CI » Topics » CIGNA Pension Plan

This excerpt taken from the CI DEF 14A filed Mar 19, 2009.
CIGNA Pension Plan
 
Since 2000 the CIGNA Pension Plan generally has covered all U.S. based employees, including all named executive officers. CIGNA makes all contributions required to meet the minimum funding requirements for plan benefits. Contributions are paid into a trust fund that pays benefits. Vested benefits are not payable until after termination of an employee’s service with CIGNA.
 
The CIGNA Pension Plan comprises Parts A and B, as described below. Part A covers certain employees hired before 1989, while Part B covers all other U.S. employees. The formulas apply equally to named executive officers and other employees. As explained below, Part A includes a frozen formula based on credited service


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as of March 31, 2008 and eligible earnings as of December 31, 2009, and effective April 1, 2008 a new cash balance formula that provides a reduced level of benefits. Part B provides only a cash balance benefit.
 
Pension benefits under both formulas are based on years of credited service and eligible earnings.
 
  •  “Credited service” is generally limited to an employee’s period of service with a CIGNA company while that Company participates in the CIGNA Pension Plan. An employee receives credit for one year of credited service for any calendar year in which he or she is credited with at least 1,000 hours of service.
 
  •  “Eligible earnings” includes base salary and annual incentive—but not payments under any long-term incentive compensation plans.
 
Part A.  For credited service before April 1, 2008, Part A provides an annual retirement benefit stated in terms of a single life annuity payable at age 65. That annual benefit equals:
 
  •  the employee’s years of credited service (up to a maximum of 30 years);
 
  •  multiplied by 2% of the higher of the employee’s average annual eligible earnings over (a) the final 36 months of service, or (b) the three consecutive calendar years with the highest eligible earnings;
 
  •  minus an offset equal to approximately half of the employee’s annual Social Security benefits.
 
On March 31, 2008, this formula was frozen so that credited service after March 31, 2008 and eligible earnings after December 31, 2009 are not counted.
 
Part A benefits under the frozen formula are generally payable only in annuity form as early as age 55. An actuarial reduction applies if benefit payments begin before age 65. Part A benefits became 100% vested upon a participant’s completion of five years of vesting service. All Part A participants are 100% vested.
 
Effective April 1, 2008, CIGNA adopted a new cash balance formula under Part A. For credited service on or after April 1, 2008, the plan provides a retirement benefit stated as a lump sum hypothetical account balance. That account balance equals the sum of (1) the employee’s accumulated annual benefit credits, and (2) quarterly interest credits.
 
For each year that an employee earns a year of credited service, the employee’s account receives annual benefit credits equal to the following percentage of eligible earnings: 8% in 2008 (for eligible earnings after March 31, 2008); 9% for 2009; and 10% for 2010 and later. However, after employees have earned 30 years of credited service, the percentage is 3%.
 
On the last day of each calendar quarter until an employee’s benefit is paid, the employee’s account also receives interest credits, which are based on an annual rate equal to the lesser of 9% or the yield on the five-year U.S. Treasury Constant Maturity Notes for the month of November of the preceding calendar year, plus 25 basis points. However, the annual rate will not be less than 4.5%.
 
The hypothetical account balance is payable as early as an employee’s termination of employment. Payments may be made in annuity form or lump sum, at the employee’s election.
 
Part B.  Part B provides a retirement benefit stated as a lump sum hypothetical account balance. That account balance equals the sum of (1) the employee’s accumulated annual benefit credits, and (2) quarterly interest credits.
 
For each year that an employee is credited with a year of credited service, the employee’s account receives annual benefit credits. Annual benefit credits range from 3% to 8.5% of eligible earnings, based on the employee’s age and accumulated years of credited service.
 
On the last day of each calendar quarter until an employee’s benefit is paid, the employee’s account also receives interest credits, which are based on an annual rate equal to the lesser of 9% or the yield on the five-year U.S. Treasury Constant Maturity Notes for the month of November of the preceding calendar year, plus 25 basis points. However, the annual rate will not be less than 4.5%.


