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The
Verizon Management Pension Plan is a noncontributory,
tax-qualified pension plan for salaried employees that
provides for distribution of benefits in a lump sum
or an annuity, at the participant’s election.
All participant pension benefits under this plan are
calculated using a cash balance formula that provides
for pay credits equal to 4 to 7 percent (depending on
age and service) of annual eligible pay up to the statutory
limit on compensation ($205,000 in 2004), for each year
of service following the conversion to cash balance.
Messrs. Seidenberg, Babbio, and Barr and Ms. Toben and
other Verizon executive officers began participating
in the Verizon Management Pension Plan as of January
1, 2002. Effective January 1, 2005, in connection with
his change to a Verizon service company payroll, Mr.
Strigl began participating in the Verizon Management
Pension Plan. Mr. Strigl’s prior service with
Bell Atlantic Mobile and Verizon Wireless, Inc. is recognized
for pension plan vesting and eligibility purposes only.
In general, eligible pay includes base salary and short-term
incentives, exclusive of certain senior manager or other
incentive compensation, and other similar types of payments.
Additionally, monthly interest credits are made to the
participant’s account balance based upon the prevailing
market yields on certain U.S. Treasury obligations.
In order to record these pay and interest credits, the
plan administrator maintains a hypothetical account
balance for each participant. However, as part of the
transition to a cash balance formula, all participants
who had at least 10 years of service with the Company
as of January 1, 2002 receive benefits under an alternative
formula, referred to as the “highest average pay
formula,” if that formula provides a higher benefit
than the cash balance formula. Under this formula, pensions
are computed until 2008 on 1.35% of eligible pay for
average annual salary for the five highest consecutive
years up to the statutory limit on compensation ($205,000
in 2004), for each year of service. In 2008, the Verizon
Management Pension Plan will shift from this highest
average pay formula to a career average pay formula.
Under the career average pay formula an employee’s
pension is computed on 1.35% of eligible pay for average
annual salary over the remainder of the employee’s
career with the Company up to the statutory limit on
compensation, for each year of service. As of December
31, 2004, the actual years of service credited under
the Verizon Management Pension Plan for Messrs. Seidenberg,
Babbio, and Barr and Ms. Toben were 38, 38, 10, and
32, respectively.
The following table illustrates the estimated annual
benefits payable pursuant to the highest average pay
formula under the Verizon Management Pension Plan based
on a maximum compensation limit of $205,000. The table
assumes normal retirement at age 65 and is calculated
on a single life annuity basis, based upon final average
earnings and years of service: |
| Pension
Plan Table |
 |
Final
Average
|
Years
of Service |
|
|
Earnings
|
|
15 |
|
|
20 |
|
|
25 |
|
|
30 |
|
|
35 |
|
|
40 |
|
|
| $205,000 |
$ |
41,513 |
|
$ |
55,350 |
|
$ |
69,188 |
|
$ |
83,025 |
|
$ |
96,863 |
|
$ |
110,700 |
|
|
|
Because
employees with less than 10 years of service generally
do not qualify for the highest average pay formula under
the plan, Mr. Barr’s cash balance account was
$138,307 as of December 31, 2004.
Section 415 of the Internal Revenue Code places certain
limitations on pension benefits that may be paid from
the trusts of tax-qualified plans, such as the Verizon
Management Pension Plan. Accordingly, any pension amounts
for executive officers that exceed that limit will be
paid from the Company’s assets under the Verizon
Income Deferral Plan (“IDP”). Verizon’s
executive officers, including Messrs. Seidenberg, Babbio,
Strigl, and Barr and Ms. Toben, began participating
in the IDP as of January 1, 2002. This plan is a nonqualified,
unfunded, supplemental retirement and deferred compensation
plan provided to all eligible senior managers under
which an individual account is maintained for each participant.
The plan allows the approximately 300 active participants
to defer voluntarily the receipt of up to 100% of their
eligible compensation, and also provides retirement
and other benefits to participants through Company credits
to the participant’s account under the plan. Eligible
compensation consists of: |
| I. |
a
participant’s base salary in excess of the
Internal Revenue Code limit on compensation for
qualified retirement plans ($205,000 in 2004); |
| II. |
the
participant’s short-term incentive award;
and |
| III. |
other
bonuses that the plan administrator determines are
eligible for deferral. |
|
| If
any participant elects to defer eligible income, the Company
provides a matching contribution equal to the rate of
match under the qualified savings plan for management
employees. That rate is 100% of the first 4% of eligible
compensation deferred and 50% of the next 2% of eligible
compensation deferred. In addition, until December 31,
2004, the Company made retirement contributions to a participant’s
account equal to 32% of the base salary, in excess of
$205,000, and short-term incentive award components of
the participant’s eligible compensation, for the
first 20 years of participation in the plan and, thereafter,
equal to 7% of such eligible compensation. The following
table shows the aggregate portion of each named executive
officer’s account attributable to the Company’s
contributions as of December 31, 2004. |
|
| Executive |
Aggregate
Account Balance |
|
|
|
Mr.
Seidenberg
|
$ |
13,769,807 |
|
|
| Mr.
Babbio |
$ |
11,911,035 |
|
|
| Mr.
Strigl |
$ |
4,448,952 |
|
|
| Mr.
Barr |
$ |
6,657,816 |
|
|
| Ms.
Toben |
$ |
3,004,344 |
|
|
|
|
The
actual annual Company contribution for 2004 has been
included in column (i) of the Summary Compensation Table.
The Human Resources Committee eliminated the Verizon
Income Deferral Plan and froze the accrual of future
benefits under the IDP, including the 32% retirement
contribution credit on eligible compensation, as of
the close of business on December 31, 2004. As a result,
beginning on January 1, 2005, executive officers and
other senior managers are eligible to receive retirement
pay credits equal to 4%-7% (depending on age and service)
on all eligible compensation that exceeds the IRS qualified
pay limits ($210,000 in 2005). This is the same pay-credit
percentage range received by all other management employees
who participate in the Verizon Management Pension Plan.
This action reduces future guaranteed pension credits
received by Verizon executive officers and other senior
managers from 32% to a range of 4%-7%. |
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