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EXHIBIT 10.66
MANAGEMENT
SUPPLEMENTAL
BENEFIT
PLAN
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SECOND RESTATEMENT OF
THE DETROIT EDISON COMPANY
MANAGEMENT SUPPLEMENTAL BENEFIT PLAN
The Detroit Edison Company Management Supplemental Benefit Plan (the "Plan"),
established by The Detroit Edison Company (the "Company") effective July 24,
1989, as amended and restated effective January 22, 1990, is hereby amended and
restated as of June 26, 1995, by this Second Restatement.
PURPOSE
The Management Supplemental Benefit Plan ("Plan") is designed to supplement
pension benefits for eligible management employes. The Plan has the objective
of making the Company's retirement program more competitive within the electric
utility industry and general industry, which will facilitate the attraction and
retention of management employes.
DEFINITION
AVERAGE FINAL COMPENSATION. Equals one-fifth of normal pay during the 260
weeks of Company service that results in the highest average, calculated
without regard to any limitation imposed by Section 401(a)(17) of the Internal
Revenue Code.
AWARDED SERVICE. Years of service that may be imputed to an otherwise eligible
Plan participant by the Organization and Compensation Committee ("Committee")
of the Board of Directors, having taken into account the value to the Company
of such participant's prior experience.
COMPANY SERVICE. All years of service with the Company calculated to the
nearest month.
EXECUTIVE POST-EMPLOYMENT INCOME ARRANGEMENT. Individual arrangements that
were entered into with certain executives upon initial employment with the
Company. The arrangements may provide for additional benefits upon retirement.
KEY EMPLOYE DEFERRED COMPENSATION PLAN. The Key Employe Deferred Compensation
Plan initiated in 1964 which provides a supplemental pension benefit to certain
management employes.
NORMAL PAY. The employe's salary for a standard forty-hour work week
calculated without regard to any limitation imposed by Section 401(a)(17) of
the Internal Revenue Code
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including amounts deferred by the employe under the Company's qualified and
non-qualified savings plans. It does not include any bonuses, special pay, or
premium for overtime work.
RETIREMENT PLAN. The Employes' Retirement Plan of The Detroit Edison Company
("Detroit Edison"). The Retirement Plan is a defined benefit pension plan
sponsored by Detroit Edison for eligible employes.
RETIREMENT ALLOWANCE FACTOR. The multiplier used in the basic formula of the
Retirement Plan.
ELIGIBILITY
Eligibility to participate in this Plan is determined no later than the latest
to occur of:
(1) 90 days from the date hereof; or
(2) 90 days subsequent to an otherwise eligible participant's 55th
birthday; or
(3) In the case of an otherwise eligible participant who does not
have at least 10 years of Company service at age 55, 90 days
subsequent to the otherwise eligible participant's having 10
years of Company service.
Participation in the Plan is limited to those management employes who
(1) Are members of Management Council (pursuant to OR3, Management
Groups, as may be amended from time to time) at the time of
termination from the Company (or death while actively employed
by the Company); and
(2) Are not personally eligible to receive a benefit from the Key
Employe Deferred Compensation (KEDC) Plan although a court of
competent jurisdiction may have recognized spousal rights;
(3) Do not have an effective Executive Post-Employment Income
Arrangement; and
(4) At the time of termination from the Company (or death while
actively employed), are at least 55 years of age and have at
least 10 years of Company service.
Employes who are eligible to receive a benefit from KEDC or who have entered
into Post-Employment Income Arrangements with the Company may elect to
participate in this Plan in accordance with the first paragraph of this section
by filing an election to waive any rights to
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a benefit from KEDC and/or any rights under a Post-Employment Income
Arrangement with the Vice President-Human Resources, who will provide an
election form upon request.
TARGET PERCENTAGE OF AVERAGE FINAL COMPENSATION
Payments from the Plan are based upon the calculated target percentage of
average final compensation. The target percentage of average final
compensation is determined by years of Company service and awarded service, if
any, and by the management group in which the participant is a member at the
time of termination from the Company (or death while actively employed by the
Company) as specified in Exhibit A.
Participants awarded service under the Plan must certify any retirement income
expected or being received from a previous employer. Payments from the Plan to
participants with awarded service will be reduced by the non-contributory
portion of any retirement income expected or being received from a previous
employer.
Payments from the Plan will be reduced by any KEDC spousal payments required by
a court of competent jurisdiction. Payments from the Plan may also be affected
by the employe's age at termination (see Early Retirement) and the payment
option selected by the employe (see Payment Options).
EARLY RETIREMENT
The Plan provides for an unreduced target percentage for those terminating
employment at age 60 or older. A reduced or adjusted target percentage is
provided for those terminating employment (including death) who are at least
age 55 but prior to age 60. The early retirement adjustment schedule is as
follows:
AGE AT EARLY RETIREMENT
TERMINATION ADJUSTMENT PERCENTAGE
55 50%
56 60%
57 70%
58 80%
59 90%
60 or older 100%
Age at termination is calculated to the nearest whole month and the early
retirement adjustment percentage is determined accordingly.
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PAYMENT OPTIONS
At the time of employment termination, an eligible employe must elect one of
the following payment options: (a) Guaranteed Term Plus Life, (b)
Actuarial-Adjusted Life with a 100% Joint and Survivor Benefit and (c)
Actuarial-Adjusted Life with a 50% Joint and Survivor Benefit. In the event
that an employe dies during active employment, and at the time of death was
eligible for a benefit as provided herein, the payment option is deemed to be
Guaranteed Term Plus Life.
GUARANTEED TERM PLUS LIFE
If the employe elects the Guaranteed Term Plus Life payment option, the
employe, at the time of employment termination, must also elect a survivor
benefit of either monthly payments or an adjusted lump sum payment. In the
event that such an election is not made by the employe, or in the event that
the employe dies during active employment and at the time of death was eligible
for a Plan benefit as provided herein, the survivor benefit is assumed to be
the adjusted lump sum payment.
The Guaranteed Term Plus Life payment option provides for a minimum of 15 years
of payments to the employe or, if the employe lives beyond the 15-year period,
the payments continue to be made to the employe for the life of the employe.
If the employe elects the monthly payment survivor benefit and dies prior to
the end of the 15-year period, payments will continue to be made to the
employe's beneficiary or estate for the balance of the 15-year period. At the
end of this 15-year period, all payments cease and liability of the Company
under the Plan is terminated.
If the employe elects the lump sum payment survivor benefit and dies prior to
the end of the 15-year period, an adjusted lump sum payment is made to the
employe's designated beneficiary or estate. The adjusted lump sum payment is
determined by a standard annuity calculation where the adjusted lump sum is the
present worth of the remaining monthly benefits in the 15-year period. The
methodology and other relevant factors for determining the amount of the
adjusted lump sum payment are provided in Exhibit B. Upon payment of the lump
sum payment, all payments cease and liability of the Company under the Plan is
terminated.
ACTUARIAL-ADJUSTED LIFE WITH A 100% JOINT AND SURVIVOR BENEFIT
This option provides for the actuarial equivalent to the benefit payment under
the Guaranteed Term Plus Life option. Upon the death of the employe and the
designated beneficiary, all
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payments cease and the liability of the Company under the Plan is terminated.
The actuarial equivalent benefit is provided for the life of the employe and
upon the death of the employe, 100% of the benefit is provided to the employe's
designated beneficiary for the duration of the beneficiary's life. If the
employe's designated beneficiary should die prior to the employe, payments
continue from the life of the employe and upon the death of the employe all
payments cease and liability of the Company under the Plan is terminated. If
the employe and designated beneficiary are the same age, the actuarial
equivalent benefit equals 97.94% of the Guaranteed Term Plus Life benefit.
If the beneficiary is younger than the employe, this percentage is reduced by
1.2% for each 12 full months of difference in age. If the beneficiary is older
than the employe, this percentage is increased 1.2% for each 12 full months in
difference in age up to a maximum of 100%.