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Part B benefits are payable as early as an employee’s termination of employment. Payments may be made in annuity form or lump sum, at the employee’s election.
 
As of January 1, 2008, an employee must have at least three years of vesting service to be 100% vested with a right to a Part B pension benefit. “Vesting service” is service with any CIGNA company, even if the Company does not participate in the CIGNA Pension Plan.
 
Change of Control.  Any participants in Part A or Part B of the CIGNA Pension Plan who are terminated other than for cause, within three years after a change of control of CIGNA would receive certain additional benefits:
 
  •  Part A would provide up to three years of additional service credit and a floor amount of final average earnings based on an employee’s level of earnings at the time of the change of control; and
 
  •  Part B would provide a special benefit credit for the year of the participant’s termination equal to between 3% and 8.5% of the participant’s highest base salary in effect at any time between the date of the change of control and the date of termination, multiplied by the number of years between January 1 of the year of termination and the third anniversary of the change of control.
 
This excerpt taken from the CI DEF 14A filed Mar 20, 2008.

CIGNA Pension Plan

Since 2000 the CIGNA Pension Plan generally has covered all U.S. based employees, including all named executive officers. CIGNA makes all contributions required to meet the minimum funding requirements for plan benefits. Contributions are paid into a trust fund that pays benefits. Vested benefits are not payable until after termination of an employee's service with CIGNA.

The CIGNA Pension Plan has two different benefit formulas—Parts A and B, as described below. Part A covers certain employees hired before 1989, while Part B covers all other U.S. employees. The formulas apply equally to named executive officers and other employees.

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Pension benefits under both formulas are based on years of credited service and eligible earnings.

    "Credited service" is generally limited to an employee's period of service with a CIGNA company while that Company participates in the CIGNA Pension Plan. An employee receives credit for one year of credited service for any calendar year in which he or she is credited with at least 1,000 hours of service.

    "Eligible earnings" includes base salary and annual incentive—but not payments under any long-term incentive compensation plans.

Part A.    Part A provides an annual retirement benefit stated in terms of a single life annuity payable at age 65. That annual benefit equals:

    the employee's years of credited service (up to a maximum of 30 years);

    multiplied by 2% of the higher of the employee's average annual eligible earnings over (a) the final 36 months of service, or (b) the three consecutive calendar years with the highest eligible earnings;

    minus an offset equal to approximately half of the employee's annual Social Security benefits.

Part A benefits are generally payable only in annuity form as early as age 55. An actuarial reduction applies if benefit payments begin before age 65. Part A benefits become 100% vested upon a participant's completion of five years of vesting service.

On December 10, 2007 the People Resources Committee of the Board of Directors authorized the amendment of Part A of the CIGNA Pension Plan. The amendment is to freeze the current formula in two phases. The first phase will freeze credited service as of March 31, 2008 and the second phase will freeze a participant's eligible earnings as of December 31, 2009.

Beginning April 1, 2008 the plan will provide a new formula with the retirement benefit stated as a lump sum hypothetical account balance. That account balance equals the sum of (1) the employee's accumulated annual benefit credits, and (2) quarterly interest credits.

For each year that an employee earns a year of credited service, the employee's account receives annual benefit credits. Annual benefit credits are a percentage of eligible earnings as follows: 8% for the remainder of 2008, 9% for 2009 and 10% for 2010 and later; however, after employees have earned 30 years of credited service, the percentage is 3%.

On the last day of each calendar quarter until an employee's benefit is paid, the employee's account also receives interest credits, which are based on the return on five-year U.S. Treasury Constant Maturity Notes.

The hypothetical account balance is payable as early as an employee's termination of employment. Payments may be made in annuity form or lump sum, at the employee's election.

Part B.    Part B provides a retirement benefit stated as a lump sum hypothetical account balance. That account balance equals the sum of (1) the employee's accumulated annual benefit credits, and (2) quarterly interest credits.

For each year that an employee is credited with a year of credited service, the employee's account receives annual benefit credits. Annual benefit credits range from 3% to 8.5% of eligible earnings, based on the employee's age and accumulated years of credited service.

