Progressive 2014 Annual Report Download - page 33

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Matching contributions made by the company for the 401(k) Plan were $74.8 million, $69.9 million, and $66.5 million for the
years ended December 31, 2014, 2013, and 2012, respectively.
Postemployment Benefits Progressive provides various postemployment benefits to former or inactive employees who
meet eligibility requirements, and to their beneficiaries and covered dependents. Postemployment benefits include salary
continuation and disability-related benefits, including workers’ compensation and, if elected, continuation of health-care
benefits for specified limited periods. The liability for these benefits was $22.5 million and $24.0 million at December 31,
2014 and 2013, respectively.
Postretirement Benefits We provide postretirement health and life insurance benefits to all employees who met
requirements as to age and length of service at December 31, 1988. There are approximately 115 people who are eligible
for these postretirement benefits. Our funding policy for these benefits is to contribute annually, to a 501(c)(9) trust, the
maximum amount that can be deducted for federal income tax purposes.
Incentive Compensation Plans – Employees Our incentive compensation programs include both non-equity incentive
plans (cash) and equity incentive plans. Cash incentive compensation includes a cash bonus program for a limited number
of senior executives and our Gainsharing program for other employees; the structures of these programs are similar in
nature. Equity incentive compensation plans provide for the granting of restricted stock awards and restricted stock unit
awards (collectively, “restricted equity awards”) to key members of management. The amounts charged to income for the
incentive compensation plans for the years ended December 31, were:
2014 2013 2012
(millions) Pretax After Tax Pretax After Tax Pretax After Tax
Cash $266.2 $173.0 $234.5 $152.4 $207.0 $134.6
Equity 51.4 33.4 64.9 42.2 63.4 41.2
Our 2003 Incentive Plan has expired, and no new awards may be made under this plan; however, awards granted prior to
the plan’s expiration remain outstanding. Our 2010 Equity Incentive Plan, which provides for the granting of equity-based
compensation to officers and other key employees, originally authorized 18.0 million shares.
We have issued restricted equity awards since 2003. In March 2010, we began issuing restricted stock units in lieu of
restricted stock as the form of our equity awards. The restricted equity awards are issued as either time-based or
performance-based awards. The time-based awards vest in equal installments upon the lapse of specified periods of time,
typically three, four, and five years. All restricted stock units are settled at or after vesting in Progressive common shares
from existing treasury shares on a one-to-one basis.
The performance-based awards were granted to our Chief Executive Officer as his sole equity award in each of the last five
years, and to approximately 45 other executives and senior managers in addition to their time-based awards, to provide
additional incentive to achieve pre-established profitability and growth targets. Vesting of these awards is contingent upon
the achievement of predetermined performance goals within specified time periods. The targets for the performance-based
awards, as well as the number of units that ultimately may vest, vary by grant. All performance-based awards include a
specified number of shares or units that will be issued if performance meets a specified target. For awards granted in 2013
and 2014, performance-based awards based on insurance operating results may vest between 0% to 250% of target
depending on the results achieved. The performance-based awards based on insurance operating results granted in 2010
through 2012, and all performance awards based on investment results, may vest from 0% to 200% of the target amount
depending on the results achieved. Outstanding performance-based awards made prior to March 2009 will either vest or be
forfeited in full (i.e., no partial vesting), and if performance goals are not achieved within the contractual term, the awards
will expire. For awards granted prior to 2009, the maximum contractual term is ten years from the grant date, and for awards
granted in or after 2009, the maximum contractual term is 5 years from the date of grant.
Generally, time-based and performance-based equity awards are expensed pro rata over their respective vesting periods
based on the market value of the awards at the time of grant. Performance-based equity awards that contain variable
vesting criteria are expensed based on management’s expectation of the percentage of the award, if any, that will ultimately
vest. These estimates can change periodically throughout the measurement period.
App.-A-32