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EXHIBIT (10)(h)
SUPPLEMENTAL EXECUTIVE RETIREMENT
PLAN FOR EMPLOYEES OF
CMS ENERGY / CONSUMERS ENERGY COMPANY
INTRODUCTION
The objective of the Supplemental Executive Retirement Plan (hereinafter
referred to as the "Supplemental Plan") is to attract and motivate top level
executives, including those recruited in mid- or late-career whose normal
pension would result in inadequate compensation, by providing additional
retirement income to supplement that provided by the Pension Plan of the
Company.
The Supplemental Executive Retirement Plan became effective on January 1, 1982
and is applicable to all employees of the Company who are eligible in accordance
with the provisions of this Supplemental Plan.
This instrument describes the Supplemental Plan for employees who retire, die or
whose services are terminated on or after May 1, 1998. The rights of employees
who, prior to May 1, 1998, retired, died or whose services were terminated are
governed by the provisions of the instrument in effect at such time. This
Supplemental Plan is an unfunded, unsecured promise to pay benefits at a later
date. Subject to the provisions of this Supplemental Plan, Participants have no
greater rights than the general creditors of the Company.
SECTION I. DEFINITIONS
Whenever used in this Supplemental Plan, the following terms shall have the
respective meanings set forth below, unless the context clearly indicates
otherwise. The definitions set forth in Section I of the Pension Plan are hereby
adopted and made a part of this Supplemental Plan.
"ACCRUED Means the Supplemental Executive Retirement Income
SUPPLEMENTAL beginning at Normal Retirement Date which would be
EXECUTIVE payable to a Participant at the rates provided in
RETIREMENT subsection 1 of Section V, on the basis of his
INCOME" Accredited Service and Preference Service rendered to
the date of computation.
"DISABILITY SERVICE Means the pension supplement, provision for which is
PENSION made in Section V, subsection 9 of this Supplemental
SUPPLEMENT" Executive Retirement Plan.
"EXECUTIVE Means the applicable amount awarded to the Participant
INCENTIVE under an Executive Incentive Compensation Plan of the
COMPENSATION" Company.
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"FINAL EXECUTIVE Means 1/12th of the average of the Earnings (without
PAY" regard to any limitations imposed on the Pension Plan
by the Internal Revenue Code or Regulations thereunder)
plus Executive Incentive Compensation (if any) of a
Participant, including any such amounts deferred, for
his five years of highest totals of Earnings plus
Executive Incentive Compensation (if any) during the
period of his Accredited Service (or the average of his
monthly total of Earnings plus Executive Incentive
Compensation earned over his Accredited Service,
including any such amounts deferred, if the Participant
has fewer than five years of Accredited Service as a
Participant).
For a Participant with a Salary Grade E-5 or above and
who, upon a Change in Control, receives a severance
payment under an employment agreement, three of the
five highest years of Earnings plus Executive Incentive
Compensation shall be one-third of the severance
payment paid to such Participant.
For purposes of determining Final Executive Pay,
Accredited Service shall include only the service
provided while the Participant holds a position that
qualifies for inclusion under this Supplemental Plan.
"PARTICIPANT" Means an employee of the Company included in the
Supplemental Plan pursuant to Section II.
"PLAN" OR Means the Pension Plan for Employees of Consumers
"PENSION PLAN" Energy Company, as amended.
"PREFERENCE Means the period of service credited to a Participant
SERVICE" pursuant to Section III.
"SERP RETIREMENT Means the managing board of the Plan as determined by
BOARD" the Board of Directors.
"SUPPLEMENTAL Means the monthly retirement income provided for by
EXECUTIVE this Supplemental Plan.
RETIREMENT
INCOME"
"SUPPLEMENTAL Means the Supplemental Executive Retirement Plan as it
PLAN" is described in this instrument.
The masculine pronoun wherever used herein shall mean or include the feminine
pronoun.
