ITT » Topics » ITT Salaried Retirement Plan

This excerpt taken from the ITT DEF 14A filed Mar 26, 2008.
ITT Salaried Retirement Plan
 
Under the ITT Salaried Retirement Plan participants have the option, on an annual basis, to elect to be covered under either a Traditional Pension Plan or a Pension Equity Plan formula for future pension accruals. The ITT Salaried Retirement Plan is a funded and tax qualified retirement program. The Plan is described in detail below. All of the Named Executive Officers participate in the Traditional Pension Plan formula of the ITT Salaried Retirement Plan.
 
While the Traditional Pension Plan formula pays benefits on a monthly basis after retirement, the Pension Equity Plan formula enables participants to elect to have benefits paid as a single sum payment upon employment termination, regardless of the participant’s age. The Traditional Pension Plan benefit payable to an employee depends upon the date an employee first became a participant under the plan.
 
Under the Traditional Pension Plan, a participant first employed prior to January 1, 2000 would receive an annual pension that would be the total of:
 
  •  2% of his or her “average final compensation” (as defined below) for each of the first 25 years of benefit service, plus


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  •  11/2% of his or her average final compensation for each of the next 15 years of benefit service, reduced by
 
  •  11/4% of his or her primary Social Security benefit for each year of benefit service up to a maximum of 40 years.
 
In addition, under the Traditional Pension Plan, a participant first employed on or after January 1, 2000 would receive an annual pension that would equal:
 
  •  11/2% of his or her average final compensation (as defined below) for each year of benefit service up to 40 years, reduced by
 
  •  11/4% of his or her primary Social Security benefit for each year of benefit service up to a maximum of 40 years.
 
For a participant first employed prior to January 1, 2005, average final compensation (including salary plus approved bonus or AIP payments) is the total of:
 
  •  the participant’s average annual base salary for the five calendar years of the last 120 consecutive calendar months of eligibility service that would result in the highest average annual base salary amount, plus
 
  •  the participant’s average annual pension eligible compensation, not including base salary, for the five calendar years of the participant’s last 120 consecutive calendar months of eligibility service that would result in the highest average annual compensation amount.
 
For a participant first employed on or after January 1, 2005, average final compensation is the average of the participant’s total pension eligible compensation (salary, bonus and annual incentive payments for Named Executive Officers and other exempt salaried employees) over the five consecutive calendar years of the participant’s final 120 months of employment.
 
As it applies to participants first employed prior to January 1, 2000, under the Traditional Pension Plan, Standard Early Retirement is available to employees at least 55 years of age with 10 years of eligibility service. Special Early Retirement is available to employees at least age 55 with 15 years of eligibility service or at least age 50 whose age plus total eligibility service equals at least 80. For Standard Early Retirement, if payments begin before age 65, payments from anticipated payments at the normal retirement age of 65 are reduced by 1/4 of 1% for each month that payments commence prior to the Normal Retirement Age. For Special Early Retirement, if payments begin between ages 60-64, benefits will be payable at 100%. If payments begin prior to age 60 they are reduced by 5/12 of 1% for each month that payments start before age 60 but not more than 25%.
 
For participants first employed from January 1, 2000 through December 31, 2004, under the Traditional Pension Plan, Standard Early Retirement is available as above. Special Early Retirement is also available to employees who have attained at least age 55 with 15 years of eligibility service (but not earlier than age 55). For Special Early Retirement, the benefit payable at or after age 62 would be at 100%; if payments commence prior to age 62 they would be reduced by 5/12 of 1% for each of the first 48 months prior to age 62 and by an additional 4/12 of 1% for each of the next 12 months and by an additional 3/12 of 1% for each month prior to age 57. For participants first employed on or after January 1, 2005, and who retire before age 65, benefits may commence at or after age 55 but they would be reduced by 5/9 of 1% for each of the first 60 months prior to age 65 and an additional 5/18 of 1% for each month prior to age 60.
 
