AGREEMENT
SENIOR MANAGEMENT INDIVIDUAL LIFE INSURANCE PROGRAM
AND COLLATERAL ASSIGNMENT
THIS AGREEMENT is entered into this day of __________19__, by and between AT&T
Corp., a New York corporation, (hereinafter referred to as "the Employer" in
Part I or "Assignee" in Part II), and
INSTRUCTIONS -- Trustee as Policyholder: Check this box and fill in the
blanks to the right of it if the initial Policyholder will be a trustee
acting for the benefit of the Employee.
___
/__/ _____________________________________________ (hereinafter referred
(Name of Trustee)
to as the "Policyholder"), trustee for ____________________________
(Name of Employee)
(hereinafter referred to as the "Employee").
INSTRUCTIONS -- Employee as Policyholder: Check this box and fill in
the blank to the right of it if the initial Policyholder will be the
Employee.
___
/__/ _____________________________________________ (hereinafter referred
(Name of Employee)
to as either the "Policyholder" or "Employee", as applicable).
WHEREAS, the Employee is currently a valued employee and Senior Manager of the
Employer and the Employer wishes to assist the Employee with his/her personal
life insurance program; and
WHEREAS, the Employee (if also the Policyholder) or otherwise, the above-named
trustee, acting on behalf of the Employee, desires to accept such assistance;
NOW, THEREFORE, the Employer and the Policyholder agree as follows:
PART I - Individual Life Insurance Agreement
1. Description of Policy
In furtherance of the purposes of the Agreement, the Policyholder will
purchase and own a certain policy of life insurance on the life of the
Employee, being Policy No._________ issued by the Metropolitan Life
Insurance Company (hereinafter referred to as "the Insurer") in an
initial face amount of $_________ with an initial annual premium of
$___________ (said policy being hereinafter referred to as "the
Policy"). The Policyholder's ownership shall be subject to all the
terms and conditions set forth in this Agreement.
2. Payment of Premiums
The Employer shall pay such part of the annual premium for such Policy
(excluding the premium for any supplemental benefits not part of the
Policy at initial issuance) as is equal to the amount of the annual
premium which is in excess of the value of the "economic benefit" of
the life insurance protection for Federal Income Tax purposes as
described in Rev. Rule 64-328, Rev. Rule 66-110, and Rev. Rule 67-154.
For purposes of this Section 2, "economic benefit" means the cost of
the pure life insurance coverage (i.e. death benefit less any cash
value) portion of the Policy. The Employer's contribution to the
premium shall be reduced by any dividend used to reduce premiums. For
the convenience of the parties, the Employer shall pay the entire
premium directly to the Insurer. The Employee shall reimburse the
Employer for that portion of the premium equal to the "economic
benefit," of the life insurance protection by withholding monthly from
the Employee's paycheck, pension check, or other post-employment
payment received from the Employer, as applicable; provided, however,
that such withholding from an Employee's pension check from the AT&T
Management Pension Plan shall not exceed 10% of the gross monthly
pension and shall be revocable at the request of the Employee. If the
Employee shall have transferred or assigned his/her interest in the
Policy to a third party, such third party (in the absence of continued
payment by the Employee) shall make payment of the appropriate portion
of the premium to the Employer. If the Employee is not receiving
sufficient amounts from which premiums can be withheld, the Employee
shall make payment of the appropriate amount directly to the Employer
or to the Insurer. While this Agreement is in effect, the Employer
shall maintain a schedule (a copy of which shall be open to inspection
by the Employee), recording annually the portion of the premium paid by
the Employer and the portion paid by the Employee.
3. Collateral Assignment and Possession of Policy
To secure repayment of premiums paid by the Employer provided for in
Section 2, Part II of this Agreement includes an assignment of the
Policy or the Policyholder's interest therein (hereinafter "Collateral
Assignment") and provides for the transfer of possession of the Policy
to the Employer during the term specified in Part II of this Agreement.
Except as provided in or as otherwise consistent with the provisions of
this Agreement, the Employer covenants that it will not exercise its
rights under the Collateral Assignment provisions of this Agreement in
such a manner as to defeat the rights of the Policyholder or the policy
beneficiary under this Agreement. Specifically, the Employer covenants
that it will not surrender the Policy unless the Policyholder has
defaulted on his/her obligations under this Agreement, or the Agreement
has terminated as provided in Section 8. The Employer shall have
possession of the Policy during the period that the Employer makes
premium payments and until all such payments are repaid. The Employer
shall make the Policy available to the Insurer in order to make any
change desired by the Policyholder as to the designation of beneficiary
or the selection of a settlement option, subject, however, to the
Collateral Assignment provisions hereof.