SECTION II. ELIGIBILITY
1. EMPLOYEES INCLUDED ON JANUARY 1, 1982 BUT BEFORE MAY 1, 1995. Each officer or
other executive of the Company in Salary Grades E-1 and above on January 1,
1982, who is eligible for inclusion in the Pension Plan on that date, will be
included in the Supplemental Plan as of January 1, 1982.
2. EMPLOYEES INCLUDED AFTER JANUARY 1, 1982. Each officer or other executive of
the Company who is eligible for inclusion in the Pension Plan and is appointed
to a position at Salary Grade E-1 or above after January 1, 1982, will be
included in the Supplemental Plan on the first day of the month after he assumes
such a position. Effective May 1, 1995, an officer or executive of Consumers
Energy who is eligible for
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inclusion in the Pension Plan and is appointed to a position at Salary Grade F
or above will be included in the Supplemental Plan on the first day of the month
after he assumes such position.
SECTION III. DETERMINATION OF PREFERENCE SERVICE
1. PREFERENCE SERVICE. Each Participant with a Salary Grade E-3 or above and
each Participant below Salary Grade E-3 included in this Plan as of April 30,
1998, shall be credited with one month of Preference Service for each month of
Accredited Service credited to him under the Pension Plan until the sum of
Accredited Service and Preference Service equals 20 years and, upon a Change in
Control as defined in Section XII, each Participant with a Salary Grade E-5 or
above and who receives a severance payment under an employment agreement shall
be credited with an additional 36 months of Preference Service; provided,
however, Preference Service will be reduced by the amount (if any) by which the
total period of Preference Service when added to the total period of Accredited
Service exceeds 35 years. Any Participant on May 1, 1998 who has been credited
with more than 20 years of Accredited Service and Preference Service shall not
have such Preference Service reduced until such time as the sum of Accredited
Service and Preference Service exceeds 35 years. Each Participant below Salary
Grade E-3 first included in this Supplemental Plan on or after May 1, 1998 shall
not be credited with Preference Service.
2. TRANSFERS TO OR FROM AFFILIATED COMPANIES. In the case of the transfer of a
Participant to any company now affiliated or associated with the Company which
has at the time of transfer a pension plan with substantially the same terms as
the Pension Plan, and a supplemental plan with substantially the same terms as
this Supplemental Plan, such Participant, if and when he commences to receive
retirement income under the pension plan of the company to which he transferred,
should also receive supplemental executive retirement income from that company
based upon the Earnings and Executive Incentive Compensation received from the
Company as if such Earnings and Executive Incentive Compensation had been
received from the company to which the Participant transferred.
In the case of the transfer to this Company of any participant employed by any
company now affiliated or associated with the Company which has at the time of
transfer a pension plan with substantially the same terms as the Pension Plan,
and a supplemental plan with substantially the same terms as this Supplemental
Plan, such Participant, if and when he commences to receive Retirement Income
under the Pension Plan, will also receive Supplemental Executive Retirement
Income from the Company based upon the earnings and executive incentive
compensation received from the company from which he transferred as if such
earnings and executive incentive compensation were Earnings and Executive
Incentive Compensation received from the Company.
In the event of a transfer or transfers as set forth above, the right of the
Participant to receive benefits under this Supplemental Plan or a supplemental
plan with substantially the same terms maintained by an affiliated or associated
Company will be suspended until such time as the Participant commences to
receive supplemental executive retirement income under such other plan or the
Participant commences to receive Supplemental Executive Retirement Income under
this Supplemental Plan, at which time the Participant shall receive all
supplemental executive retirement income and Supplemental Executive Retirement
Income to which the Participant is entitled under this Supplemental Plan or a
plan maintained by an affiliated or associated company.
SECTION IV. RETIREMENT
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Retirement dates for the purposes of this Supplemental Plan shall be the same as
set forth in the retirement provisions of the Pension Plan; provided, however,
that a Participant must have five years of actual service after inclusion in
this Supplemental Plan to be eligible for Supplemental Executive Retirement
Income. Any Participant with less than five years of actual service under this
Supplemental Plan and who has submitted a request for retirement on or before
July 1, 1998, and whose request has been accepted by the SERP Retirement Board
on or before May 1, 1998, may retire under this Supplemental Plan.
