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PBI » Topics » PENSION BENEFITS AS OF DECEMBER 31, 2006

This excerpt taken from the PBI DEF 14A filed Apr 3, 2007.

PENSION BENEFITS AS OF DECEMBER 31, 2006

        Number of Years    Present Value of 
        Credited Service    Accumulated 
Name    Plan Name   
(#) 
        Benefit ($)(1) 
               
Michael J. Critelli(2)    Pitney Bowes Pension Plan    27.7      640,685 
               
Michael J. Critelli    Pitney Bowes Pension Restoration Plan    27.7      7,458,225 
               
Bruce P. Nolop    Pitney Bowes Pension Plan    7.0      63,930 
               
Bruce P. Nolop    Pitney Bowes Pension Restoration Plan    7.0      283,967 
               
Murray D. Martin(2)    Pitney Bowes Pension Plan    19.4      348,307 
               
Murray D. Martin    Pitney Bowes Pension Restoration Plan    19.4      1,939,233 
             
Michele Coleman Mayes    Pitney Bowes Pension Plan    3.9      39,994 
             
Michele Coleman Mayes    Pitney Bowes Pension Restoration Plan    3.9      124,819 
               
Patrick J. Keddy(3)    Pitney Bowes Pension Fund    17.7      1,752,091 
               
 
(1)      Material assumptions used to calculate the present value of accumulated benefits under the Pitney Bowes Pension Plan for each named executive officer are detailed in note 13 to the financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2006. In addition, the mortality table used was UP94G.
 
   
(2) Messrs. Critelli and Martin are currently eligible for early retirement. If they were to have retired on December 31, 2006, the present value of the pension benefit payable would have been $10,325,191 for Mr. Critelli and $2,283,637 for Mr. Martin.
   
(3) Amount shown for Mr. Keddy’s pension has been converted to dollars using the conversion rate of $1.825 to £1.00 (which is the average of the monthly average conversion rates for 2006).

The Pension Benefits table presents the present value of accumulated pension benefits as of December 31, 2006. The Pitney Bowes Pension Plan is a qualified pension plan for U.S. employees, while the Pitney Bowes Pension Fund is a qualified pension plan for U.K. employees. Under the qualified Pension Plan, employees receive retirement benefits each year based on compensation up to a maximum of $220,000 for 2006. Pension amounts for compensation above $220,000 are accrued under the nonqualified Pension Restoration Plan based on the same formula used under the qualified plan. Payments under the nonquali-fied Pension Restoration Plan are paid from our general assets. These payments are substantially equal to the difference between the amount that would have been payable under our qualified Pension Plan in the absence of legislation limiting pension benefits and earnings that may be considered in calculating pension benefits, and the amount actually paid under our qualified Pension Plan. Pitney Bowes does not maintain an excess benefit plan with special provisions, such as above-market interest rates and excess service credits.

Other than Ms. Mayes, who joined the company in 2003, all of the named executive officers are fully vested in their pension benefit.

The material terms of the U.S. Pension and Pension Restoration plans are summarized below:

  • Employees hired prior to January 1, 2005 are eligible to participate.

  • Normal retirement age is 65 with at least five years of service, while early retirement is allowed at age 55 with at least ten years of service.

  • The vesting period is five years.

  • For purposes of determining pension benefits, “earnings” are defined as the average of the five highest consecutive calendar year pay amounts. Earnings include base pay, vacation, severance, before-tax plan contributions, annual incentives (paid and deferred), and certain bonuses. Earnings do not include long-term cash incentive unit payments, stock options, restricted stock, hiring bonuses, company contributions to benefits, and expense reimbursements.

  • The formula to determine benefits is based on age, years of service, and final average five-year earnings. Employees receive annual percentages of earnings based on their age plus service. The annual percentages range from 2% to 10% of final average earnings, plus 2% to 6% of such earnings in excess of the Social Security Wage Base. In addition, Pension Plan participants whose age plus service totaled more than 50 as of September1, 1997 receive “transition credits” to make upfor some of the differences between the oldand new retirement plan formulas. Messrs.Critelli and Martin are among those Pension

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    Plan participants who are eligible to receive“transition credits.”
  • The maximum annual benefit accrual under the Pension Restoration Plan is an amount equal to 16.5% multiplied by the participant’s final average earnings and the participant’s credited service.

  • Upon retirement, benefits are payable in a lump-sum or various annuity forms, including life annuity and 50% joint and survivor annuity.

  • The distribution options under the Pension Restoration Plan are designed to ensure compliance with Internal Revenue Code Section 409A.

The material terms of the U.K. Pension Fund are summarized below:

  • Normal retirement age is 65, while early retirement is allowed from age 55. The plan was revised in July 1998 to change the retirement age to 65 from 60. The benefit for service from July 1998 is reduced by 4% per year before age 65 and the benefit for service before July 1998 is reduced 4% per year before age 60.

  • For purposes of determining pension benefits, earnings are defined as the average of the three highest consecutive calendar year earnings amounts during the last ten years. Earnings include base pay and annual incentives less the U.K. social security threshold.

  • The formula to determine benefits is based on years of service and earnings. Employees must contribute 2% of their earnings into the defined benefit section of the plan. Employees accrue 1/80th of their earnings for each year of service. For service prior to July 1998, employees accrued 1/60th of earnings for each year of service. Mr. Keddy has nine years of service accrued under the old formula.

  • The U.K. Pension Fund also includes a Qualified Defined Contribution benefit under which the employee contributes 2% of his earnings and the company gives a 2% match.
    The employee also has the option to contributeadditional savings that are not matched.

  • Upon retirement, benefits are payable as an annuity with a spousal survivor benefit, plus the option to take up to 25% of the value as a lump-sum.
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