4. Beneficiary Designation and Payment of Policy Proceeds
The Policyholder shall have the right to name the Policy beneficiary.
However, in the event of the Employee's death, the Employer shall have
an interest in the Policy proceeds equal to the value of the premiums
which the Employer has made to the extent not previously reimbursed,
less any Policy indebtedness of the Employer to the Insurer. The
balance, if any, of the proceeds of the Policy shall be paid to the
beneficiary designated in the Policy by the Policyholder.
5. Procedure at Employee's Death
Upon the death of the Employee while the Policy and this Agreement are
in force and subject to the provisions of Parts I and II hereof, the
Employer shall promptly take all necessary steps, including rendering
of such assistance as may reasonably be required by the beneficiary, to
obtain payment from the Insurer of the amounts payable under the Policy
to the respective parties, as provided under Section 4 above.
6. Disability Waiver of Premium
In the event that a supplemental agreement providing for waiver of
premium in the event of disability or any additional death benefit
becomes operational, the additional premium for such supplemental
agreement shall be paid by the Policyholder for the benefit of the
Employee. The Employer's interest in the Policy at death, under Section
4, or on surrender, under Section 9, shall be limited to total premiums
paid by the Employer and not previously reimbursed less any Policy
indebtedness of the Employer to the Insurer.
7. Choice of Dividend Option(s)
To the extent that the Insurer declares dividends on the Policy, the
Employer shall have the right to choose the option or combination of
options it desires from among those offered by the Insurer as to the
disposition of such dividends. The Employer shall notify the
Policyholder and Insurer of its choice, and the Policyholder agrees to
execute any documents necessary to choose or change the Policy's
dividend option.
8. Termination of Agreement
Part I of this Agreement shall terminate when the first of any of the
following events occurs:
(a) Termination of the Employee's employment with the Employer,
for reasons other than retirement on a disability allowance or
a minimum pension or after becoming retirement eligible. For
purposes of this Agreement, an Employee shall be considered
retirement eligible if the Employee has satisfied one of the
following minimum age and length of service (as determined
under the AT&T Management Pension Plan) combinations: (a) any
age and 30 years of service; (b) age 50 and 25 years of
service; (c) age 55 and 20 years of service; or (d) age 65 and
10 years of service;
(b) The Employee's attainment of the age 65 (in some cases later)
on or after retirement on a disability allowance or a minimum
pension or after becoming retirement eligible or, if later,
fifteen (15) years from the date of issuance of the Policy;
(c) Either party's submission of written notice, to the other
party, of intent to terminate Part I of this Agreement;
(d) Performance of the Agreement's terms, following the death of
the Employee;
(e) Failure by either the Employer or the Policyholder, for any
reason to make the premium contributions required under
Section 2 of this Agreement;
(f) Demotion of the Employee to a non-Senior Manager position; or
(g) The Employee engages in any competitive activity as determined
in accordance with the provisions of the AT&T Non-Competition
Guideline (unless either (i) the Employee has obtained the
advance written consent of the Employer's Executive Vice
President-Human Resources to engage in such competitive
activity as provided in the AT&T Non-Competition Guideline; or
(ii) the Employer's Executive Vice President-Human Resources
has waived the application of the AT&T Non-Competition
Guideline to the Employee with respect to the Agreement as
provided for in the AT&T Non-Competition Guideline).
9. Disposition of Policy Upon Termination of Agreement
Upon the termination of this Agreement for any reason other than
Section 8(d) above, the Policyholder shall have a thirty (30) day
option to satisfy the Collateral Assignment regarding the Policy held
by the Employer in accordance with the terms of this Section 9. The
amount necessary to satisfy such Collateral Assignment shall be an
amount equal to the total premium payments made, from time to time, by
the Employer pursuant to Section 2 hereof, and, at the option of the
Policyholder, either shall be paid directly by the Policyholder or
through the Employer's collection from the cash value under the Policy.
If the Policy shall then be encumbered by assignment, policy loan, or
other means which have been the result of the Employer's actions, the
Employer shall either remove such encumbrance, or reduce the amount
necessary to satisfy the Collateral Assignment by the total amount of
indebtedness outstanding against the Policy. The provisions of this
Section 9 are subject to the terms of Section 6 if the Policy's
supplemental agreements have been activated. If the Policyholder
exercises his/her option to satisfy the Collateral Assignment, the
Employer shall execute all necessary documents required by the Insurer
to remove and satisfy the Collateral Assignment outstanding on the
Policy. If the Policyholder does not exercise his/her option to satisfy
the Collateral Assignment outstanding on the Policy, the Policyholder
shall execute all documents necessary to transfer ownership of the
Policy to the Employer. Such transfer shall constitute satisfaction of
any obligation the Policyholder has to the Employer with respect to
this Agreement. The Employer shall then pay to the Policyholder the
amount, if any, by which the cash surrender value of the Policy exceeds
the amount necessary to satisfy the Collateral Assignment.
