Exhibit 10.3
February 14, 2001
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SUNTRUST
SUMMARY OF MODIFICATIONS TO THE SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
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The Compensation Committee of the Board of Directors of SunTrust Banks, Inc.
approved a recommendation presented by the Human Resources staff to amend the
SunTrust Supplemental Executive Retirement Plan (SERP). The purpose of the
amendment to the plan is to provide for a second tier SERP benefit targeted at
50% of a covered executive's final average covered compensation. The Committee
also approved a second recommendation to add 13 executives as participants in
the amended SERP at the second tier SERP benefit level. The Committee also
approved specific plan design features that are summarized below.
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PROVISION RECOMMENDATION COMMENTS
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Purpose . To deliver competitive retirement benefits that help The definition of covered compensation for the
attract and retain key talent and help mitigate the qualified retirement plan includes base pay only. More
erosion of retirement income benefits resulting from recently, a greater percentage of an executive's pay
statutory limitations is being delivered in the form of variable
. To provide a retirement benefit which more compensation that is directly linked to organization
appropriately takes into account the total cash and individual performance. Therefore, it is appropriate
compensation of covered executives to include variable pay in the definition of covered
compensation to ensure appropriate and competitive levels
of retirement income are being provided to covered
executives.
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Participation Add 13 participants. Other companies in our industry group of comparable
size would typically have 60+ participants.
Discretionary, but with strong consideration given to:
. Grades 52+ (midpoint $170,000) . 5 SunTrust executives currently in SERP
. Historically high contributors . Mr. Wells currently in SunTrust SERP per Merger
. Future senior level contribution anticipated Agreement
. Management level: primarily Management committee with . 13 Crestar executives are grandfathered participants
consideration also given to LOB heads, STI functional in Crestar SERP (5 have pulled chute including one
heads, Bank CEOs and key line managers of largest banks who is retiring soon)
. Additional 13 executives to be covered
Even with a total of 20-30 participants, SunTrust is
still conservative with respect to the total number of
covered executives when compared to our industry peer
group.
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PROVISION RECOMMENDATION COMMENTS
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Covered Includes base pay and short term cash incentive The current SERP provisions include one year
Compensation awards. Covered compensation is the sum of the of PUP in the definition of covered compensation
participants' base pay plus the annual cash due to the historical compensation mix. Since we
incentive award for a calendar year. The annual have recently shifted some portion of compensation
cash incentive award is included in the calendar opportunity for PUP to MIP, it is appropriate to only
year during which the award was earned and not the include MIP for new participants on a prospective
calendar year during which it is paid. basis. Survey data indicates that PUP awards are
typically excluded from the definition of covered
compensation. If a FIP participant becomes a SERP
participant, should consider limiting the amount of a
FIP award that can be taken into consideration when
computing final average covered compensation.
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Final Final average compensation will be the sum of the The SERP will be amended to provide that the
Average three full calendar years of covered compensation definition of final average compensation will
Compensation out of the five full calendar years immediately apply to Tier I SERP participants also. However, the
preceding the executive's retirement, that will definition of covered compensation for Tier I SERP
produce the highest average. participants will not change. Should consider capping
the amount of a FIP award at equivalent MIP level if
a FIP particpant becomes a covered executive.
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Benefit 2% x years of creditable service not to exceed Credit given for all creditable SunTrust service
Accrual 25 years x covered compensation
Formula
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Target Benefit 50% of final average covered compensation Current SunTrust SERP target retirement benefit
Amount Offset by: is 60% of final average covered compensation.
(Income . Benefits payable from SunTrust Retirement Plan This was adopted in mid-eighties to be compatible
Replacement . Benefits payable from SunTrust ERISA Excess Plan with the qualified retirement plan for employees.
Ratio) . Benefits payable under any previous employer's This plan has since been changed. 55% is the
retirement plans (qualified and/or non-qualified) market median for a full-service executive with 30
. Benefits payable from Social Security years of service. Crestar uses 50% (but also
uses highest average comp in three years).
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PROVISION RECOMMENDATION COMMENTS
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Payment The normal form of payment would continue to be a single The grandfathered PBGC rate would not be available
lump sum distribution. Other payment options, as provided to new participants for purposes of calculating the
for in the retirement plan, would be available at the lump sum value of the accrued SERP benefit.
executive's election
.
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Vesting Age 60 with 10 years of service Current SERP specifies age 60. There have been no
external hires added to the SERP. Recently, as a
Immediate vesting as a result of death, disability, or in precautionary measure, all current SERP
the event of a change in control participants were vested to avoid the excise tax on
excess parachute attributable to accelerated vesting
in the event of a change in control.
Age 60 provides a "Golden Handcuff" until the
executive attains age 60, and helps avoid some of the
excise tax on excess parachute payments in the event of
a CIC.
