AIG 2005 Annual Report Download - page 169

AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
current and any predecessor retirement plans (including the
15. Employee Benefits
AIG Excess Retirement Income Plan and any comparable
Continued
plans), Social Security, if any, and from any qualified pension
AIG’s U.S. retirement plan is a qualified, noncontributory plan of prior employers. Currently, each of these plans is
defined benefit plan which is subject to the provisions of unfunded. AGC and HSB have adopted similar supplemental
ERISA. All employees of AIG and most of its subsidiaries and type plans. These plans are also unfunded.
affiliates who are regularly employed in the United States, Where non-U.S. retirement plans are defined benefit plans,
including certain U.S. citizens employed abroad on a U.S. they are generally either based on the employees’ years of
dollar payroll, and who have attained age 21 and completed credited service and compensation in the years preceding
twelve months of continuous service are eligible to participate retirement, or on points accumulated based on the employee’s
in this plan. An employee with 5 or more years of plan job grade and other factors during each year of service.
participation is entitled to pension benefits beginning at
normal retirement at age 65. Benefits are based upon a (b) Postretirement Plans: In addition to AIG’s defined benefit
percentage of average final compensation multiplied by years of pension plan, AIG and its subsidiaries provide a postretirement
credited service limited to 44 years of credited service. The benefit program for medical care and life insurance domesti-
average final compensation is subject to certain limitations. cally and in certain foreign countries. Eligibility in the various
Employees may elect certain options with respect to receipt of plans is generally based upon completion of a specified period
their pension benefits including a joint and survivor annuity. of eligible service and attaining a specified age. Overseas,
An employee with 10 or more years of plan participation may benefits vary by geographic location.
retire early from age 55 to 64. An early retirement factor is AIG’s U.S. postretirement medical and life insurance
applied resulting in a reduced benefit. If an employee benefits are based upon the employee electing immediate
terminates with less than five years of plan participation, the retirement and having a minimum of ten years of service.
employee forfeits the right to receive any pension benefits Retirees who were age 65 by May 1, 1989 and their
accumulated to that time. Annual funding requirements are dependents participate in the medical plan at no cost.
determined based on the ‘‘projected unit credit’’ cost method, Employees who retired after May 1, 1989 and prior to
which attributes a pro rata portion of the total projected January 1, 1993 pay 50 percent of the active employee
benefit payable at normal retirement to each year of credited premium. Retiree contributions are subject to adjustment
service. annually. Other cost sharing features of the medical plan
The HSB retirement plan was merged into the AIG U.S. include deductibles, coinsurance and Medicare coordination
retirement plan effective April 1, 2001. Benefits for HSB and a lifetime maximum benefit of $2.0 million. The maximum
participants were changed effective January 1, 2005 to be life insurance benefit prior to age 70 is $32,500, with a
substantially similar to the AIG U.S. retirement plan benefit maximum of $25,000 thereafter.
subject to a grandfathering agreement. The AGC retirement Effective January 1, 1993, both plans’ provisions were
plan was merged into the AIG U.S. retirement plan effective amended. Employees who retire after January 1, 1993 are
January 1, 2002. Benefits for AGC participants were changed required to pay the actual cost of the medical benefits premium
effective January 1, 2003 to be substantially similar to the AIG reduced by a credit of a certain amount, based on years of
U.S. retirement plan benefits subject to grandfathering service at retirement. The life insurance benefit varies by age
requirements. at retirement from $5,000 for retirement at ages 55 through 59;
AIG SunAmerica employees began participation and accru- $10,000 for retirement at ages 60 through 64 and $15,000 for
ing benefits in the AIG plan on January 1, 2003. Vesting with retirement at ages 65 and over.
respect to AIG SunAmerica employees in the AIG plan begins (c) Voluntary Savings Plans: AIG sponsors a voluntary savings
on the later of January 1, 1999, the date of acquisition or the plan for domestic employees (the AIG Incentive Savings plan),
date of hire. which, during the three years ended December 31, 2005,
21st Century sponsors its own benefit plans for its eligible provided for salary reduction contributions by employees and
employees. Assets, obligations and costs with respect to 21st matching contributions by AIG of up to seven percent of
Century’s plans are included herein. The assumptions used in annual salary depending on the employees’ years of service.
its plans were not significantly different from those used by Contributions are funded currently.
AIG in AIG’s U.S. plans. AGC sponsored a voluntary savings plan for its employees,
The AIG Excess Retirement Income Plan provides a benefit which was merged into the AIG Incentive Savings plan on
equal to the reduction in benefits payable under the AIG U.S. January 1, 2003.
retirement plan as a result of federal tax limitations on HSB sponsored a voluntary savings plan for its employees,
compensation and benefits payable thereunder. AIG has which was merged into the AIG Incentive Savings plan on
adopted a Supplemental Executive Retirement Plan (Supple- January 1, 2002.
mental Plan) to provide additional retirement benefits to AIG SunAmerica sponsored a voluntary savings plan for its
designated executives. Under the Supplemental Plan, an employees, which was merged into the AIG Incentive Savings
annual benefit accrues at a percentage of final average pay plan on January 1, 2003. Under an AIG SunAmerica
multiplied by each year of credited service, not greater than 60 Executive Savings Plan, designated AIG SunAmerica execu-
percent of final average pay, reduced by any benefits from the tives also could defer up to 90 percent of cash compensation
AIG m Form 10-K 117