10. Taxable Income
The Employee is responsible for determining the amount of taxable
income, if any, includable in his/her gross income for tax purposes as
a result of this Agreement or coverage under the Policy.
11. Policyholder's Right to Assign His/Her Interest
The Policyholder shall have the right to transfer his/her entire
interest in the Policy (other than rights assigned to the Employer
pursuant to this Agreement and subject to the obligations of any
outstanding Collateral Assignment) to another person, trust or entity
(herein the "Transferee"). If the Policyholder makes such a transfer,
all his/her rights shall be vested in the Transferee and the
Policyholder shall have no further interest in the Policy and
Agreement. Any Transferee shall be subject to all obligations of the
Policyholder under both Parts I and II of this Agreement.
12. Insurer's Obligations
The Insurer is not a party to this Agreement. It is understood by the
parties hereto that in issuing such Policy of insurance, the Insurer
shall have no liability except as set forth in the Policy and except as
set forth in any assignment of the Policy filed at its Home Office.
Except as set forth in Sections 13 and 14, the Insurer shall not be
bound to inquire into, or take notice of, any of the covenants herein
contained as to the Policy of insurance or as to application
of proceeds of such Policy. Upon the death of the Employee and payment
of the proceeds in accordance with Sections 13 and 14 of this
Agreement, the Insurer shall be discharged from all liability.
13. Administrative and Fiduciary Provisions
AT&T Corp. shall be the administrator with respect to any rights or
obligations of the Employer hereunder and shall have the authority to
control and manage the operation and administration of this Agreement.
The Insurer shall be the fiduciary of the Policy solely with regard to
the review and final decision on the claim for benefits under the
Policy, as provided in the claims procedure set forth in Section 14.
14. Claims Procedure
The following claims procedure shall apply to the Policy and the Senior
Management Individual Life Insurance Program:
(a) Filing of a claim for benefits: The Policyholder or the
beneficiary of the Policy shall make a claim for the benefits
provided under the Policy in the manner provided in the
Policy.
(b) Claim denial: With respect to a claim for benefits under said
Policy, the Insurer shall be the entity which reviews and
makes decisions on claim denials according to the terms of the
Policy.
(c) Notification to claimant of decisions. If a claim is wholly or
partially denied, notice of the decision, meeting the
requirements of Section (d) following shall be furnished to
the claimant within a reasonable period of time after a claim
has been filed.
(d) Content of notice: The Insurer shall provide, to any claimant
who is denied a claim for benefits, written notice setting
forth in a manner calculated to be understood by the claimant,
the following:
(1) The specific reason or reasons for the denial;
(2) Specific reference to pertinent Policy provisions or
provisions of this Agreement on which the denial is
based;
(3) A description of any additional material or
information necessary for the claimant to perfect the
claim and an explanation of why such material or
information is necessary; and
(4) An explanation of this Agreement's claim review
procedure, as set forth in Sections (e) and (f)
following.
(e) Review procedure: The purposes of the review procedure set
forth in this Section and Section (f) following is to provide
a method by which a claimant under the Policy and the Senior
Management Individual Life Insurance Program may have a
reasonable opportunity to appeal a denial of claim for a full
and fair review. To accomplish that purpose, the claimant or
his/her duly authorized representative:
(1) May request a review upon written application to the
Insurer;
(2) May review the Policy or pertinent Senior Management
Individual Life Insurance Program documents or
agreements; and
(3) May submit issues and comments in writing.
A claimant, (or his/her duly authorized representative), shall
request a review by filing a written application for review at
any time within sixty (60) days after receipt by the claimant
of written notice of the denial of the claim.
(f) Decision on review. A decision on review of a denial of a
claim shall be made in the following manner:
(1) the decision on review shall be made by the Insurer
which may, at its discretion, hold a hearing on the
denied claim. The Insurer shall make its decision
promptly, unless special circumstances (such as the
need to hold a hearing) require an extension of time
for processing, in which case a decision shall be
rendered as soon as possible, but not later than one
hundred twenty (120) days after receipt of the
request for review.
(2) The decision on review shall be in writing and shall
include specific reasons for the decision, written in
a manner calculated to be understood by the claimant,
and specific references to the pertinent Policy
provision or provision of this Agreement on which the
decision is based.
