This excerpt taken from the PCG DEF 14A filed Mar 14, 2006.
Long-Term Incentive Program Awards in 2005
This table summarizes the long-term incentive grants made to the officers named in the Summary Compensation Table during the past year.
PG&E Corporation and Pacific Gas and Electric Company provide retirement benefits to all of the officers named in the Summary Compensation Table on pages 36 and 37. The benefit formula for eligible officers is 1.7 percent of the average of the three highest combined salary and annual Short-Term Incentive Plan payments during the last 10 years of service multiplied by years of credited service.
During 2002 and 2003, annuities were purchased to replace a significant portion of the unfunded retirement benefits for certain officers whose entire accrued benefit could not be provided under the Retirement Plan due to tax code limits. The annuities will not change the amount or timing of the after-tax benefits that would have been provided upon retirement under the Supplemental Executive Retirement Plan (SERP) or similar arrangements. In connection with the annuities, tax restoration payments were made such that the annuitization was tax-neutral to the officer.
Effective July 1, 2003, Mr. Darbee and Mr. King became participants in the SERP with five years of credited service. Mr. Darbee and Mr. King will each earn an additional five years of credited service, provided that they are employed by PG&E Corporation or a subsidiary on July 1, 2008.
As of December 31, 2005, the estimated pre-tax annual retirement benefits payable under the SERP or similar arrangements (assuming credited service to age 65), adjusted to reflect the effect of the annuities, for the most highly compensated executive officers were as follows: Mr. Darbee $460,435, Mr. Johns $290,525, Mr. Worthington $398,510, and Mr. King $567,129. The estimated annual retirement benefits are single life annuity benefits and would not be subject to any Social Security offsets. Mr. Smith and Mr. Glynn retired December 31, 2005, and are entitled to annual retirement benefits of $478,332 and $452,279, respectively. Mr. Smith's and Mr. Glynn's retirement benefits have been adjusted to reflect the effect of the annuities and the election of 100% joint and survivor annuity benefits, and are not subject to Social Security offsets.