Allstate 2008 Annual Report Download - page 74

(16) The present value of the non-qualified pension benefits for Mr. Simonson earned through December 31, 2008, based on a 7.5%
discount rate is disclosed in the Pension Benefits Table. The present value of Mr. Simonson’s non-qualified pension benefits (SRIP),
$1,981,580, earned through December 31, 2008 is based on the lump sum methodology (i.e., interest rate and mortality table) used by
the Allstate pension plans in 2009, as required under the Pension Protection Act. Specifically, the interest rate for 2009 is based on
60% of the average August 30-year Treasury Bond rate from the prior year, and 40% of the average corporate bond segmented yield
curve from August of the prior year. The mortality table for 2009 is the 2009 combined static Pension Protection Act funding mortality
table with a blend of 50% males and 50% females, as published by the IRS. The benefits earned under the SRIP would be payable
upon reaching age 65, and if termination is a result of a voluntary termination, involuntary termination or retirement. Mr. Simonson
will turn 65 on July 28, 2010. SRIP benefits would become payable immediately upon death.
(17) The present value of the non-qualified pension benefits for Mr. Hale earned through his termination date of March 31, 2008, based on
a 7.5% discount rate is disclosed in the Pension Benefits Table. The present value of Mr. Hale’s non-qualified pension benefits (SRIP)
earned through March 31, 2008 is $182,463. Mr. Hale was paid his entire SRIP benefit in the amount of $182,463 in January, 2009.
(18) The present value of the non-qualified pension benefits for Mr. Pilch earned through December 31, 2008, based on a 7.5% discount
rate is disclosed in the Pension Benefits Table. The present value of Mr. Pilch’s non-qualified pension benefits (SRIP), $1,720,059
earned through December 31, 2008 is based on the lump sum methodology (i.e., interest rate and mortality table) used by the Allstate
pension plans in 2009, as required under the Pension Protection Act. Specifically, the interest rate for 2009 is based on 60% of the
average August 30-year Treasury Bond rate from the prior year, and 40% of the average corporate bond segmented yield curve from
August of the prior year. The mortality table for 2009 is the 2009 combined static Pension Protection Act funding mortality table with a
blend of 50% males and 50% females, as published by the IRS. The benefits earned under the SRIP would be payable upon reaching
age 65 and if termination is a result of a voluntary termination, involuntary termination or retirement. Mr. Pilch will turn 65 on
September 21, 2011. SRIP benefits would become payable immediately upon death or disability.
Change-in-Control
The Allstate Corporation and Allstate Insurance Company have entered into agreements with the named
executives to provide certain benefits and compensation in the event of a change-in-control. In general, a
change-in-control is one or more of the following events: (1) any person acquires 30% or more of the combined
voting power of Allstate common stock within a 12-month period; (2) any person acquires more than 50% of the
combined voting power of Allstate common stock; (3) certain changes are made to the composition of the Board;
or (4) the consummation of a merger, reorganization or similar transaction. These triggers were selected because,
in a widely held company the size of Allstate, they could each result in a substantial change in management.
During the two-year period following a change-in-control, the change-in-control agreements provide for a
minimum salary, annual cash incentive awards, long-term cash incentive awards, and other benefits. In addition,
they provide that the named executives’ positions, authority, duties, and responsibilities will be at least
commensurate in all material respects with those held prior to the change-in-control.
Under the change-in-control agreements, severance benefits would be payable if a named executive’s
employment is terminated either by Allstate without ‘‘cause’’ or by the executive for ‘‘good reason’’ as defined in
the agreements during the two-year period following the change-in-control. Cause means the named executive
has been convicted of a felony or other crime involving fraud or dishonesty, has willfully or intentionally breached
his change-in-control agreement, has habitually neglected his or her duties, or has engaged in willful or reckless
material misconduct in the performance of his or her duties. Good reason includes a material diminution in a
named executive’s base compensation, authority, duties, or responsibilities, a material change in the geographic
location where the named executive performs services, or a material breach of the change-in-control agreement
by Allstate. The principal severance benefits payable on post-change-in-control terminations include: pro-rated
annual cash incentive awards and long-term cash incentive awards (all at target); a payment equal to three times
(two times for Mr. Pilch) the sum of the executive’s base salary and target annual cash incentive award; the
continuation of certain welfare benefits for the continuation coverage period at a cost not to exceed the amount
paid by the named executive prior to termination; outplacement services, an enhanced retirement benefit
consisting of an additional three years of service, age, and compensation (two years for Mr. Pilch); and
reimbursement (on an after-tax basis) of any resulting excise taxes.
If a named executive’s employment is terminated by reason of death or disability during the two-year period
commencing on the date of a change-in-control, Allstate will pay the named executive or the named executive’s
estate a lump-sum cash amount equal to all amounts earned but unpaid, including any annual and long-term
cash incentive awards, as of the termination date. In addition, in the event of death, the named executive’s estate
or beneficiary will be entitled to survivor and other benefits, including retiree medical coverage, if eligible, that are
not less favorable than the most favorable benefits available to the estates or surviving families of peer executives
of Allstate. In the event of disability, Allstate will pay disability and other benefits, including supplemental
long-term disability benefits and retiree medical coverage, if eligible, that are not less favorable than the most
favorable benefits available to disabled peer executives. If Allstate terminates a named executive’s employment for
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Proxy Statement