salary plus annual incentive at a business rating of 100 and individual performance rating of “Exceeds.” This limitation does not apply to any executive who was age 55 or older at December 31, 2006, or to any executive at PMI who is not a participant in our U.S.-based pension plan. Mr. Camilleri is the only current executive who is subject to this limitation. Mr. Camilleri was awarded an annual incentive award of $4,500,000 for 2006. Of this amount, $2,887,500 will be included in his pension calculation.

 

29


Table of Contents

During 2006, Philip Morris USA implemented a redesigned retirement plan to improve its effectiveness in attracting and retaining talent. Effective January 1, 2007, newly hired employees will not participate in the defined benefit plan but will be entitled to an employer match to our defined contribution plan. The employer match is in addition to our contribution to the Deferred Profit Sharing Plan.

 

This excerpt taken from the MO DEF 14A filed Mar 14, 2006.

Retirement Benefits

 

The Company maintains tax-qualified pension and deferred profit-sharing plans which provide funded retirement benefits for nearly all employees. It also maintains unfunded supplemental pension and deferred profit-sharing plans providing benefits that, because of tax law limitations, cannot be provided under the tax-qualified plans. The annual pension benefits payable for the life of the employee commencing at normal retirement age (age 65) for salaried employees of Altria Group, Inc. and its subsidiaries other than Kraft Foods Inc. and its subsidiaries (“Altria employees’”) are determined under a formula, described in more detail on pages 34-35, based on years of service and compensation. This life annuity amount may be reduced as a result of elections of survivor death benefits or for commencement of benefits before normal retirement age. Altria employees who terminate employment before age 55 can commence benefits after attaining age 55 with reductions in the amounts that would otherwise be payable at age 65, reflecting the early commencement. Employees who continue in employment until they are age 55 or older can elect to retire early and immediately commence benefits with a smaller reduction for early commencement or, after 30 years of service, can retire at or after age 55 with no reduction from the annual amount otherwise payable at normal retirement age.

 

Pensions for Altria employees are payable from a funded tax-qualified pension plan and, to the extent that tax law limitations do not allow paying the full pension under the tax-qualified plan, under Altria’s unfunded supplemental pension plans. Because of these limitations most of the pension benefits promised to the named executive officers were provided under the supplemental pension plans. Contributions to the tax-qualified deferred profit-sharing plan were also limited by the tax rules, with any amount above the limits being credited under the supplemental deferred profit-sharing plan. In prior years the Company paid amounts to individual trusts established by a number of employees or to employees themselves that serve to offset the benefits payable under these supplemental retirement plans. For benefits earned for service before 2005, the benefits promised these employees will remain in place and additional payments with respect to these pre-2005 benefits may continue to be made.

 

Beginning with 2005, new arrangements were implemented to ensure compliance with new tax legislation. Under the new arrangements, most Altria employees eligible for the individual trust payments will not accrue additional benefits under the supplemental pension or deferred profit-sharing plans. Instead, for 2005 and subsequent years they will receive current payments calculated to approximate (after paying taxes on the payments) the after-tax value of the additional benefits they would have earned had they remained covered by these supplemental retirement plans. These new “target payments” will be made annually shortly after the close of each calendar year during which employment continues, subject to the Company’s right to discontinue the payments. Like the payments made for pre-2005 plan benefits, these payments will be made to individual trusts established by the employees or to the employees themselves. They are not intended to represent an increase from the benefits previously promised to employees. Instead, the annual target payments are intended to provide amounts that employees can save for retirement and that have a value approximating the additional supplemental retirement plan accruals they will no longer receive.

 

The new payments completely replace post-2004 coverage under the supplemental retirement plans for the employees, including all of the eligible named executive officers, who receive them. The amounts of the new payments will vary from year to year depending on an employee’s age, salary changes, interest rates, whether the employee would have become eligible for early retirement benefits had he or she continued to be covered by the supplemental retirement plans, and other factors, just as the value of continued plan coverage would vary from year to year. Since the new payments fully replace post-2004 coverage under the supplemental retirement plans, they also render the annual value earned by employees more transparent than under the previous arrangement.

 

The value received under tax-qualified retirement plans and as target payments by the named executive officers (other than Mr. Deromedi, who is covered only by retirement plans maintained by

 

24


Table of Contents

Kraft Foods Inc.) for 2005 are summarized in the table below. As is evident from the table, the limitations applicable to tax-qualified plans will result in a very high proportion of the retirement allowances earned by named executive officers in future years being delivered through the target payments.

 

     Mr. Camilleri

   Mr. Parrish

   Mr. Szymanczyk

   Mr. Wall

1. Present value of 2005 Qualified Pension Accruals

   $ 15,080    $ 20,611    $ 22,451    $ 28,405

2. Qualified Deferred Profit-Sharing Plan Allocations

     28,000      28,000      28,000      28,000

3. Target Payments

     2,197,965      3,127,774      2,542,886      1,447,393
    

  

  

  

Total

   $ 2,241,045    $ 3,176,385    $ 2,593,337    $ 1,503,798
    

  

  

  

 

The target payment for Mr. Parrish for 2005 was substantially greater than would otherwise have been the case as a result of his attaining age 55 during the year. Had he continued to accrue pension benefits under the supplemental retirement plans, he would have become eligible for early retirement with an increase in the present value of his pension benefits approximating this increase in his target payment. For the tax-qualified pension plan accruals shown on line 1 above, the present values shown are for the incremental annual pension benefits for service during 2005 payable in the form of a single life annuity commencing at normal retirement age (age 65) based on the same assumptions used to determine the benefit obligations under the qualified pension plan for year-end 2005 financial disclosure under Statement of Financial Accounting Standards No. 87, “Employer’s Accounting for Pensions”. As noted previously, other payments have been and may continue to be made with respect to promised supplemental retirement plan benefits earned from service before 2005. These pre-2005 supplemental benefits are frozen in amount and are not duplicated in the target payments, which are earned for post-2004 service.

 

Additional information concerning deferred profit-sharing and pension benefits and target payments is contained in the Summary Compensation Table on page 28 and the Altria Group, Inc. Retirement Plans discussion beginning on page 34 where such information is reported in accordance with current SEC rules.

 

Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki