PHILIP MORRIS BENEFIT EQUALIZATION PLAN
Effective September 2, 1974
(As amended and in effect as of January 1, 1994)
PHILIP MORRIS BENEFIT EQUALIZATION PLAN
The Philip Morris Benefit Equalization Plan governs the rights of a person
whose benefits under the Retirement Plan or the Profit-Sharing Plan, or both
Plans, are subject to the Statutory Limitations.
The Plan as hereinafter set forth shall, in the case of Benefit
Equalization Retirement Allowances payable under Article II, A hereof, be
effective with respect to each Employee whose date of retirement (as specified
in an application for retirement under Article II, B of the PM Retirement Plan)
is on or after April 1, 1993 or who has filed an application for an Optional
Payment pursuant to Article II, C(2) of the Plan after March 1, 1992. The
rights of a person who retired or otherwise terminated employment before March
1, 1993 shall be governed by the provisions of the Plan as in effect on the date
of retirement or other termination of employment, unless an application for an
Optional Payment was filed after March 1, 1992.
The Plan as hereinafter set forth shall, in the case of Benefit
Equalization Profit-Sharing Allowances payable under Article II, B hereof, be
effective with respect to Employees whose date of retirement or other
termination of employment is on or after April 1, 1993 or who has filed an
application for an Optional Payment pursuant to Article II, C(2) of the Plan
after March 1, 1992. The rights of a person who retired or otherwise terminated
employment before April 1, 1993 shall be governed by the provisions of the Plan
as in effect on the date of retirement or other termination of employment,
unless an application for an Optional Payment was filed after March 1, 1992.
That portion of the Philip Morris Benefit Equalization Plan which
provides benefits to a Beneficiary solely in excess of the Section 415
Limitations shall be treated as a separate plan from that portion of the Plan
which provides benefits to a Beneficiary attributable solely to the Compensation
Limitation or to the Compensation Limitation and the Section 415 Limitations.
ARTICLE I
DEFINITIONS
The following terms as used herein shall have the meanings set forth below.
Capitalized terms used herein and not defined below shall have the meanings set
forth in the PM Retirement Plan or the Profit-Sharing Plan, as the context may
require.
(a) 'ACTUARIAL EQUIVALENT' shall mean a benefit which is equivalent
in value to the benefit otherwise payable pursuant to the terms of the
Plan, based on the actuarial principles and assumptions set forth in
Exhibit 'I' to the PM Retirement Plan; provided, however, that a Single Sum
Payment shall be the Actuarial Equivalent of the Benefit Equalization
Retirement Allowance payable in equal monthly payments during a twelve (12)
month period for the life of the Retired Employee, using the actuarial
principles and assumptions set forth in Exhibit 'A' to the Plan.
(b) 'ALLOWANCES' shall mean a Benefit Equalization Retirement
Allowance and a Benefit Equalization Profit-Sharing Allowance.
(c) 'BENEFICIARY' shall mean an Employee or the Spouse or other
beneficiary of such Employee whose benefits under the Retirement Plan or
Profit-Sharing Plan, or both Plans, are subject to the Statutory
Limitations.
(d) 'BENEFIT EQUALIZATION PROFIT-SHARING ALLOWANCE' or 'PROFIT-
SHARING ALLOWANCE' shall mean the benefit determined under Article II, B hereof
and payable at the time and in the manner set forth in Article II, D hereof.
(e) 'BENEFIT EQUALIZATION JOINT AND SURVIVOR ALLOWANCE' shall mean
the total amount payable during a twelve (12) month period as a reduced
Benefit Equalization Retirement Allowance to a Retired Employee for life
and after his death the amount payable to his Spouse for life equal to
one-half of the reduced Benefit Equalization Retirement Allowance payable
to the Retired Employee, which together shall be the Actuarial Equivalent
of the Benefit Equalization Retirement Allowance of the Retired Employee.