ACTUARIAL-ADJUSTED LIFE WITH A 50% JOINT AND SURVIVOR BENEFIT
This option provides for the actuarial equivalent to the benefit payable under
the Guaranteed Term Plus Life option. Upon the death of the employe and the
designated beneficiary, all payments cease and the liability of the Company
under the Plan is terminated. The actuarial equivalent benefit is provided for
the life of the employe and upon the death of the employe, 50% of the benefit
is provided to the employe's designated beneficiary for the duration of the
beneficiary's life. If the employe's designated beneficiary should die prior to
the employe, payments continue for the life of the employe and upon the death
of the employe all payments cease and liability of the Company under the Plan
is terminated. If the employe and designated beneficiary are the same age, the
actuarial equivalent benefit equals 107.72% of the Guaranteed Term Plus Life
benefit. If the beneficiary is younger than the employe, this percentage is
reduced by 1% for each 12 full months of difference in age. If the beneficiary
is older than the employe, there is no adjustment to the percentage. If the
employe does not designate a beneficiary, the actuarial equivalent benefit
equals 107.72% of the Guaranteed Term Plus Life benefit, and upon the death of
the employe all payments cease and the liability of the Company under the Plan
is terminated.
PAYMENT CALCULATION
Monthly payments from the Plan are determined as follows:
STEP 1. DETERMINE GROSS TARGET AMOUNT
The gross target amount results from multiplying the target percentage
by average final compensation (see Exhibit A to determine the target
percentage).
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STEP 2. DETERMINE RETIREMENT PLAN BENEFIT
The Retirement Plan benefit results from multiplying the retirement
allowance factor by average final compensation and by Company service,
calculated for purposes hereof, without regard to any limitations
imposed by Section 401(a)(17) or Section 415 of the Internal Revenue
Code.
STEP 3. DETERMINE BASE ANNUAL TARGET BENEFIT AMOUNT
The base annual target benefit amount results from subtracting the
Retirement Plan benefit from the gross target amount.
STEP 4. DETERMINE ADJUSTED ANNUAL TARGET BENEFIT AMOUNT
The adjusted annual target benefit amount results from multiplying the
base annual target benefit amount by the early retirement adjustment
percentage (see page 4 to determine the early retirement adjustment
percentage).
STEP 5. DETERMINE MONTHLY TARGET BENEFIT AMOUNT UNDER THE
GUARANTEED TERM PLUS LIFE PAYMENT OPTION
The monthly target benefit amount under the Guaranteed Term Plus Life
payment option is determined by dividing the adjusted annual target
benefit amount by 12.
STEP 6. ACTUARIAL-ADJUSTED PAYMENT OPTION
If an actuarial-adjusted payment option is selected, the actuarial
adjustment is applied to the monthly target benefit amount under the
Guaranteed Term Plus Life payment option.
Exhibit C displays examples of the Plan payment calculation procedure.
In the event an employe receives an assessment of income taxes from the
Internal Revenue Service which treats any amount under this Plan as includible
in such employe's gross income prior to payment of such amount to such employe,
the Company shall pay an amount equal to such income taxes to such employe
within 30 days after receipt of written notice from such employe about such
assessment. The base annual target benefit amount (Step 3) shall be reduced by
an amount equal to such income taxes and Steps 4, 5 and 6 shall be reduced
accordingly.
Each payment under this Plan shall be reduced by any federal, state or local
taxes which the Company determines should be withheld from such payment.
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SCHEDULE OF PAYMENTS
Plan payments, if any, are made to the employe or to the designated beneficiary
on a monthly basis. The schedule will follow the provisions for payment under
the Retirement Plan. The accompanying examples show the effect of Retirement
Plan benefits at different times.
BENEFICIARY DESIGNATION
Each eligible participant may name any beneficiary to whom payments under the
Plan are to be paid in case of the employe's death. Each designation will
revoke all prior designations by the employe and shall be on a form prescribed
by the Company and will be effective only when filed by the employe with the
Treasurer. In the absence of any such designation, payments due shall be paid
to the employe's estate.
TAXATION
The Company makes no representation as to the tax consequences of individual
payment options. Plan participants are urged to consult tax advisors of their
choice for information and advice.
