This excerpt taken from the CLX DEF 14A filed Oct 5, 2007.
Pension benefits are paid to named executive officers under the following plans: The Clorox Company Pension Plan (the Pension Plan), the cash balance restoration provision in the NQDC and the SERP, or in the case of the CEO, the replacement SERP. The following narrative provides detail on each of the plans or provision.
This excerpt taken from the CLX DEF 14A filed Oct 4, 2006.
Pension benefits are paid to executive officers under three plans: The Clorox Company Pension Plan (the Pension Plan), the Nonqualified Deferred Compensation Plan and the Supplemental Executive Retirement Plan (the SERP).
The Pension Plan is a non-contributory defined benefit retirement plan covering salaried and hourly employees of Clorox. All employees with at least one year of service participate in the Pension Plan. Prior to July 1, 1996, benefits were calculated based on career average compensation. Effective July 1, 1996, participants in the Pension Plan accrue benefits equal to 3% of qualified earnings each year. Qualified earnings include base annual salary and bonus. Participants benefits are adjusted each quarter by an interest factor. Participants meeting certain age and years of service levels will receive the greater of the benefits calculated under the career average compensation formula and the cash balance formula. Except for Mr. Johnston, who has met the age and years of service levels and will receive the greater of the benefits under the current and prior formula, which, as of June 30, 2006, had a lump sum value of $578,000, each of the Named Officers will receive benefits calculated under the cash balance formula. A participant is fully vested in his or her benefit after five years of service.
The Nonqualified Deferred Compensation Plan provides additional benefits equal to the employer-provided benefits that plan participants do not receive under the Pension Plan because of Internal Revenue Code limits. This plan has the same five-year vesting provision as the Pension Plan.
The purpose of the SERP is to provide executive officers a fixed objective of 55% of the average annual compensation for the three consecutive years of highest compensation (except bonuses need not be consecutive). Compensation consists of base annual salary and the EIC Plan bonus. For the Named Officers, those amounts are shown in the salary and bonus columns of the Summary Compensation Table on page 19. Participants must attain at least age 55 with 10 years of service before leaving the Company to be eligible for benefits under the SERP. The SERP benefits are offset by the annuity value of amounts received from primary social security at retirement and the actual value of the Pension Plan and Company contributions to the 401(k) Plan and the Nonqualified Deferred Compensation Plan at retirement.
Pension benefits are subject to actual market returns; therefore, the ultimate benefit payable could exceed the SERP objective of 55% of average annual compensation. Assuming retirement at age 65, fiscal year 2006 annual base salary and bonus and no future increase in such compensation and an interest rate of 8%, the total pension benefit for the Named Officers is not expected to exceed 55% of their average compensation. The annual retirement benefits shown in the table below are based on the SERP, calculated for an unmarried person, on a straight-line annuity basis, based on retirement at age 65 with 15 or more years of service with the Company. They would be proportionately reduced for early retirement or for shorter years of service to a minimum of 10 years. Thus, the table below shows what would be received by the Named Officers under the three plans for pension benefits, taken collectively.