(f) 'BENEFIT EQUALIZATION OPTIONAL PAYMENT ALLOWANCE' shall mean (1)
the total amount payable during a twelve (12) month period in accordance
with one of the payment methods described in Article II, A(4)(d) of the PM
Retirement Plan designated by the Employee in the application for an
Optional Payment under Article II, C(2) hereof pursuant to which the
Employee receives for life after his retirement a reduced Benefit
Equalization Retirement Allowance and after his death after retirement his
beneficiary receives for life a benefit according to the option elected by
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the Employee, which together shall be the Actuarial Equivalent of the
Benefit Equalization Retirement Allowance payable in equal monthly
payments for the life of the Employee after his retirement, or (2) the
total amount payable during a twelve (12) month period in accordance
with one of the payment methods described in Article II, A(4)(d) of
the PM Retirement Plan pursuant to an election described in Article
II, A(4)(c) of the PM Retirement Plan and designated by the Employee
in the application for an Optional Payment under Article II, C(2)
hereof pursuant to which the Employee receives for life after his
retirement a reduced Benefit Equalization Retirement Allowance and
after his death his beneficiary receives for life a benefit according
to the option elected by the Employee, which together shall be the
Actuarial Equivalent of the Benefit Equalization Retirement Allowance
accrued to the date of election.
(g) 'BENEFIT EQUALIZATION RETIREMENT ALLOWANCE' shall mean the
benefit determined under Article II, A hereof and payable at the time and
in the manner set forth in Article II, C, provided, that payment to a
Retired Employee in any form shall be the Actuarial Equivalent of a Benefit
Equalization Retirement Allowance expressed as a benefit payable in equal
monthly payments during a twelve (12) month period for the life of the
Retired Employee commencing at the Retired Employee's Normal Retirement
Age.
(h) 'BENEFIT EQUALIZATION SURVIVOR ALLOWANCE' shall mean the total
amount payable during a twelve (12) month period in equal monthly payments
for the life of the Spouse of a Deceased Employee or deceased Retired
Employee who has died after the date of his retirement and prior to the
date his Optional Payment under Paragraph I(r)(i) or (ii) hereof commences
to be paid in an amount equal to one-half of the reduced Benefit
Equalization Retirement Allowance which would have been payable as a
Benefit Equalization Joint and Survivor Allowance to the Deceased Employee
or deceased Retired Employee.
(i) 'CHANGE IN CIRCUMSTANCE' shall mean (1) the marriage of the
Employee or Retired Employee, (2) the divorce of the Employee or Retired
Employee from his Spouse, provided such Spouse was designated as the
beneficiary in the currently effective application to receive an Optional
Payment, or the Employee or Retired Employee elected to receive an Optional
Payment pursuant to clause (i) of Paragraph (r) hereof, (3) the death of
the beneficiary designated in the application to receive an Optional
Payment, or (4) a medical condition, based on medical evidence satisfactory
to the Administrator, which is expected to result in the death of the
beneficiary (including the Spouse) who is designated to receive a benefit
after the death of the Retired Employee in accordance with the application
to receive an Optional Payment originally filed with the Administrator,
within five (5) years of the filing of an application for change in
Optional Payment method pursuant to Article II, C(2) or Article II,D(2)
hereof.
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(j) 'COMMITTEE' shall mean the Corporate Employee Benefit Committee
of the Company charged with the administration of the Plan as from time to
time constituted.
(k) 'COMPANY' shall mean Philip Morris Companies Inc.
(l) 'COMPENSATION LIMITATION' shall mean the limitation of Section
401(a)(17) of the Code on the annual compensation of an Employee which may
be taken into account under the Plans.
(m) 'DEFERRED RETIREMENT ALLOWANCE' shall mean the Retirement
Allowance payable pursuant to Article II, A(2) of the PM Retirement Plan.
(n) 'EARLY RETIREMENT ALLOWANCE' shall mean the Retirement Allowances
payable pursuant to Article II, A(3) of the PM Retirement Plan.
(o) 'EMPLOYEE' shall mean any person employed by a Participating
Company on a salaried basis whose benefits under the Retirement Plan or
Profit-Sharing Plan, or both Plans, are subject to the Statutory
Limitations.
(p) 'FULL RETIREMENT ALLOWANCE' shall mean the Retirement Allowance
payable pursuant to Article II, A(1) of the PM Retirement Plan.
(q) 'FUND' shall mean the trust fund provided for in the
Profit-Sharing Plan and established under the trust agreement with respect
to the Profit-Sharing Plan.
(r) 'OPTIONAL PAYMENT' shall mean (1) in the case of a Benefit
Equalization Retirement Allowance, the following optional forms in which
the Benefit Equalization Retirement Allowance of an Employee who has made
an election pursuant to Article II, C(2) hereof may be paid: (i) in equal
monthly payments for the life of the Retired Employee, (ii) as a Benefit
Equalization Joint and Survivor Allowance, or (iii) as a Benefit
Equalization Optional Payment Allowance, and (2) in the case of a Benefit
Equalization Profit-Sharing Allowance, any of the methods of distribution
permitted under Article VI of the Profit-Sharing Plan (other than a Single
Sum Payment payable at the time specified in Article II, D(1) hereof) and
in the event the Retired Employee dies before distribution of his Benefit
Equalization Profit-Sharing Allowance is made, commences to be made or is
fully distributed, to the beneficiary designated in the notification set
forth in Article II, E, hereof, in accordance with the method of
distribution specified in such notification; provided however, that an
Employee may not revoke or modify the method or the timing of any
distribution of his Benefit Equalization Profit-Sharing Allowance later
than at the times specified in Article II, D(2) hereof. Any election to
receive an Optional Payment with respect to a Retired Employee's Allowances
under the Plan shall be
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independent of any election with respect to his benefits payable under
the Retirement Plan, the Profit-Sharing Plan, or any other plan of a
member of the Controlled Group.
(s) 'PARTICIPATING COMPANY' shall mean the Company and any other
corporation which is a member of the Controlled Group and which, with the
approval of the Committee, determines to participate in the Plan for the
benefit of its eligible employees and executes such instruments of
participation as the Committee deems necessary.
(t) 'PLAN' shall mean the Philip Morris Benefit Equalization Plan
described herein and in any amendments hereto.
(u) 'PLANS' shall mean the Retirement Plan and the Profit-Sharing
Plan.
(v) 'PM RETIREMENT PLAN' shall mean the Philip Morris Salaried
Employees' Retirement Plan, effective as of September 1, 1978 and as
amended from time to time.
(w) 'PROFIT-SHARING PLAN' shall mean the Philip Morris Deferred
Profit-Sharing Plan, effective January 1, 1956 and as amended from time to
time.
(x) 'RETIREMENT PLAN' shall mean the PM Retirement Plan and each
other defined benefit plan qualified under Section 401(a) of the Code
maintained by a member of the Controlled Group in which an Employee has an
accrued benefit, other than a defined benefit plan whose benefits in excess
of the Statutory Limitations are payable from one or more of the following
plans maintained by a member of the Controlled Group other than a
Participating Company: (1) an excess benefit plan (as defined in Section
3(36) of ERISA), or (2) a plan maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees.
(y) 'SECTION 415 LIMITATIONS' shall mean: (1) in the case of the
Retirement Plan, the limitations on benefits applicable to defined benefit
plans set forth in Section 415 of the Code and the Treasury Regulations
promulgated thereunder, and (2) in the case of the Profit-Sharing Plan, the
limitations on contributions applicable to defined contribution plans set
forth in Section 415 of the Code and the Treasury Regulations promulgated
thereunder.
(z) 'SINGLE SUM PAYMENT' shall mean (1) in the case of a Benefit
Equalization Retirement Allowance, the normal form of distribution to a
Retired Employee who is eligible for a Full, Deferred or Early Retirement
Allowance, which distribution shall be made in one payment to the Retired
Employee (or his Spouse or
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other beneficiary) at the time set forth in Article II, C(1)(a) hereof
and which is the Actuarial Equivalent of the Benefit Equalization
Retirement Allowance payable in equal monthly payments during a twelve
(12) month period for the life of the Retired Employee and (2) in the
case of a Benefit Equalization Profit-Sharing Allowance, the normal
form of distribution of the balance to the credit of a Retired
Employee as determined in accordance with Article II, B hereof, which
distribution shall be made in one payment to the Retired Employee (or
his Spouse or other beneficiary) at the time set forth in Article II,
D(1) hereof.
(aa) 'STATUTORY LIMITATIONS' shall mean (1) the Section 415
Limitations and (2) the Compensation Limitation.
(ab) 'VESTED RETIREMENT ALLOWANCE' shall mean the Retirement Allowance
payable pursuant to Article II, A(6) of the PM Retirement Plan.
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ARTICLE II
BENEFIT EQUALIZATION RETIREMENT ALLOWANCES AND
BENEFIT EQUALIZATION PROFIT-SHARING ALLOWANCES
A. Benefit Equalization Retirement Allowances and other benefits payable under
this Plan shall be as follows:
(1) (a) The Benefit Equalization Retirement Allowance with respect to a
Retired Employee who has retired on a Full, Deferred or Early Retirement
Allowance shall equal the amount by which the Full, Deferred or Early Retirement
Allowance under the Retirement Plan accrued to the date of retirement, if
computed without regard to the Statutory Limitations, exceeds the amount of the
Full, Deferred or Early Retirement Allowance actually payable under the
Retirement Plan; provided, however, that in the event the Benefit Equalization
Retirement Allowance with respect to the Retired Employee is paid in a Single
Sum Payment pursuant to Paragraph C(1)(a) hereof prior to the Retired Employee's
Benefit Commencement Date, the amount of such Benefit Equalization Retirement
Allowance shall equal the amount by which the Full, Deferred or Early Retirement
Allowance under the Retirement Plan accrued to the date of retirement, if
computed without regard to the Statutory Limitations, is reasonably estimated by
the Administrator to exceed the amount of the Full, Deferred or Early Retirement
Allowance which is projected by the Administrator to be actually payable under
the Retirement Plan.
(b) (i) The Spouse of a Retired Employee described in Subparagraph
(1)(a) above whose request for an Optional Payment pursuant to Article
I(r)(1)(i) or (ii) hereof has been granted by the Management Committee, but who
has died after the date of his retirement and prior to the date his Optional
Payment commences to be paid shall be eligible to receive a Benefit Equalization
Survivor Allowance.
(ii) The beneficiary of a Retired Employee described in
Subparagraph (1)(a) above whose request for a Benefit Equalization
Optional Payment Allowance pursuant to Article I(f)(1) has been
granted by the Management Committee, but who has died after the date
of his retirement and prior to the date his Optional Payment commences
to be paid shall be eligible to receive that portion of the Benefit
Equalization Optional Payment Allowance elected by the Retired
Employee which is payable after the death of the Retired Employee.
(2) (a) The Benefit Equalization Retirement Allowance with respect to a
Retired Employee who is only eligible for a Vested Retirement Allowance and who
is living on his Benefit Commencement Date shall equal the amount by which the
Vested Retirement Allowance under the Retirement Plan accrued to the date of his
termination of employment
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with the Controlled Group, if computed without regard to the Statutory
Limitations, exceeds the amount of the Vested Retirement Allowance actually
payable under the Retirement Plan.
(b) The Spouse of a Retired Employee described in Subparagraph 2(a)
above who has died after termination of his employment with the Controlled Group
and prior to his Benefit Commencement Date shall be eligible to receive a
Benefit Equalization Survivor Allowance.
(3) (a) The Spouse of a Deceased Employee who has died prior to the date
of his retirement or other termination from the service of any member of the
Controlled Group shall be eligible to receive a Benefit Equalization Survivor
Allowance unless the Management Committee has granted the request of the
Deceased Employee to receive a Benefit Equalization Optional Payment Allowance
described in Article I(f)(2) hereof in which event such Spouse shall receive the
Benefit Equalization Survivor Allowance accrued after the date specified in the
election.
(b) The beneficiary of a Deceased Employee or deceased Retired
Employee whose request for a Benefit Equalization Optional Payment Allowance
described in Article I(f)(2) has been granted by the Management Committee shall
be eligible to receive that portion of the Benefit Equalization Optional Payment
Allowance elected by the Retired Employee which is payable after the death of
the Deceased Employee or deceased Retired Employee.
B. Benefit Equalization Profit-Sharing Allowances payable under this Plan
shall be as follows:
The Benefit Equalization Profit-Sharing Allowance with respect to a Retired
Employee shall equal the amounts which would have been credited, but were
not credited to his Company Account as a result of the Statutory
Limitations. All such amounts shall be deemed to have been invested in
Part C of the Fund and valued in accordance with the provisions of the
Profit-Sharing Plan.
C. Commencement and termination of Benefit Equalization Retirement Allowances:
(1) (a) The Benefit Equalization Retirement Allowance payable pursuant to
Paragraph A(1)(a) hereof shall be distributed to the Retired Employee in a
Single Sum Payment no later than sixty (60) days following the Retired
Employee's date of retirement (or, if the Retired Employee dies after the date
of retirement and before distribution of his Single Sum Payment is made, to his
beneficiary as determined pursuant to Paragraph E hereof, in a Single Sum
Payment within sixty (60) days following the date of the Retired
7
Employee's death) unless the Employee has elected to have distribution of his
Benefit Equalization Retirement Allowance made in accordance with Subparagraph
(2) hereof.
(b) The Benefit Equalization Retirement Allowance payable pursuant to
Paragraph A(2)(a) hereof shall be distributed as an Optional Payment under
Article I(r)(1)(i) or (ii) hereof (which Optional Payment shall be in the same
form which the Retired Employee's benefits are paid from the PM Retirement Plan)
and shall commence on the Employee's Benefit Commencement Date.
(c) (i) The Benefit Equalization Survivor Allowance payable pursuant
to Paragraphs A(1)(b)(i), (A)(2)(b) and A(3)(a) hereof shall commence to be paid
on the later of (A) the first day of the calendar month coincident with or next
following the date the Deceased Employee or deceased Retired Employee would have
attained the age of fifty-five (55) years, or (B) the first day of the calendar
month in which the Deceased Employee or deceased Retired Employee died, provided
that the Spouse may elect in accordance with the provisions of Article II,
A(5)(c) or (f) of the PM Retirement Plan, as applicable to the Spouse, that the
Benefit Equalization Survivor Allowance shall commence on the first day of any
month thereafter, but not later than the first day of the calendar month in
which the Deceased Employee or deceased Retired Employee would have attained his
Normal Retirement Age. Any such Benefit Equalization Survivor Allowance shall
terminate with the payment due on the first day of the month in which the Spouse
dies.
(ii) The benefit payable to the beneficiary of the Deceased
Employee or deceased Retired Employee pursuant to Paragraph
A(1)(b)(ii) or (3)(b) hereof shall commence on the first day of the
calendar month following the month in which the Deceased Employee or
deceased Retired Employee died.
(2) An Employee who is eligible to retire on a Full, Deferred or Early
Retirement Allowance and whose Benefit Equalization Retirement Allowance is
otherwise payable in a Single Sum Payment pursuant to Paragraph C(1)(a) hereof
may make application to the Administrator to receive an Optional Payment. The
application may be filed prior to the date the Employee is eligible for an Early
Retirement Allowance and shall specify the form of Optional Payment, the
beneficiary and the date on which the Optional Payment is to commence to be
made, which date shall be on or before the first day of the month coincident
with or next preceding the Employee's Required Benefit Commencement Date, but in
no event shall the Employee's Optional Payment commence to be paid prior to the
later of the first day of the month following the first anniversary of the date
of the filing of his application with the Administrator or the Employee's
Benefit Commencement Date; provided, however, that in the event the Employee or
former Employee incurs a Change in Circumstance on or after the date of the
filing of the application and prior to the date his Optional Payment commences
to be paid, the Employee or former Employee may file an application with the
Administrator within ninety (90) days of the Change in Circumstance,
8
but in no event later than the date his Optional Payment is to commence, to
change the form of Optional Payment or to change the beneficiary who is
designated to receive a benefit after the death of the Retired Employee in
accordance with the Optional Payment method originally filed with the
Administrator; provided, further that any election to change the form of
Optional Payment filed after the date of his retirement and prior to the date
his Optional Payment is to commence may only change the form of Optional Payment
to one of the forms specified in Article I(r)(i) or (ii) hereof. In the case
of an Employee who eighteen (18) months prior to attaining the age of sixty-five
(65) years could be compulsorily retired by his Participating Company upon
attaining the age of sixty-five (65) years pursuant to Section 12(c) of the Age
Discrimination in Employment Act, any application to receive an Optional Payment
must be filed with the Administrator more than one (1) year preceding the date
the Employee attains the age of sixty-five (65) years. The Administrator shall
notify the Management Committee of all applications for an Optional Payment.
The Management Committee may grant or deny any such application in its sole and
absolute discretion. Any such application shall be of no force and effect if
(i) the Employee does not retire on a Full, Deferred or Early Retirement
Allowance, (ii) the Employee incurs a disability at any time before the date his
Optional Payment commences to be made which causes him to be eligible for
benefits under the Philip Morris Long-Term Disability Plan, or (iii) the
Employee is retired for ill health, disability or hardship under Article II,
A(3)(a) of the PM Retirement Plan, provided that in the event the application is
of no force and effect under clauses (ii) or (iii) hereof, payment of the
Employee's Benefit Equalization Retirement Allowance shall be made in a Single
Sum Payment pursuant to Paragraph C(1)(a) hereof within sixty (60) days of the
date of his retirement, but otherwise such application shall be irrevocable and
effective on the Employee's retirement on a Full, Deferred or Early Retirement
Allowance and the Employee's benefits shall commence on the date specified in
the application; provided, however, that (A) if within the one (1) year period
following the date of the filing of the application with the Administrator the
Employee's service with any member of the Controlled Group is involuntarily
terminated other than by reason of the Employee's death, disability or
misconduct (as determined by the Management Committee), such Employee's Optional
Payment shall commence to be paid on the Employee's Benefit Commencement Date,
or (B) if within the one (1) year period following the date of the filing of the
application with the Administrator the Employee voluntarily retires or his
employment is terminated for misconduct (as determined by the Management
Committee) by any member of the Controlled Group, the Optional Payment shall be
reduced as specified in Paragraph C(4)(a) hereof.
(3) (a) Notwithstanding the preceding provisions of this Paragraph, the
Committee may cause the distribution of the Benefit Equalization Retirement
Allowance to any group of similarly situated Beneficiaries in a Single Sum
Payment or as an Optional Payment.
(b) Notwithstanding the preceding provisions of this Paragraph, the
Administrator shall distribute an Employee's Benefit Equalization Retirement
Allowance in a
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Single Sum Payment if the Benefit Equalization Retirement Allowance payable in
equal monthly payments is not more than $250 per month.
(4) (a) The Benefit Equalization Retirement Allowance payable to an
Employee pursuant to clause (B) of Paragraph C(2) hereof shall be further
reduced by one percent (1%) for each month (or portion of a month) by which the
month in which the Employee's termination of employment precedes the first
anniversary of the filing of the application with the Administrator.
(b) Any Benefit Equalization Survivor Allowance or Benefit
Equalization Optional Payment Allowance payable under this Plan to any
Beneficiary other than a Retired Employee commencing at an age other than the
Retired Employee's Normal Retirement Age shall be the Actuarial Equivalent of
the Beneficiary's benefit payable pursuant to the terms of the Plan in equal
monthly payments for life commencing at the Retired Employee's Normal Retirement
Age.
D. Commencement and termination of Benefit Equalization Profit-Sharing
Allowances:
(1) The Benefit Equalization Profit-Sharing Allowance payable pursuant to
Paragraph B shall be distributed to the Retired Employee in a Single Sum Payment
no later than sixty (60) days following the Retired Employee's date of
retirement (or, if the Retired Employee dies after the date of retirement and
before distribution of his Single Sum Payment is made, to his beneficiary as
determined pursuant to Paragraph E hereof, in a Single Sum Payment within sixty
(60) days following the date of the Retired Employee's death) unless the
Employee's Benefit Equalization Profit-Sharing Allowance is distributed in
accordance with Subparagraph (2) hereof.
(2) An Employee who is eligible for a Benefit Equalization Profit-Sharing
Allowance may make application to the Administrator to receive an Optional
Payment. The application shall specify the form of Optional Payment, the
beneficiary and the date on which the Optional Payment is to be paid or commence
to be paid, which date shall be on or before the first day of the month
coincident with or next preceding the Employee's Required Benefit Commencement
Date, but in no event shall the Employee's Optional Payment commence to be paid
prior to the later of the first day of the month following the first anniversary
of the date of the filing of his application with the Administrator or the
Employee's date of retirement; provided, however, that in the event the Employee
or former Employee has elected to receive his Optional Payment over the joint
life expectancies of the Employee and his beneficiary and incurs a Change in
Circumstance described in Article I(i)(2), (3) or (4) hereof on or after the
date of the filing of the application and prior to the date his Optional Payment
commences to be paid, the Employee or former Employee may file an application
with the Administrator within ninety (90) days of the Change in Circumstance,
but in no event later than the date his Optional Payment commences to be made to
designate a new
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beneficiary or elect to receive his Optional Payment over the life expectancy of
the Employee or former Employee. In the case of an Employee who eighteen (18)
months prior to attaining the age of sixty-five (65) years could be compulsorily
retired by his Participating Company upon attaining the age of sixty-five (65)
years pursuant to Section 12(c) of the Age Discrimination in Employment Act, any
application to receive an Optional Payment must be filed with the Administrator
more than one (1) year preceding the date the Employee attains the age of
sixty-five (65) years. The Administrator shall notify the Management Committee
of all applications for an Optional Payment. The Management Committee may grant
or deny any such application in its sole and absolute discretion. If within the
one (1) year period following the date of the filing of the application with the
Administrator the Employee voluntarily retires (other than for ill health,
disability or hardship under Article II, A(3)(a) of the PM Retirement Plan),
voluntarily terminates his employment with his Participating Company (other than
for a disability which causes him to be eligible for benefits under the Philip
Morris Long-Term Disability Plan) or his employment is terminated for misconduct
(as determined by the Management Committee) by any member of the Controlled
Group, the Optional Payment shall be reduced in the same manner as specified in
Paragraph C(4)(a) hereof. If the Employee dies after the date of retirement and
prior to the date his Benefit Equalization Profit-Sharing Allowance is paid or
commences to be paid, payment shall be made to his designated beneficiary
commencing in the form and on the date specified in the application and if no
such form or commencement date shall be specified in the application, to his
designated beneficiary in a Single Sum Payment within sixty (60) days of the
date of his death.