NON-SECURED PROMISE; AMENDMENTS
Eligible participants have the status of general unsecured creditors of the
Company. This Plan constitutes a promise by the Company to make benefit
payments in the future. The Company intends that this Plan be unfunded for tax
purposes and for purposes of Title I of ERISA. The Company intends that this
Plan be maintained primarily for a select group of management or highly
compensated employes.
Payments under this Plan as they become due shall be paid by the Company from
its general assets.
The Company reserves the right to amend, modify, or discontinue this Plan at
any time; provided, however, that no such amendment, modification, or
termination shall affect the rights of participants or beneficiaries who are
receiving or are immediately eligible to receive benefits from this Plan at the
time of such amendment, modification, or termination.
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ADMINISTRATION; ARBITRATION
The Vice President-Human Resources is responsible for the administration of the
Plan. The Vice President-Human Resources has the authority to interpret the
provisions of the Plan and prescribe any regulations relating to its
administration. The decisions of the Vice President-Human Resources with
respect thereto shall be conclusive. The Vice President-Human Resources shall
review the Plan from time to time and as part of such review is hereby directed
and authorized to amend such Plan to the extent necessary for ease of
administration and/or to comply with applicable federal and state laws.
The Treasurer of the Company shall be responsible for the administration of
benefits under the Plan.
Notwithstanding any provision in this Plan to the contrary, in the event of any
dispute, claim or controversy (hereinafter referred to as a "Grievance")
between an employe who is eligible to receive benefits under this Plan and the
Company with respect to the payment of benefits to such employe under this
Plan, the computation of benefits under this Plan, or any of the terms or
conditions of this Plan, such Grievance shall be resolved by arbitration.
Arbitration shall be the sole exclusive remedy to redress any Grievance. The
arbitration decision shall be final and binding, and a judgment on the
arbitration award may be entered in any court of competent jurisdiction and
enforcement may be had according to its terms. The arbitration shall be
conducted by American Arbitration Association in accordance with the Commercial
Arbitration Rules of the American Arbitration Association and expenses of the
arbitrator(s) and the American Arbitration Association shall be borne by the
Company. Neither the Company nor such employe shall be entitled to attorneys'
fees, expert witness fees, or other expenses expended in the course of such
arbitration or the enforcement of any award rendered thereunder. The place of
the arbitration shall be the offices of the American Arbitration Association in
the Detroit Metropolitan area, Michigan. The arbitrator(s) shall not have the
jurisdiction or authority to change any of the provisions of this Plan by
alteration of, addition to, or subtraction from the terms thereof. The
arbitrator(s)' sole authority shall be to apply any terms and conditions of
this Plan. Since arbitration is the exclusive remedy with respect to any
Grievance, no employe eligible to receive benefits under this Plan has the
right to resort to any federal court, state court, local court, or
administrative agency concerning breaches of any terms and provisions
hereunder, and the decision of the arbitrator(s) shall be a complete defense to
any suit, action, or proceeding instituted in any federal court, state court,
local court, or administrative agency by such employe or the Company with
respect to any Grievance which is arbitrable as herein set forth. The
arbitration provisions shall, with respect to any Grievance, survive the
termination of this Plan.
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NON-ALIENABILITY AND NON-TRANSFERABILITY
The right of a participant, participant's spouse or beneficiary to payment of
any benefit hereunder shall not be alienated, assigned, transferred, pledged or
encumbered and shall not be subject to execution, attachment or similar
process. No account shall be subject in any manner to alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution or
levy of any kind, whether voluntary or involuntary, including but not limited
to any liability which is for alimony or other payments for the support of a
spouse or former spouse, or for any other relative of any employe. Any
attempted assignment, pledge, levy or similar process shall be null and void
and without effect.
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EXHIBIT A
TARGET PERCENTAGE
TARGET PERCENTAGE
MANAGEMENT OF AVERAGE FINAL
INDEX GROUP COMPENSATION SERVICE
----- ----- ------------ -------
1. Chairman of the Board 60% 25
President
Executive Vice President
2. Senior Vice President 60% 30
Vice President
3. Management Council members 55% 35
other than those included
in Groups 1 and 2 above
If the sum of Company service and awarded service is greater than the
corresponding service index, the target percentage is increased by 0.5% for
each year of service above the index. If the sum of Company service and
awarded service is less than the corresponding service index, the target
percentage is reduced by 1% for each year of service below the index for
employes in Groups 1 and 2 and by 1.5% for each year of service below the index
for employes in Group 3.
Company service is calculated to the nearest whole month. Awarded service is
determined by the sole discretion of the Committee. The target percentage is
adjusted accordingly if the service index results in fractional years.
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EXHIBIT B
Table for Determining the Adjusted Lump Sum Payment Under the Guaranteed Term
Plus Life Payment Option (Per $1,000 of Adjusted Annual Target Benefit Amount)
Remaining
Years Of
Guaranteed
Term
Payment
Interest Rate
6% 7% 8% 9% 10% 11% 12%
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15 $9,875 $9,271 $8,720 $8,216 $7,755 $7,332 $6,943
14 9,456 8,909 8,406 7,945 7,520 7,128 6,767
13 9,012 8,520 8,067 7,648 7,260 6,901 6,569
12 8,540 8,103 7,699 7,323 6,973 6,648 6,345
11 8,038 7,656 7,300 6,967 6,656 6,365 6,093
10 7,506 7,177 6,868 6,578 6,306 6,050 5,808
9 6,941 6,663 6,401 6,153 5,919 5,698 5,488
8 6,341 6,112 5,895 5,688 5,492 5,305 5,127
7 5,704 5,521 5,347 5,179 5,020 4,867 4,721
6 5,028 4,888 4,753 4,623 4,498 4,378 4,263
5 4,310 4,208 4,110 4,014 3,922 3,833 3,746
4 3,548 3,480 3,413 3,349 3,286 3,224 3,164
3 2,739 2,699 2,659 2,621 2,583 2,545 2,509
2 1,880 1,861 1,843 1,824 1,806 1,788 1,770
1 968 963 958 953 948 943 938
0 0 0 0 0 0 0 0
NOTES: (1) Interest rate is determined by the current prime interest rate
of the NBD Bank less 2%.
(2) Apply linear interpolation for partial years remaining in
guaranteed term period and adjustments for fractional interest
rates.
(3) Exhibit B shows the information to perform a standard annuity
due calculation. It is the present worth of a stream of
monthly payments of $1,000/12 per month made at the end of the
month and continuing for the number of months remaining.
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EXHIBIT B (CONTINUED)
The formula is:
Adjusted Lump Sum = Pmt x (1 -(1 + i) -n)/i
Where i is the NBD Bank Prime rate less 2% divided by 12 and n is
the number of months remaining. Pmt is $1,000/12 or $83.33.
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EXHIBIT C
EXAMPLE 1
Assumptions:
Date of Termination: January 31,1994
Age at Termination: 65 Years, 0 Months
Position: Vice President
Average Final Compensation: $180,000
Company Service & Awarded Service: 25 Years, 0 Months
Retirement Allowance Factor: .014
Payment Option: Guaranteed Term Plus Life
(Survivor benefit -
monthly payments)
(Given the above, the target percentage is 55%)
Step 1: 55% x $180,000 = $99,000
Step 2: .014% x $180,000 x 25 = $63,000
Step 3: $99,000 - $63,000 = $36,000
Step 4: $36,000 x 100% = $36,000
Step 5: $36,000/12 = $3,000
Monthly payments of $3,000 will be made for 15 years, or for the life
of the employe if greater than 15 years.
EXAMPLE 1A
Assumptions listed for Example 1 apply with the exception of the
following:
Payment Option: Guaranteed Term Plus Life
(Survivor benefit - lump sum payment)
NBD Bank 9%
Prime Interest Rate:
Date of Employe's Death January 31,1999
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EXHIBIT C (CONTINUED)
Monthly payments of $3,000 are made for the life of the employe (see
Example 1). Upon the death of the employe (January 31,1999), a lump
sum payment of $258,277.20 is made to the beneficiary (see Exhibit B).
EXAMPLE 2
Assumptions:
Date of Termination: January 31,1994
Age at Termination: 58 Years, 6 Months
Position: Vice President
Average Final Compensation: $180,000
Company Service & Awarded Service: 25 Years, 6 Months
Retirement Allowance Factor: .014
Payment Option: Guaranteed Term Plus Life
(Survivor benefit-monthly
payments)
(Given the above, the target percentage is 55.5%)
Step 1: 55.5% x $180,000 = $99,900
Step 2: .014 x $180,000 x 25.5 x 88% = $56,549
Step 3: $99,900 - $56,549 = $43,351
Step 4: $43,351 x 85% = $36,848.35
Step 5: $36,848.35/12 = $3,070.70
Monthly payments of $3,070.70 will be made for 15 years, or for the
life of the employe if greater than 15 years.
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EXHIBIT C (CONTINUED)
EXAMPLE 2A
Assumptions listed for Example 2 apply with the exception of the
following:
Payment Option: Actuarial-Adjusted Life with a
100% Joint and Survivor Benefit
Employe/Beneficiary Beneficiary is two years younger
Age Difference: than the employe
Step 1 - Step 5: Same as Example 2. The monthly
benefit under the Guaranteed
Term Plus Life option is $3,070.70
Step 6: $3,070.70 x .9554 = $2,933.75
Monthly payments of $2,933.75 are made for the life of the employe.
Upon the death of the employe, monthly payments of $2,933.75 are made for the
life of the designated beneficiary. Upon the death of the designated
beneficiary, all payments cease.
EXAMPLE 2B
Assumptions listed for Example 2A apply with the exception of the
following:
Payment Option: Actuarial-Adjusted Life with a 50%
Joint and Survivor Benefit
Step 1 - Step 5: Same as Example 2. The monthly
benefit under the Guaranteed
Term Plus Life option is $3,070.70
Step 6: $3.070.70 x 1.0572 = $3,246.34
Monthly payments of $3,246.34 are made for the life of the employe.
Upon the death of the employe, monthly payments of $1,623.17
($3,246.34 x 50%) are made for the life of the designated beneficiary.
Upon the death of the designated beneficiary, all payments cease.
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EXAMPLE 3
Assumptions:
Date of Termination: January 31,1994
Age at Termination: 58 Years, 6 Months
Position: Vice President
Average Final Compensation: $180,000
Company Service & Awarded Service: 14 Years, 0 Months
Retirement Allowance Factor: .014
Payment Option: Guaranteed Term Plus Life
(Survivor benefit -
monthly payments)
(Given the above, the target percentage is 44%)
Step 1: 44% x $180,000 = $79,200
Step 2: $0 (Employe is ineligible for an immediate
benefit under the Retirement Plan)
Step 3: $79,200 - $0 = $79,200
Step 4: $79,200 x 85% = $67,320
Step 5: $67,320/12 = $5,610.00
Monthly payments of $5,610.00 will be made until a benefit is payable
under the Retirement Plan. At that time the benefit payable under the
MSBP will be offset by an amount equivalent to the benefit paid under
the Retirement Plan (Step 6 - Option III assumed).
Step 6: .014 x $180,000 x 14 = $35,280
Step 7: $67,320 - $35,280 = $32,040
Step 8: $32,040/12 = $2,670.00
Monthly payments of $2,670.00 will be made for the years remaining of
the 15 years guaranteed (i.e., 8.5 years) or for the life of the
employe if greater.
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EXAMPLE 3A
Assumptions listed for Example 3 apply with the exception of the
following:
Age at Termination: 60
Employe/Beneficiary Beneficiary is two years younger
Age Difference: than the employee
Step 1 - Step 3: Same as Example 3.
Step 4: $79,200 x 100% = $79,200
Step 5: $79,200/12 = $6,600.00
Monthly payments of $6,600.00 will be made to the employe until a benefit
is payable under the Retirement Plan. At that time the benefit payable under
the MSBP will be offset by an amount equivalent to the benefit paid under the
Retirement Plan (Step 6 - Option II assumed).
Step 6: .014 x $180,000 x 14 x 88% = $31,046.40
Step 7: $79,200 - $31,046.40 = $48,153.60
Step 8: $48,153.60/12 = $4,012.80
Monthly payments of $4,012.80 will be made for the years remaining of the 15
years guaranteed (i.e., 10 years) or for the life of the employe if greater.
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