If an external hire becomes a named participant in the
SERP, a determination could be made regarding the
appropriateness of this vesting schedule or whether, on
an individual basis, we designate a specific amount of
service or special vesting schedule as appropriate.
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Early Eligible at age 60 with 10 years of service Same early retirement reduction factors as qualified
Retirement pension plan.
SERP service factor (which acts as an early
retirement reduction) will not apply to new
participants.
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Survivor Pre-retirement: joint & 50% survivor annuity
Benefit Post-retirement: none (unless executive had elected a
joint and survivor payment option)
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PROVISION RECOMMENDATION COMMENTS
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Change in Control Continue with current CIC provisions: All SERP participants will also be provided
. Within 3 years of a change in control, if there is with a change in control agreement. Therefore,
involuntary termination or voluntary termination for it is possible that all change in control
good reason, SERP compensation is to be based on the protections, benefits enhancements and benefit
highest compensation for any 12 month period during continuation provisions can be addressed in the
the last five years; SERP service is to be increased change in control agreements and section 13 of
by the lesser of 36 full months or the number of the SERP can be deleted.
months between the normal retirement date and the
date of termination. The SERP distribution is to be
paid in a lump sum as soon as practical after a change
in control.
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Special Include consulting, non-compete, and
Provisions non-solicitation provisions both from a business
perspective as well as to minimize impact of the excise
tax on excess parachute payments in the event of a
change in control.
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Dispute Resolution . Require binding arbitration to resolve disputes
. Losing party pays attorneys fees
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Other Eligibility for an executive to receive benefits under the This has been an issue with a Crestar
SERP will not be construed to be "retirement" under the participant and we want this to be clearly
SunTrust Retirement Plan for purposes of establishing stated.
eligibility for other benefits.
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Cost Existing corporate owned life insurance
policies could potentially provide sufficient
underlying assets to offset the financial
statement expense and balance sheet
liabilities attributable to the emerging
benefit obligations associated with adding
participants to the SERP.
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Rabbi Trust Continue to have SERP secured by a Rabbi trust
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SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
SERP TIER 1
PURPOSE
The SunTrust Banks, Inc. Supplemental Executive Retirement Plan (SERP) is
designed to provide a targeted level of post retirement income to certain key
executives to supplement the benefits provided under the SunTrust Retirement and
ERISA Excess Plans. This Plan is intended to better enable the Company to
deliver more competitive levels of total retirement income to its senior
executives and to aid in the recruitment and retention of critical executive
talent.
PARTICIPANTS
Participation in the SERP is limited to a highly select group of key executives
who have significant impact upon the long-term growth and profitability of the
Company and who are designated as SERP Participants by the Compensation
Committee.
SERP BENEFIT
The SERP Benefit is an annual retirement income benefit equal to 60% of the
Participant's SERP Covered Compensation both earned and paid immediately prior
to retirement. The SERP Benefit is reduced by any benefits payable to the
Participant under the SunTrust Retirement Plan, Social Security, the SunTrust
ERISA Excess Plan and certain other executive retirement arrangements. The
benefit is calculated at the Participant's normal or early retirement date
followed by a one-time adjustment to occur in January after the Participant's
Management Incentive Plan (MIP) and Performance Unit Plan (PUP) awards are paid.
SERP COVERED COMPENSATION
SERP Covered Compensation is sum of the three full calendar years of a
Participant's base salary, annual MIP award and PUP award payment out of the
five full calendar years of a Participant's base salary, annual MIP award and
PUP award payment immediately preceding the Participant's normal or early
retirement date that will produce the highest average.
VESTING
A Participant becomes 100% vested in his/her accrued SERP Benefit after the
completion of 10 years of service and the attainment of age 60.
RETIREMENT DATES
The SERP Benefit becomes fully accrued and payable to a Participant if
retirement occurs at age 65 or later. Early retirement can occur at age 60 or
thereafter, with the Participant receiving the benefit accrued up to the date of
his/her early retirement actuarially adjusted for early commencement of payment.
The early retirement SERP Benefit is calculated by applying a SERP service
factor to the accrued SERP Benefit. The SERP service factor is derived by
dividing the Participant's actual months of service at the early retirement date
by his/her projected months of service had he/she remained with the Company
until the normal retirement date. This factor is applied to the accrued SERP
Benefit to obtain the early retirement SERP Benefit. No SERP benefit is payable
to a Participant if retirement or termination occurs prior to the attainment of
age 60.
DISABILITY PROVISION
In the event a Participant becomes disabled prior to retirement, the
Participant will continue to accrue a SERP Benefit while disabled until the
Retirement Plan benefit is payable or recovery, whichever is earlier. SERP
Compensation during any period of disability when compensation is not
earned or paid will be assumed at the same rate in effect at the time
disability began. The benefit becomes payable under the SERP at age 65 or,
if early retirement is elected under the Retirement Plan, at the early
retirement date.