(3) (a) Notwithstanding the preceding provisions of this Paragraph, the
Committee may cause the distribution of the Benefit Equalization Profit-Sharing
Allowance to any group of similarly situated Beneficiaries in a Single Sum
Payment or as an Optional Payment.
(b) Notwithstanding the preceding provisions of this Paragraph, the
Administrator shall distribute an Employee's Benefit Equalization Profit-Sharing
Allowance in a Single Sum Payment if the value of such Benefit Equalization
Profit-Sharing Allowance is not more than $10,000.
E. Application or Notification for payment of Allowances:
An application for a Retirement Allowance, Survivor Allowance or optional
form of benefit under the Retirement Plan shall be deemed notification to the
Administrator that payment of the Benefit Equalization Retirement Allowance or
other benefit is to be made or commence to be made to the Retired Employee,
Spouse
11
or other beneficiary in accordance with the terms of this Plan. An application
for distribution of the Employee's Accounts shall be deemed notification to the
Administrator that payment of the Benefit Equalization Profit-Sharing Allowance
is to be made or commence to be made to the Retired Employee, Spouse or other
beneficiary in accordance with the terms of this Plan. In the event the
Employee shall not have elected an Optional Payment method with respect to his
Benefit Equalization Retirement Allowance, any such notification shall specify
the beneficiary to whom payment of the Single Sum Payment shall be made in the
event the Employee dies after the date of his retirement and prior to the date
the Single Sum Payment is made, provided, that if the Employee shall fail to
designate a beneficiary or if the beneficiary shall predecease the Employee, the
Administrator shall distribute the Single Sum Payment to the duly authorized
representative of the former Employee's estate.
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ARTICLE III
FUNDS FROM WHICH ALLOWANCES ARE PAYABLE
Individual accounts shall be established for the benefit of each
Beneficiary under the Plan. Separate individual accounts shall be established
for that portion of each Beneficiary's benefits under the Plan attributable
solely to the Section 415 Limitations, and for that portion of each
Beneficiary's benefits under the Plan attributable solely to the Compensation
Limitation, or to the Compensation Limitation and the Section 415 Limitations.
If any portion of a Beneficiary's benefits are attributable to the Compensation
Limitation, the total amount of all benefits payable to the Beneficiary under
the Plan shall be paid from that portion of the Plan which provides benefits
attributable solely to the Compensation Limitation or to the Compensation
Limitation and the Section 415 Limitations. Any benefits payable from an
individual account shall be payable solely to the Beneficiary for whom such
account was established. The Plan shall be unfunded. All benefits intended to
be provided under the Plan shall be paid from time to time from the general
assets of the Employee's Participating Company and paid in accordance with the
provisions of the Plan; provided, however, that the Participating Companies
reserve the right to meet the obligations created under the Plan through one or
more trusts or other agreements. The contributions by each Participating
Company on behalf of its Employees to the individual accounts established
pursuant to the provisions of the Plan, whether in trust or otherwise, shall be
in an amount which such Participating Company, with the advice of an actuary,
determines to be sufficient to provide for the payment of the benefits under the
Plan.
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ARTICLE IV
THE CORPORATE EMPLOYEE BENEFIT COMMITTEE AND ITS DELEGATEES
The general administration of the Plan shall be vested in the Committee,
the Management Committee and the Administrator.
All powers, rights, duties and responsibilities assigned to the Committee,
the Management Committee and the Administrator under the Retirement Plan
applicable to this Plan shall be the powers, rights, duties and responsibilities
of the Committee, the Management Committee and the Administrator under the terms
of this Plan, except that the Committee, the Management Committee and the
Administrator shall not be fiduciaries (within the meaning of Section 3(21) of
ERISA) with respect to that portion of the Plan which is intended to be exempt
from the requirements of ERISA pursuant to Section 4(b)(5) thereof.
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ARTICLE V
AMENDMENT AND DISCONTINUANCE OF THE PLAN
The Board may, from time to time, and at any time, amend the Plan;
provided, however, that authority to amend the Plan is delegated to the
following committees or individuals where approval of the Plan amendment or
amendments by the shareholders of the Company is not required: (1) to the
Committee, if the amendment (or amendments) will not increase the annual cost of
the Plan by $10,000,000, (2) to the Management Committee, if the amendment (or
amendments) will not increase the annual cost of the Plan by $4,000,000, (3) to
the Administrator, if the amendment (or amendments) will not increase the annual
cost of the Plan by $500,000.
