Allstate 2013 Annual Report Download - page 273

excess of the company action level allows the insurance company to avoid RBC regulatory action. AIC’s total statutory
capital and surplus exceeds its company action level RBC as of December 31, 2012. These requirements do not represent
a significant constraint for the payment of dividends by AIC.
The amount of restricted net assets, as represented by the Corporation’s investment in its insurance subsidiaries,
was $25 billion as of December 31, 2012.
Intercompany transactions
Notification and approval of intercompany lending activities is also required by the IL DOI for transactions that
exceed a level that is based on a formula using statutory admitted assets and statutory surplus.
17. Benefit Plans
Pension and other postretirement plans
Defined benefit pension plans cover most full-time employees, certain part-time employees and employee-agents.
Benefits under the pension plans are based upon the employee’s length of service and eligible annual compensation. A
cash balance formula was added to the Allstate Retirement Plan effective January 1, 2003. All eligible employees hired
before August 1, 2002 were provided with a one-time opportunity to choose between the cash balance formula and the
final average pay formula. The cash balance formula applies to all eligible employees hired after August 1, 2002.
The Company also provides certain health care subsidies for eligible employees hired before January 1, 2003 when
they retire and their eligible dependents and certain life insurance benefits for eligible employees hired before January 1,
2003 when they retire (‘‘postretirement benefits’’). Qualified employees may become eligible for these benefits if they
retire in accordance with the terms of the applicable plans and are continuously insured under the Company’s group
plans or other approved plans in accordance with the plan’s participation requirements. The Company shares the cost of
retiree medical benefits with non Medicare-eligible retirees based on years of service, with the Company’s share being
subject to a 5% limit on annual medical cost inflation after retirement. During 2009, the Company decided to change its
approach for delivering benefits to Medicare-eligible retirees. The Company no longer offers medical benefits for
Medicare-eligible retirees but instead provides a fixed Company contribution (based on years of service and other
factors), which is not subject to adjustments for inflation.
The Company has reserved the right to modify or terminate its benefit plans at any time and for any reason.
Obligations and funded status
The Company calculates benefit obligations based upon generally accepted actuarial methodologies using the
projected benefit obligation (‘‘PBO’’) for pension plans and the accumulated postretirement benefit obligation (‘‘APBO’’)
for other postretirement plans. The determination of pension costs and other postretirement obligations are determined
using a December 31 measurement date. The benefit obligations represent the actuarial present value of all benefits
attributed to employee service rendered as of the measurement date. The PBO is measured using the pension benefit
formula and assumptions as to future compensation levels. A plan’s funded status is calculated as the difference
between the benefit obligation and the fair value of plan assets. The Company’s funding policy for the pension plans is to
make annual contributions at a level that is in accordance with regulations under the Internal Revenue Code (‘‘IRC’’) and
generally accepted actuarial principles. The Company’s postretirement benefit plans are not funded.
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