SECTION V. SUPPLEMENTAL EXECUTIVE RETIREMENT INCOME
While the Company hopes and expects to continue the Supplemental Plan
indefinitely, it reserves the right to terminate or modify it at any time.
1. NORMAL OR DEFERRED SUPPLEMENTAL EXECUTIVE RETIREMENT INCOME. The monthly
Supplemental Executive Retirement Income payable to a Participant who, at Normal
Retirement Date or a Deferred Retirement Date, retires on or after September 1,
1995, pursuant to the provisions of the Pension Plan from the service of the
Company, will be an amount equal to the product of the Participant's Final
Executive Pay times the sum of the percentages determined below, plus, for each
employee who retires with 35 years of Accredited Service under the Pension Plan,
an amount equal to $20.00 for each additional full year of vested service that
would otherwise have been credited as Accredited Service but for the application
of the minimum age requirements in the Pension Plan or the 35-year Accredited
Service maximum, minus (i) a portion of the Participant's estimated primary
Social Security benefit, as determined pursuant to the Pension Plan, equal to
the lesser of (1) .5% multiplied by 1/12th of the Participant's "Final Average
Compensation" up to "Covered Compensation" (as those terms are used in Section
401(l) of the Internal Revenue Code) for each year of Accredited Service and
Preference Service, (2) 1/2 of the benefit that would be provided prior to the
application of the offset, with respect to Participant's Final Pay up to Covered
Compensation, or (3) the maximum offset allowed under Section 401(l) of the
Internal Revenue Code, and (ii) the Retirement Income provided by the Pension
Plan:
2.1% for each of the first 20 years of Accredited Service and Preference
Service.
1.5% for each of the next 15 years of Accredited Service and Preference Service.
2. EARLY SUPPLEMENTAL EXECUTIVE RETIREMENT INCOME. The monthly Supplemental
Executive Retirement Income payable to a Participant who, on an Early Retirement
Date, retires from the service of the Company, will be the amount of his Accrued
Supplemental Executive Retirement Income on the date his retirement commences,
reduced by 5/12th of 1% for each month by which his Early Retirement Date
precedes his Normal Retirement Date by more than 36 months.
3. LIMITATION AS TO MONTHS FOR WHICH PAYMENT MAY BE MADE. The Company shall pay
to a Participant, or to his Provisional Payee, if applicable, Supplemental
Executive Retirement Income in the amount determined pursuant to this
Supplemental Plan only for a month in which the Participant or his Provisional
Payee is entitled to receive Retirement Income under the provisions of the
Pension Plan or would be entitled to Retirement Income but for the election of a
Single Sum payment under the Pension Plan. Payment of Supplemental Executive
Retirement Income shall terminate when payment of Retirement Income is
terminated pursuant to the Pension Plan.
4. The payments provided for in this Supplemental Plan shall be made by the
Company at such times as required under this Supplemental Plan; provided,
however, that, while the Company hopes and expects to make the payments provided
for under this Supplemental Plan, such payment is not guaranteed.
5. The Company may establish a fund, as part of the general assets of the
Company, to provide for the payments required under this Supplemental Plan.
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6. MAXIMUM PERMISSIBLE RETIREMENT INCOME. Notwithstanding any other provision of
this Supplemental Plan, if the Retirement Income payable to a retired employee
under provisions of subsection 7 of Section V of the Pension Plan is a greater
amount than permitted by Section 415 of the Internal Revenue Code to be paid by
qualified plans, then such excess Retirement Income shall be payable to such
retired employee under this Plan; subject, however, to approval by the Board of
Directors of the Company for each such employee.