SURVIVOR BENEFIT
In the event of the death of a Participant prior to retirement, a survivor
benefit will be paid to the Participant's spouse, or if unmarried, the
named beneficiary under the SunTrust Retirement Plan. The SERP Survivor
Benefit is equal to the accrued benefit that would have been payable to the
Participant's spouse under a 100% joint and survivor annuity option if the
Participant had retired on the date immediately preceding his/her death.
The SERP Survivor Benefit will be paid in a lump sum as soon as practicable
following the Participant's death. The computation of the SERP Survivor
Benefit will be based on the survivor's annuity amount at the later of the
date the deceased Participant would have otherwise attained age 55 or the
actual date of the Participant's death. If the SERP Survivor Benefit is
paid before age 60, it is actuarially reduced in the same manner as
retirement payments under the SunTrust Retirement Plan.
PAYMENT OPTIONS
Upon retirement, the SERP Benefit will be paid from the general assets of the
Company in the form of a single lump sum distribution. A Participant may make a
written election to have his/her benefit paid in any form of benefit available
under the Retirement Plan provided this election is made at least one year
before the benefit is to be paid under this plan. For grandfathered participants
designated prior to 1994, lump sum payments will be calculated using the PBGC
interest rate (rather than the GATT interest rate used in the Retirement Plan).
At such time that the PBGC rate is no longer published, a phantom PBGC rate will
be used, as outlined in the plan document.
TAX CONSEQUENCES
The SERP is an unfunded, nonqualified deferred compensation plan. Distributions
are treated as ordinary income. Required federal income tax, state income tax
(if applicable) and FICA payroll taxes will be withheld according to the
withholding tables in effect at the time of retirement.
FORFEITURE AND NONCOMPETE
The Compensation Committee may require a Participant to execute a release and
waiver of claims form as a condition of receiving benefits under the SERP. The
Committee may also forfeit, suspend or seek to recover SERP Benefit payments for
a Participant's violation of applicable civil or criminal laws, corporate rules
of conduct or engaging in activity which the Committee determines is detrimental
to the interests of the Company. The release also serves as a non-compete
agreement between Participant and the Company stating that the Participant
agrees not to engage in any business with a direct competitor of the Company.
CHANGE IN CONTROL PROTECTION
In the event of a Change in Control and the constructive termination of the
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Participant's employment within three years of the change in control date, the
Participant's SERP Benefit will vest automatically and will be calculated based
upon the following provisions:
. 36 months will be added to the SERP service factor (or if less the number of
months to the Participant's 65/th/ birth date)
. SERP Compensation will be calculated using the highest 12 months out of the
last 60 months.
. The benefit will be payable immediately with a reduction factor of 3% for
every year below age 60.
. The payment will automatically be made as a lump sum.
Additionally, the Participant will continue to receive health, life and
disability benefit coverage for up to two years after termination.
The SERP Benefit is secured by a rabbi trust (grantor trust). The purpose of
this trust is to provide for the funding of the projected SERP Benefit in the
event of a change in control. In addition, the trust would provide protection
against a refusal to pay by future management. The trust would become
irrevocable upon a change in control. This trust does not provide protection
against insolvency or regulatory intervention.
***
This is a non-technical summary of the Plan. The Plan Document is the
authoritative source for all questions on the SERP. A copy of the Plan Document
can be obtained by calling Donna Daniel at (404) 827-6163. The Compensation
Committee administers the Plan and has the authority to amend it prospectively
or terminate the Plan at any time.
Revised February 15, 2001 (SERP Tier1)
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
SERP TIER 2
PURPOSE
The SunTrust Banks, Inc. Supplemental Executive Retirement Plan (SERP) is
designed to provide a targeted level of post retirement income to certain key
executives to supplement the benefits provided under the SunTrust Retirement and
ERISA Excess Plans. This Plan is intended to better enable the company to
deliver more competitive levels of total retirement income to its senior
executives and to aid in the recruitment and retention of critical executive
talent.
PARTICIPANTS
Participation in the SERP is limited to a highly select group of key executives
who have significant impact upon the long-term growth and profitability of the
Corporation and are designated as SERP Participants by the Compensation
Committee.
SERP BENEFIT
The SERP Benefit is an annual retirement income benefit equal to a service
related percentage of a Participant's SERP Covered Compensation. The SERP
benefit formula is 2% X a Participant's years of service up to 25 years X a
Participant's SERP Covered Compensation. Therefore, a SERP Participant with 25
or more years of service will have a SERP benefit factor of 50% (the target
benefit level). The SERP Benefit is reduced by any benefits payable to the
Participant under the SunTrust Retirement Plan, Social Security, the SunTrust
ERISA Excess Plan and certain other executive retirement arrangements.
