This excerpt taken from the XEL DEF 14A filed Apr 18, 2007.
Retirement and Deferred Compensation Benefits. In 2006 the Company provided retirement benefits to executive officers under the Xcel Energy qualified and non-qualified pension plans subject to the same terms as all eligible non-bargaining employees. The role of the pension plans in executive compensation is the same as it is for other employees. The purpose is to provide a basis for providing income after retirement. The qualified pension plan includes earnings below the Internal Revenue Services established limits and the benefit may be payable in a manner that results in individual income tax advantages. The non-qualified pension plan includes earnings, if any, above the same Internal Revenue Service limit. The 2006 the Internal Revenue Service earnings limit was $220,000.
Each executive officer was eligible to participate in Xcel Energys (401(k)) Savings Plan and Deferred Compensation Plans. The plans allow executive officers, like other eligible employees, to defer all or a portion of their base salary and their annual incentive award. The Company matches 100% of eligible amounts deferred to both plans up to 3% of base salary and then up to 50% of eligible amounts deferred in both plans in excess of 3% of base salary up to 5% of base salary. The purpose of the Deferred Compensation Plan is to make up for retirement benefits that cannot be paid under the Companys qualified retirement plans due to the Internal Revenue Service Code limitations and the exclusion of certain compensation elements from pension eligible earnings.
Most executive officers and all of the NEOs are eligible to participate in the Supplemental Executive Retirement Plan (SERP). The SERP provides benefits to executive officers in addition to those provided through the qualified and non-qualified pension plans. The SERP benefit accrues over twenty years and is equal to 55% of the average of the highest three years of covered compensation out of the five years preceding retirement or termination minus the qualified and non-qualified pension plan benefits. Covered compensation for the purposes of calculating SERP benefits includes base salary and annual incentive. Long-term incentive payments are not included in covered compensation. The SERP benefit is valued as a 20-year annuity but is payable as a lump sum (unless the executive officer elected otherwise). Unreduced benefits are payable at age 62, or as early as age 55 reduced 5% for each year that the benefit commencement date precedes age 62. As part of the merger agreements, New Century Energies granted additional credited service years under the SERP to two NEOs. The Company granted the President and CEO of PSCo five additional credited years of service for purposes of SERP accrual. The Company has agreed to accrue SERP benefits for the President, Utilities Group ratably over eleven years rather than twenty years and to permit distribution of his full unreduced benefit as early as age 60.