7. SINGLE SUM PAYMENT. The Retirement Board, after discussion with a retiring
Participant, may pay in a single sum to such Participant, who retires on or
after February 1, 1991, at the time of the Participant's retirement with
benefits under the Pension Plan, the present value of the Participant's
Supplemental Executive Retirement Income. The present value of that part of the
Participant's Supplemental Executive Retirement Income which represents payment
to make up Retirement Income lost under the Pension Plan because of the Maximum
Retirement Income provision thereof (Section V, subsection 6 of the Plan) will
not be paid in a lump sum unless the Participant has elected to receive a single
sum payment under the Pension Plan. The present value will be actuarially
determined using the Pension Benefit Guaranty Corporation Immediate Annuity
Rate, as of the date of the distribution, increased to 120%. The discussion with
a retiring Participant is for the purpose of assuring the Retirement Board of
accurate current information for use in making its independent decision as to
whether or not to make payment in a single sum. In making its independent
decision, the Retirement Board may take into account any financial hardship of
the Participant, the health or disability of the Participant, and/or any other
factor it considers relevant. The decision of the Retirement Board shall be in
the sole discretion of said Board and shall be final, binding and conclusive.
Discussion with respect to such a payment and the decision with respect thereto
will take place at least three months before Early Retirement Date, Normal
Retirement Date or Deferred Retirement Date. The SERP Retirement Board will not
render a decision regarding a single sum payment any earlier than six months
prior to the Participant's actual retirement date.
8. RETIRED PARTICIPANTS. The Supplemental Executive Retirement Income of retired
Participants may be increased from time to time by such reasonable amounts as
determined by the Board of Directors of the Company, to counter the effects of
inflation, provided that the percentage amount of such increases will be made
uniformly for all retired Participants, or for retired Participants within such
reasonable classes, as may be determined by the Board of Directors. This
provision shall not apply to any Participant who has received his benefit as a
single sum.
9. DISABILITY SERVICE PENSION SUPPLEMENT. If a Participant is totally disabled
(unable to perform the Participant's regular job because of disease or injury)
and, as a result, fails to accumulate Accredited Service under the Pension Plan
for some period of time (Disability Service), a Disability Service Pension
Supplement will be calculated and paid as if Accredited Service and applicable
Preference Service were credited during such period subject to the following:
A. The Participant must have retired with Retirement Income under the Pension
Plan.
B. The period of Disability Service begins when the Participant stops
accumulating Accredited Service under the Pension Plan as a result of the
Participant's total disability, provided that the Participant has not
undertaken other employment.
C. The period of Disability Service ends when the Participant first:
1. Begins again to accumulate Accredited Service under the Pension Plan,
2. Undertakes other employment,
3. Retires on an Early Retirement Date, or,
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4. Attains the Participant's Normal Retirement Date.
D. The "Final Executive Pay" of the Participant, for purposes of determining
the Disability Pension Supplement only, will be calculated as if the
Participant were earning during the period of Disability Service the sum of
(1) the Participant's last monthly rate of basic earnings prior to the
period of Disability Service, and (2) 1/12th of the average of the
Executive Incentive Compensation (if any) for the five years of Accredited
Service while in an eligible salary grade immediately preceding the period
of Disability Service (or the monthly average of Executive Incentive
Compensation earned over the Participant's Accredited Service if the
Participant has fewer than five years of Accredited Service while in an
eligible salary grade), increased or decreased each July 1, following the
beginning of the Participant's period of Disability Service, according to
the change in the Bureau of Labor Statistics Consumer Price Index (CPI-W)
for the preceding 12-month period of Disability Service (or lesser period
of Disability Service, if applicable). However, no July 1 increase will
exceed an amount which could result in an increase greater than a 5%
compounded annual increase since the beginning of the Participant's period
of Disability Service, nor in a reduction in the Participant's Final
Executive Pay to an amount less than the Participant's Final Executive Pay
prior to the period of Disability Service. For purposes of this provision,
the Consumer Price Index for the second month previous to any measurement
date will be deemed to be in effect on such date.
E. The amount of the Disability Service Pension Supplement is the Supplemental
Executive Retirement Income, calculated using Final Executive Pay as
determined in Section V, subsection 9.D above, and giving credit for
Accredited Service and applicable Preference Service for any period of
Disability Service, less:
1. The Supplemental Executive Retirement Income calculated without regard
to the Disability Service Pension Supplement,
2. The Retirement Income provided by the Pension Plan, and
3. Any amount paid to a retired Participant for lost benefits under the
Pension Plan, for the period of Disability Service, under an insurance
policy, the premiums for which were paid in whole or in part by CMS
Energy Corporation or any subsidiaries which are at least 80% owned,
directly or indirectly, by CMS Energy Corporation.