Any amendment to the Plan may effect a substantial change in the Plan and
may include (but shall not be limited to) any change deemed by the Company to be
necessary or desirable to obtain tax benefits under any existing or future laws
or rules or regulations thereunder; provided, however, that no such amendment
shall deprive any Beneficiary of any Allowances accrued at the time of such
amendment.
The Plan may be discontinued at any time by the Board; provided, however,
that such discontinuance shall not deprive any Beneficiary of any Allowances
accrued at the time of such discontinuance.
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ARTICLE VI
FORMS; COMMUNICATIONS
The Management Committee shall provide such appropriate forms as it may
deem expedient in the administration of the Plan and no action to be taken under
the Plan for which a form is so provided shall be valid unless upon such form.
All communi-cations concerning the Plan shall be in writing addressed to the
Committee, the Management Committee or the Administrator at such address as may
from time to time be designated. No communication shall be effective for any
purpose unless received by the Committee, the Management Committee or the
Administrator.
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ARTICLE VII
INTERPRETATION OF PROVISIONS
The Management Committee shall have the full power and authority to grant
or deny requests for payment of a Benefit Equalization Retirement Allowance in
accordance with a form of distribution authorized under the Retirement Plan and
the Committee shall have full power and authority with respect to all other
matters arising in the administration, interpretation and application of the
Plan. Any member of the Management Committee who makes a request for payment of
a Benefit Equalization Retirement Allowance in accordance with a form of
distribution authorized under the Retirement Plan shall excuse himself from any
and all deliberations and decisions of the Management Committee in connection
with such request.
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ARTICLE VIII
CHANGE IN CONTROL PROVISIONS
A. In the event of a Change of Control, each Employee shall be fully vested in
his Allowances and any other benefits accrued through the date of the
Change of Control ('Accrued Benefits'). Each Employee (or his beneficiary)
shall, upon the Change of Control, be entitled to a lump sum in cash,
payable within 30 days of the Change of Control, equal to the actuarial
equivalent of his Accrued Benefits, determined using actuarial assumptions
no less favorable than those used under the Supplemental Management
Employees' Retirement Plan immediately prior to the Change of Control.
B. Definition of Change of Control.
'Change of Control' shall mean the happening of any of the following
events:
(1) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, and
amended (the 'Exchange Act')) (a 'Person') of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
'Outstanding Company Common Stock') or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the 'Outstanding Company Voting Securities');
provided, however, that the following acquisitions shall not constitute a Change
of Control: (i) any acquisition directly from the Company, (ii) any acquisition
by the Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company or (iv) any acquisition by any corporation pursuant to a transaction
described in clauses (i), (ii) and (iii) of paragraph (3) of this Section B; or
(2) Individuals who, as of the date hereof, constitute the Board (the
'Incumbent Board') cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
18
(3) Approval by the shareholders of the Company of a reorganization,
merger, share exchange or consolidation (a 'Business Combination'), in each
case, unless, following such Business Combination, (i) all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 80% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns the
Company through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (ii) no Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(4) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other disposition
of all or substantially all of the assets of the Company, other than to a
corporation, with respect to which following such sale or other disposition, (A)
more than 80% of, respectively, the then outstanding shares of common stock of
such corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such
sale or other disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) less than 20% of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by any Person (excluding any
employee benefit plan (or related trust) of the Company or such corporation),
except to the extent that such Person owned 20% or more of the Outstanding
Company Common Stock or Outstanding Company Voting Securities prior to the sale
or disposition and (C) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the time of
the execution of the
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initial agreement, or of the action of the Board, providing for such sale or
other disposition of assets of the Company or were elected, appointed or
nominated by the Board.
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EXHIBIT A
PHILIP MORRIS BENEFIT EQUALIZATION PLAN
ACTUARIAL ASSUMPTIONS USED TO CALCULATE A SINGLE SUM PAYMENT
INTEREST RATE: Average of the interest rates established by the Pension
Benefit Guaranty Corporation to value immediate annuities in the case of a plan
termination for the 24 months preceding the Employee's date of retirement, less
1/2 of 1%.
MORTALITY ASSUMPTION: UP-1984 Unisex Mortality Table
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Benefit Equalization Plan - Philip Morris Cos. Inc.
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