On the last day of each calendar quarter until an employee's benefit is paid, the employee's account also receives interest credits, which are based on the return on five-year U.S. Treasury Constant Maturity Notes.

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Part B benefits are payable as early as an employee's termination of employment. Payments may be made in annuity form or lump sum, at the employee's election.

As of January 1, 2008, an employee must have at least three years of vesting service to be 100% vested with a right to a Part B pension benefit. "Vesting service" is service with any CIGNA company, whether or not it participates in the CIGNA Pension Plan.

Change of Control.    If the CIGNA Pension Plan is terminated within five years after a change of control of CIGNA:

    Part A would provide up to three years of additional service credit and a floor amount of final average earnings based on an employee's level of earnings at the time of the change of control; and

    Part B would provide a special benefit credit for the year of the plan's termination equal to between 3% and 8.5% of the highest base salary in effect at any time between the date of the change of control and the date of termination, multiplied by the number of years between the date of termination and a date three years from the date of the change of control.
This excerpt taken from the CI DEF 14A filed Mar 22, 2007.

CIGNA Pension Plan

Since 2000 the CIGNA Pension Plan generally has covered all U.S. based employees, including all named executive officers. CIGNA makes all contributions required to meet the minimum funding requirements for plan benefits. Contributions are paid into a trust fund that pays benefits. Vested benefits are not payable until after termination of an employee’s service with CIGNA.

The CIGNA Pension Plan has two different benefit formulas — Parts A and B, as described below. Part A covers certain employees hired before 1989, while Part B covers all other U.S. employees. The formulas apply equally to named executive officers and other employees.

Pension benefits under both formulas are based on years of credited service and eligible earnings.

·       “Credited service” is generally limited to an employee’s period of service with a CIGNA company while that Company participates in the CIGNA Pension Plan. An employee receives credit for one year of credited service for any calendar year in which he or she is credited with at least 1,000 hours of service.

·       “Eligible earnings” includes base salary and annual bonus — but not payments under any long-term incentive compensation plans.

In addition, an employee must have at least five years of vesting service to be vested with a right to a pension benefit. “Vesting service” is service with any CIGNA company, whether or not it participates in the CIGNA Pension Plan.

Part A.   Part A provides an annual retirement benefit stated in terms of a single life annuity payable at age 65. That annual benefit equals:

·       the employee’s years of credited service (up to a maximum of 30 years);

·       multiplied by 2% of the higher of the employee’s average annual eligible earnings over (a) the final 36 months of service, or (b) the three consecutive calendar years with the highest eligible earnings;

·       minus an offset equal to approximately half of the employee’s annual Social Security benefits.

Part A benefits are generally payable only in annuity form as early as age 55. An actuarial reduction applies if benefit payments begin before age 65.

Part B.   Part B provides a retirement benefit stated as a lump sum hypothetical account balance. That account balance equals the sum of (1) the employee’s accumulated annual benefit credits, and (2) quarterly interest credits.

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For each year that an employee is credited with a year of credited service, the employee’s account receives annual benefit credits. Annual benefit credits range from 3% to 8.5% of eligible earnings, based on the employee’s age and accumulated years of credited service.

On the last day of each calendar quarter until an employee’s benefit is paid, the employee’s account also receives interest credits, which are based on the return on five-year U.S. Treasury Constant Maturity Notes.

Part B benefits are payable as early as an employee’s termination of employment. Payments may be made in annuity form or lump sum, at the employee’s election.

Change of Control.   If the CIGNA Pension Plan is terminated within five years after a change of control of CIGNA:

·       Part A would provide up to three years of additional service credit and a floor amount of final average earnings based on an employee’s level of earnings at the time of the change of control; and

·       Part B would provide a special benefit credit for the year of the plan’s termination equal to between 3% and 8.5% of the highest base salary in effect at any time between the date of the change of control and the date of termination, multiplied by the number of years between the date of termination and a date three years from the date of the change of control.

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