F. Payments will begin as of the latter of:
1. The Participant's Normal Retirement Date.
2. The first day of the month following the cessation of any Long Term
Disability payments pursuant to any plan or insurance policy, the
premiums for which were paid in whole or in part by CMS Energy
Corporation, or any of its directly or indirectly wholly owned
subsidiaries.
SECTION VI. PROVISIONAL PAYEE OPTIONS AND
PRE-RETIREMENT SURVIVING SPOUSE BENEFIT
1. POST-RETIREMENT. The provisions of Section VI of the Pension Plan, pertaining
to Provisional Payee Options are adopted as part of this Supplemental Plan and
any option which is elected by or otherwise applicable to a Participant under
the Pension Plan will be identically applicable under the provisions of this
Supplemental Plan. A Participant may not have a Provisional Payee Option under
this Supplemental Plan which differs from such option or options elected by or
otherwise applicable to him under the Pension Plan except that a Participant who
has elected a Single Sum under the Pension Plan may name a Provisional Payee
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under this Supplemental Plan. Nevertheless, a Provisional Payee may elect, upon
the death of the Participant and the agreement of the SERP Retirement Board, to
then receive the present value of the amount of the payments to which he
otherwise would be entitled, as determined by the SERP Retirement Board using
such actuarial tables and interest assumptions as may be adopted for this
purpose by the SERP Retirement Board and in use at the time of the Participant's
death.
2. PRE-RETIREMENT SURVIVING SPOUSE BENEFIT. Provisions of Section VI, subsection
2 of the Pension Plan of Consumers Power Company pertaining to Pre-Retirement
Surviving Spouse Benefits are adopted as part of this Supplemental Plan.
SECTION VII. TERMINATION OF SERVICE
If a Participant included in the Supplemental Plan voluntarily terminates his
services other than by transfer to an affiliated or associated company as
provided by subsection 2 of Section III of this Supplemental Plan, retirement as
provided by Section IV of the Pension Plan, or in accordance with the terms of
an Employment Agreement effective following a Change in Control as defined in
Section XII, the Participant will forfeit all Supplemental Executive Retirement
Income except for any amount attributable to Earnings not permitted to be used
for benefit calculation under the Pension Plan by the Internal Revenue Code or
Regulations thereunder. Any such amount shall be calculated without Preference
Service. A Participant whose services are terminated for any reason other than
death prior to attaining five years of actual service after inclusion in this
Supplemental Plan shall not be eligible for Supplemental Executive Retirement
Income. If the Accrued Retirement Income is actuarially reduced because of
retirement at an Early Retirement Date, the Accrued Supplemental Executive
Retirement Income will be reduced by an identical percentage.
SECTION VIII. FORFEITURE
A Participant who is discharged by the Company for cause, or an employee who is
subsequently convicted of any felony committed while in the course of his
employment with the Company, which felony involved theft, malicious destruction
or misuse of the property of the Company or the embezzlement or misapplication
of the funds of the Company, or who makes an admission in writing of the
commission of such felony, shall be ineligible for and forfeit Supplemental
Executive Retirement Income.
SECTION IX. NON-ALIENATION OF BENEFITS
No benefit under the Supplemental Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
charge, renunciation, or reduction and any attempt so to anticipate, alienate,
sell, transfer, assign, pledge, encumber, charge, renounce, or reduce the same
shall be void, nor shall any such benefit be in any manner liable for or subject
to the debts, contracts, liabilities, engagements or torts of the person
entitled to such benefit.
