ComEd 2006 Annual Report Download - page 360

balance plan. Each of these plans is intended to be tax-qualified under Section 401(a) of the Internal
Revenue Code.
Covered compensation under the plans generally includes salary and annual incentive payments,
which are disclosed in the Summary Compensation Table for the NEOs. The calculation of retirement
benefits under the Exelon Corporation Retirement Program is based upon average earnings for the
highest consecutive multi-year period. Messrs. Rowe, Skolds, Mehrberg, Clark, Crane, McDonald,
Mitchell, and Costello participate in the Exelon Corporation Retirement Program. Messrs. Young,
McLean, O’Brien, and Hilzinger participate in Exelon’s cash balance pension plans.
Under the cash balance pension plan, an account is established for each participant and the
account balance grows as a result of annual benefit credits and annual investment credits. Currently,
the annual benefit credit under the plan is 5.75% of base pay and annual incentive award (subject to
applicable Internal Revenue Code limit). The annual investment credit is the greater of 4%, or the
average for the year of the S&P 500 Index and the applicable interest rate specified in Section 417(e)
of the Internal Revenue Code that is used to determine lump sum payments (the interest rate is
determined in November of each year). Benefits are vested and nonforfeitable after completion of at
least five years of service, and are payable following termination of employment. Apart from the benefit
credits and vesting requirement, and as described above, years of service are not relevant to a
determination of accrued benefits under the cash balance pension plans.
The Internal Revenue Code limits to $220,000 as of January 1, 2006 the individual annual
compensation that may be taken into account under the tax-qualified retirement plan. As permitted by
ERISA, Exelon sponsors supplemental pension plans that allow the payment to certain individuals out
of its general assets of any benefits calculated under provisions of the applicable qualified pension plan
which may be above these limits.
For purposes of the SERP, Mr. Skolds received an additional 7
1
⁄ 2 years of credited service upon
his 5th anniversary of employment and will receive an additional 7
1
⁄ 2 years upon his 10th anniversary in
2010. These credited years of service were awarded to him when he came to work for the company in
2000 to compensate Mr. Skolds for the pension benefits from his former employer that he surrendered
to come to work for the company. Mr. Mehrberg received an additional 10 years of credited service
upon his fifth anniversary. He was awarded these credited years of service in 2002 as a retention
incentive. Mr. Crane received an additional eight years of credited service through December 31, 2006
as part of his employment offer that provides one additional year of service credit for each year of
employment to a maximum of 10 additional years.
Under his employment agreement, Mr. Rowe is entitled to receive a special supplemental
executive retirement plan benefit (the SERP benefit) upon termination of employment for any reason
other than for cause. The SERP benefit, when added to all other retirement benefits provided to
Mr. Rowe by Exelon, will equal Mr. Rowe’s SERP benefit, calculated under the terms of the SERP in
effect on March 10, 1998 as if he had earned 20 years of service on March 16, 1998 and one
additional year of service on each anniversary of that date occurring prior to his termination of
employment. In the event Mr. Rowe’s employment had terminated for cause prior to March 16, 2006
(his “normal retirement date” under his original employment agreement), his entire SERP benefit would
have been forfeited. Upon a termination for cause on or after March 16, 2006, the portion of the SERP
benefit accruing after that date is forfeited.
As of January 1, 2004, Exelon does not grant additional years of credited service to executives
under the non-qualified pension plans that supplement the Exelon Corporation Retirement Program for
any period in which services are not actually performed, except that up to two years of service credits
may be provided under severance or change in control agreements first entered into after such date.
Service credits previously available under employment, change in control or severance agreements or
arrangements (or any successors arrangements) are not affected by this policy.
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