Allstate 2015 Annual Report Download - page 61

The Allstate Corporation 2016 Proxy Statement 55
EXECUTIVE COMPENSATION
Allstate Retirement Plan (ARP)
Contributions to the ARP are made entirely by
Allstate and are paid into a trust fund from which
benefits are paid. Before January 1, 2014, ARP
participants earned benefits under one of two
formulas (final average pay or cash balance) based
on their date of hire or their choice at the time
Allstate introduced the cash balance formula. In
order to better align our pension benefits with
market practices, provide future pension benefits
more equitably to Allstate employees, and reduce
costs, final average pay benefits were frozen as of
December 31, 2013. As of January 1, 2014, all eligible
participants earn benefits under a cash balance
formula only.
Final Average Pay Formula — Frozen as of
12/31/13
Benefits under the final average pay formula were
earned and are stated in the form of a straight
life annuity payable at the normal retirement age
of 65. Ms. Greffin and Messrs. Shebik and Wilson
have earned final average pay benefits equal to the
sum of a Base Benefit and an Additional Benefit.
The Base Benefit equals 1.55% of the participant’s
average annual compensation, multiplied by
credited service after 1988 through 2013. The
Additional Benefit equals 0.65% of the amount of
the participant’s average annual compensation that
exceeds the participant’s covered compensation,
multiplied by credited service after 1988 through
2013. Covered compensation is the average of the
maximum annual salary taxable for Social Security
over the 35-year period ending the year the
participant would reach Social Security retirement
age. Ms. Greffin and Messrs. Shebik and Wilson
are eligible for a reduced early retirement benefit
which would reduce their Base Benefit by 4.8%
for each year of early payment before age 65 and
their Additional Benefit by 8% for each year of early
payment from age 62 to age 65 and 4% for each year
of early payment from age 55 to age 62, prorated on
a monthly basis based on age at the date payments
begin.
Cash Balance Formula — For all Participants
Beginning 1/1/14
All named executives earned benefits under the
cash balance formula in 2015. Under this formula,
participants receive pay credits while employed at
Allstate, based on a percentage of eligible annual
compensation and years of service, plus interest
credits. Pay credits are allocated to a hypothetical
account in an amount equal to 3% to 5% of eligible
annual compensation, depending on years of
vesting service. Interest credits are allocated to the
hypothetical account based on the interest crediting
rate in effect for that plan year as published by the
Internal Revenue Service. The interest crediting rate
is set annually and is currently based on the average
yield for 30-year U.S. Treasury securities for August
of the prior year. Prior to 2014, Messrs. Civgin and
Winter earned cash balance credits equal to 2.5% of
eligible annual compensation after they completed
one year of vesting service based on the prior cash
balance formula.
Supplemental Retirement Income Plan (SRIP)
SRIP benefits are generally determined using a
two-step process: (1) determine the amount that
would be payable under the ARP formula(s) specified
above if Internal Revenue Code limits did not apply,
then (2) reduce the amount described in (1) by the
amount actually payable under the applicable ARP
formula(s). The normal retirement date under the
SRIP is age 65. If eligible for early retirement under
the ARP, the employee also is eligible for early
retirement under the SRIP. SRIP benefits are not
funded and are paid out of Allstate’s general assets.
Credited Service
No additional service credit beyond service with
Allstate or its predecessors is granted under the
ARP or the SRIP to any of the named executives.
Messrs. Shebik and Wilson have combined service
with Allstate and its former parent company, Sears,
Roebuck and Co., of 27.2 and 22.8 years, respectively.
As a result, a portion of their retirement benefits will
be paid from the Sears pension plan. Consistent with
the pension benefits of other employees with Sears
service who moved to Allstate during the spin-off
from Sears in 1995, Messrs. Shebik’s and Wilson’s
final average pay pension benefits under the ARP
and the SRIP are calculated as if each had worked his
combined Sears-Allstate career with Allstate through
December 31, 2013, and then are reduced by amounts
earned under the Sears pension plan.
Eligible Compensation
Under both the ARP and SRIP, eligible compensation
consists of salary, annual cash incentive awards, and
certain other forms of compensation, but does not
include long-term cash incentive awards or income
related to equity awards. Compensation used to
determine benefits under the ARP is limited in
accordance with the Internal Revenue Code. For final
average pay benefits, average annual compensation
is the average compensation of the five highest
consecutive calendar years within the last ten
consecutive calendar years through 2013.
Payment Options
Payment options under the ARP include a lump sum,
straight life annuity, and various survivor annuity
options. The lump sum under the final average
pay benefit is calculated in accordance with the
applicable interest rate and mortality assumptions