If any Participant or retired Participant or any Provisional Payee under the
Supplemental Plan is adjudicated bankrupt or attempts to anticipate, alienate,
sell, transfer, assign, pledge, encumber, charge, renounce, or reduce any
benefit under the Supplemental Plan, except as specifically provided in the
Supplemental Plan, then such benefit shall cease and terminate and in that event
the SERP Retirement Board shall hold or apply the same or any part thereof to or
for the benefit of such Participant or retired Participant or Provisional Payee
in such manner as the SERP Retirement Board may think proper, provided the SERP
Retirement Board shall not act in any manner as would perpetuate the alienations
prohibited by this Section.
SECTION X. LIMITATION OF RIGHTS
Neither the establishment of this Supplemental Plan, nor any modification
thereto, nor the payment of any benefits, shall be construed as giving to any
Participant, other employee, or other person any legal or
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equitable rights against the Company, or any officer or employee thereof, or the
SERP Retirement Board, except as herein provided. Under no circumstances shall
the terms of employment of any employee be modified or in any way affected
hereby. Inclusion under the Supplemental Plan will not give any Participant or
any Provisional Payee any right to claim a Supplemental Executive Retirement
Income except to the extent such right is specifically fixed under the terms of
the Supplemental Plan. Subject to the provisions of this Supplemental Plan and
the Supplemental Executive Retirement Trust the Participant shall have no rights
greater than those of a general, unsecured creditor of the Company.
SECTION XI. ADMINISTRATION OF SUPPLEMENTAL PLAN
The general administration of this Supplemental Plan shall be placed in the SERP
Retirement Board provided for in this Supplemental Plan and the provisions of
Section XII of the Pension Plan will govern the administration of this
Supplemental Plan as far as applicable. The determination of the SERP Retirement
Board as to any question or matter arising under this Supplemental Plan shall be
conclusive and binding.
The claim procedure of this Supplemental Plan shall be the same as the claim
procedure provided in the Pension Plan.
SECTION XII. AMENDMENT, MODIFICATION OR
TERMINATION OF THE SUPPLEMENTAL PLAN
This Supplemental Plan may be amended, modified or terminated at any time by
action of the Board of Directors of the Company. Notwithstanding any other
provisions of this Supplemental Plan, in the event of a Change in Control (as
hereinafter defined), each Participant shall be fully vested in any benefit
accredited to the Participant as of the date of the Change in Control, and such
amount shall not be subject to further vesting requirements or to any forfeiture
provisions. These provisions with respect to Change in Control may not be
amended subsequent to such Change in Control without the written consent of a
majority in number of Participants. For purposes of this Supplemental Plan, a
Change in Control shall occur upon the occurrence of one or more of the
following:
(i) a Change in Control of the Corporation would be required to be
reported in response to Item 1(a) of the Current Report on Form
8-K, as in effect on the date hereof, pursuant to Sections 13 or
15(d) of the Exchange Act, whether or not the Corporation is then
subject to such reporting requirement;
(ii) any "person" or "group" within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act becomes the "beneficial owner" as
defined in Rule 13d-3 under the Exchange Act of more than 30% of
the then outstanding voting securities of the Corporation;
(iii) during any period of twenty-four consecutive months (not
including any period prior to the adoption of this Plan) Present
Directors and/or New Directors cease for any reason to constitute
a majority of the Board. For purposes of this subsection (iii),
"Present Directors" shall mean individuals who at the beginning
of such consecutive twenty-four month period were members of the
Board and "New Directors" shall mean any director of the
Corporation whose election by the Board or whose nomination for
election by the Corporation's shareholders was approved by a vote
of at least two-thirds of the Corporation's Directors then still
in office who were Present Directors or New Directors;
(iv) there is a sale by the Corporation within a three-year period of
assets of the Corporation with either a book value or market
value of 50% or more of the assets of the Corporation;
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(v) a bidder as defined in Rule 14D-1(b) under the Exchange Act files
a Tender Offer Statement with the Securities & Exchange
Commission and the Corporation.
IN WITNESS WHEREOF, execution is hereby effected this 3rd day of December, 1999.
CMS ENERGY CORPORATION /
CONSUMERS ENERGY COMPANY
/s/ William T. McCormick, Jr.
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Chairman of the Board
ATTEST:
/s/ Thomas A. McNish
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Vice President and Secretary
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