In December 2007, effective January 1, 2008, the ITT Salaried Retirement Plan and the ITT Excess Pension Plans were amended to provide for a three-year vesting requirement. In addition, for employees for employees who are already vested and who are involuntarily terminated and entitled to severance payments from the Company, additional months of age and service (not to exceed 24 months) are to be imputed based on the employee’s actual service to his or her last day


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worked, for purposes of determining eligibility for early retirement. These amendments were intended in part to permit compliance with Internal Revenue Code Section 409A.
 
The 2007 Pension Benefits table on page 83 of this Proxy Statement provides information on the pension benefits for the Named Executives Officers. At the present time, none of the Named Executive Officers listed in the Summary Compensation Table has elected to accrue benefits under the Pension Equity Plan formula. Messrs. Driesse and Gaffney participate under the terms of the plan applicable to employees hired before January 1, 2000, Mr. Loranger participates under the terms of the plan in effect for employees hired between January 1, 2000 and December 31, 2004 and Ms. Ramos and Ms. McClain participate under the terms of the plan in effect for employees hired after January 1, 2005. The accumulated benefit an employee earns over his or her career with the Company is payable on a monthly basis starting after retirement. The normal retirement age as defined in the ITT Salaried Retirement Plan is 65. Employees may retire as early as age 55 under the terms of the plan. Pensions may be reduced if retirement starts before age 65. Possible pension reductions are described on page 81 of this Proxy Statement. Mr. Driesse is eligible for undiscounted early retirement and Mr. Minnich’s participation in the Plan ended on July 31, 2007, before he became entitled to a vested benefit.
 
Benefits under this plan are subject to the limitations imposed under Sections 415 and 401(a)(17) of the Internal Revenue Code in effect as of December 31, 2007. Section 415 limits the amount of annual pension payable from a qualified plan. For 2007 this limit is $180,000 per year for a single life annuity payable at an IRS-prescribed retirement age. This ceiling may be actuarially adjusted in accordance with IRS rules for items such as employee contributions, other forms of distribution and different annuity starting dates. Section 401(a)(17) limits the amount of compensation that may be recognized in the determination of a benefit under a qualified plan. For 2007 this limit is $225,000.
 
ITT Excess Pension Plan:  Since federal law limits the amount of benefits paid under and the amount of compensation recognized under tax-qualified retirement plans, the Company maintains the unfunded ITT Excess Pension Plan which is not qualified for tax purposes. The purpose of the ITT Excess Pension Plan is to restore benefits calculated under the ITT Salaried Retirement Plan formula which cannot be paid because of the IRS limitations noted above. The Company has not granted any extra years of benefit service to any employee under either the ITT Salaried Retirement Plan or the Excess Pension Plan. In the event of a change of control, certain extra years of service may be allowed in accordance with the terms of the Special Senior Executive Severance Pay Plan described on pages 87 to 88 of this Proxy Statement.
 
Generally, participating officers may elect, upon retirement, to receive their excess benefit in a single discounted sum payment. The single discounted sum option under the Excess Pension Plan was closed to new members effective January 1, 2008. In the event of a change of control, any excess benefit would be immediately payable, subject to any applicable Internal Revenue Code Section 409A restrictions, and would be paid in a single discounted sum.
 
Mr. Loranger’s Special Pension Arrangement:  Mr. Loranger has a Special Pension Arrangement which is described on page 75 of this Proxy Statement.
 
No pension benefits were paid to any of the named executives in the last fiscal year.
 
Excess Plan Trust:  There also is an excess plan trust under which excess benefits accrued by Messrs. Driesse, Gaffney, and Ms. Ramos and Ms. McClain are funded. Generally, participating officers may elect, upon retirement, to receive their excess benefit in a single discounted lump sum payment. In the event of a Change of Control, any excess benefit would be immediately payable, subject to any applicable Internal Revenue Code Section 409A restrictions, and would be paid in a single discounted sum.


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