Alaska Airlines and Horizon Air 2010 Annual Report Download - page 76

Retirement Benefits/Deferred Compensation
The Company provides retirement benefits
to the Named Executive Officers under the
terms of qualified and non-qualified defined-
benefit retirement plans. The Retirement
Plan for Salaried Employees (the “Salaried
Retirement Plan”) and the Company’s
401(k) plans are tax-qualified retirement
plans that the Named Executive Officers
participate in on substantially the same
terms as other participating employees. Due
to maximum limitations imposed by the
Employee Retirement Income Security Act of
1974 and the Internal Revenue Code on the
annual amount of a pension which may be
paid under a qualified defined benefit plan,
the benefits that would otherwise be
payable to the Named Executive Officers
under the Salaried Retirement Plan are
required to be limited. An unfunded defined
benefit plan, the 1995 Elected Officers
Supplementary Retirement Plan (the
“Supplementary Retirement Plan”), provides
make-up benefits plus supplemental
retirement benefits.
The Named Executive Officers are also
permitted to elect to defer up to 100% of
their annual Performance-Based Pay
payments under the Company’s Nonqualified
Deferred Compensation Plan. The Company
believes that providing the Named Executive
Officers with deferred compensation
opportunities is a cost-effective way to
permit executives to receive the tax benefits
associated with delaying the income tax
event on the compensation deferred.
Please see the “2010 Pension Benefits”
and “2010 Nonqualified Deferred
Compensation” tables and information
following them for a description of these
plans.
Agreements Regarding Change in Control
and Termination
The Company has change-in-control
agreements with the Named Executive
Officers that provide for severance benefits
if the executive’s employment terminates
under certain circumstances in connection
with a change in control.
The Company has entered into
change-in-control agreements with these
executives because it believes that the
occurrence, or potential occurrence, of a
change-in-control transaction would create
uncertainty and disruption during a critical
transaction time for the Company. The
payment of cash severance benefits under
the agreements is triggered if two conditions
are met: (1) actual or constructive
termination of employment and (2) a
change-in-control transaction. The
Committee believes that Named Executive
Officers should be entitled to receive cash
severance benefits only if both conditions
are met. Once the change-in-control event
commences, the Named Executive Officer’s
severance and benefits payable under the
contract begins to diminish with time, until
ultimate expiration of the agreement 36
months later.
Policy with Respect to Section 162(m)
Section 162(m) of the Internal Revenue
Code generally prohibits the Company from
deducting certain compensation over $1
million paid to its CEO and certain other
executive officers unless such
compensation is based on performance
objectives meeting certain criteria or is
otherwise excluded from the limitation. The
Committee strives whenever possible to
structure its compensation plans such that
they are tax deductible, and it believes that
a substantial portion of compensation paid
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