SERP COVERED COMPENSATION
SERP Covered Compensation is defined as the sum of the three full calendar years
of a Participant's base salary and annual MIP award, out of the five full
calendar years of a Participant's base salary and annual MIP award immediately
preceding the Participant's normal or early retirement date, that will produce
the highest average. The annual MIP award is included in the Participant's
compensation for the year in which it is earned and not the year in which it is
paid.
VESTING
A Participant becomes 100% vested in his/her accrued SERP Benefit after
completion of 10 years of service and the attainment of age 60.
RETIREMENT DATES
The SERP Benefit becomes fully accrued and payable to a Participant if
retirement occurs at age 65 or later. Early retirement can occur at age 60 or
thereafter, with the Participant receiving the benefit accrued up to the date of
his/her early retirement actuarially adjusted for early commencement of payment.
The accrued SERP Benefit as of the early retirement date will be reduced by the
same factors used to calculate early retirement benefits under the Retirement
Plan. No SERP benefit is payable to a Participant if retirement or termination
occurs prior to the attainment of age 60.
DISABILITY PROVISION
In the event a Participant becomes disabled prior to retirement, the Participant
will continue to accrue a SERP Benefit while disabled until the Retirement Plan
benefit is payable or recovery, whichever is earlier. SERP Compensation during
any period of disability when compensation is not earned or paid will be assumed
at the same rate in effect at the time disability began. The benefit becomes
payable under the SERP at age 65 or, if early retirement is elected under the
Retirement Plan at the early retirement date.
SURVIVOR BENEFIT
In the event of the death of a Participant prior to retirement, a survivor
benefit will be paid to the Participant's spouse, or if unmarried, the named
beneficiary under the SunTrust Retirement Plan. The SERP Survivor Benefit is
equal to the accrued benefit that would have been payable to the Participant's
spouse under a 50% joint and survivor annuity if the Participant had retired on
the date immediately preceding his/her death. The SERP Survivor Benefit will be
paid in a lump sum as soon as practicable after the Participant's death. The
computation of the SERP Survivor Benefit will be based on the survivor's annuity
amount at the later of the date the Participant would have otherwise attained
the age of 55 or the actual date of the Participant's death. If the SERP
Survivor Benefit is paid before age 60, it is actuarially reduced in the same
manner as retirement payments under the SunTrust Retirement Plan.
PAYMENT OPTIONS
Upon retirement, the SERP Benefit will be paid from the general assets of the
Company in the form of a single lump sum distribution. A Participant may make a
written election to have his/her benefit paid in any form of benefit available
under the Retirement Plan provided the election is made at least one year before
the benefit is to be paid under this plan.
TAX CONSEQUENCES
The SERP is an unfunded, nonqualified deferred compensation plan. Distributions
are treated as ordinary income. Federal income tax, state income tax (if
applicable) and FICA payroll taxes will be withheld according to withholding
tables in effect at the time of retirement.
FORFEITURE AND NONCOMPETE
The Compensation Committee may require a Participant to execute a release and
waiver of claims form as a condition of receiving benefits under the SERP. The
Committee may also forfeit, suspend or seek to recover SERP Benefit payments for
a Participant's violation of applicable civil or criminal laws, corporate rules
of conduct or engaging in activity which the Committee determines is detrimental
to the interests of the Company. The release also serves as a non-compete
agreement between Participant and the Company stating that the Participant
agrees not to engage in any business with a direct competitor of the Company.
CHANGE IN CONTROL PROTECTION
In the event of a Change in Control and the constructive termination of the
---
Participant's employment within two years of the change in control date, the
SERP Benefit will vest automatically. And, depending upon the age and service of
the Participant at the date of termination, the SERP Benefit will be calculated
in the same manner as an early retirement or vested terminated retirement
benefit under the Retirement Plan. The payment of the SERP Benefit will
automatically be made in the form of a single lump sum distribution.
The SERP Benefit is secured by a rabbi trust (grantor trust). The purpose of
this trust is to provide for the funding of the projected SERP benefit in the
event of a change in control. In addition, the trust would provide protection
against a refusal to pay by future management. The trust would become
irrevocable upon a change in control. This trust does not provide protection
against insolvency or regulatory intervention.
***
This is a non-technical summary of the Plan. The Plan Document is the
authoritative source for all questions on the SERP. A copy of the Plan Document
can be obtained by calling Donna Daniel at (404) 827-6163. The Compensation
Committee administers the Plan and has the authority to amend it prospectively
or terminate the Plan at any time.
Revised February 15, 2001
SERP Tier 2