Notwithstanding any provision of the Agreement or the Policy, no Employee,
Policyholder, Transferee, assignee or beneficiary may commence any action in any
court regarding the Policy or the Senior Management Individual Life Insurance
Program prior to pursuing all rights of Policyholder under this Section 14.
PART II - Assignment of Life Insurance Policy as Collateral
A. For value received and in specific consideration of the premium
payments made by the Employer as set forth in Section 2 of Part I
hereof, the Policyholder hereby assigns, transfers and sets over to the
Employer (in this Part II referred to as the "Assignee"), its
successors and assigns, the Policy issued by the
Insurer upon the life of the Employee and all claims, options,
privileges, rights, title and interest therein and thereunder (except
as provided in Paragraph C hereof), subject to all the terms and
conditions of the Policy and to all superior liens, if any, which the
insurer may have against the Policy. The Policyholder by this
instrument agrees and the Assignee by the acceptance of this
assignment agrees to the conditions and provisions herein set forth.
B. It is expressly agreed that, without detracting from the generality of
the foregoing, the following specific rights are included in this
Agreement and Collateral Assignment and pass to the Assignee by virtue
hereof:
1. The sole right to collect from the Insurer the net proceeds
of the Policy when it becomes a claim by death or maturity;
2. The sole right to surrender the Policy and receive the
surrender value thereof at any time provided by the terms of
the Policy and at such other times as the Insurer may allow;
3. The sole right to obtain one or more loans or advances on the
Policy, either from the Insurer or, at any time, from other
persons, and to pledge or assign the Policy as security for
such loans or advances;
4. The sole right to collect and receive all distributions or
shares of surplus, dividend deposits or additions to the
Policy now or hereafter made or apportioned thereto, and to
exercise any and all options contained in the Policy with
respect thereto; provided, that unless and until the Assignee
shall notify the Insurer in writing to the contrary, the
distributions or shares of surplus, dividend deposits and
additions shall continue on the Policy in force at the time of
this assignment; and
5. The sole right to exercise all nonforfeiture rights permitted
by the terms of the Policy or allowed by the Insurer and to
receive all benefits and advantages derived therefrom.
C. It is expressly agreed that the following specific rights, so long as
the Policy has not been surrendered, are reserved and excluded from
this Agreement and Collateral Assignment and do not pass by virtue
hereof:
1. The right to collect from the Insurer any disability benefit
payable in cash that does not reduce the amount of insurance
or the cash value of the Policy;
2. The right to designate any change in the beneficiary;
3. The right to elect any optional mode of settlement permitted
by the Policy or allowed by the Insurer;
provided, however, that the reservation of these rights shall in no way
impair the right of the Assignee to surrender the Policy completely
with all its incidents or impair any other right of the Assignee
hereunder, and any designation or change of beneficiary or election of
a mode of settlement shall be made subject to this Agreement and
Collateral Assignment and to the rights of the Assignee hereunder.
D. This Collateral Assignment is made and the Policy is to be held as
collateral security for any and all liabilities of the Policyholder to
the Assignee arising under this Agreement (all of which liabilities
secured to or to become secured are herein referred to as
"Liabilities"). It is expressly agreed that all sums received by the
Assignee hereunder whether in the event of death of the Employee, the
maturity or surrender of the Policy, the obtaining of a loan or advance
on the Policy, or otherwise, shall first be applied to the payment of
the liability for premiums paid by the Assignee on the Policy.
E. The Assignee covenants and agrees with the Policyholder as follows:
1. That any balance of sums, if any, received hereunder from the
Insurer remaining after payment of the existing Liabilities,
matured or unmatured, shall be paid by the Assignee to the
persons entitled thereto under the terms of the Policy had
this Collateral Assignment not been executed;
2. That the Assignee will not exercise either the right to
surrender the Policy or the right to obtain policy loans from
the Insurer, until there has been either default in any of the
Liabilities pursuant to this Agreement or termination of said
Agreement as therein provided; and
3. That the Assignee will, upon request, forward without
reasonable delay to the Insurer the Policy for endorsement of
any designation or change of beneficiary or any election of an
optional mode of settlement.
F. The Policyholder declares that no proceedings in bankruptcy are pending
against him/her and that his/her property is not subject to any
assignment for the benefit of creditors.
Provisions Applicable to Parts I and II
1. Amendments
Amendments may be added to this Agreement by a written agreement signed
by each of the parties and attached hereto.
2. Choice of Law
This Agreement shall be subject to, and construed according to, the
laws of the State of New Jersey.
3. A Binding Agreement
This Agreement shall bind the Employer and the Employer's successors
and assigns, the Policyholder and his/her heirs, executors,
administrators, and assigns (including a Transferee), and any Policy
beneficiary.
4. Severability Provision
The Employer and the Policyholder agree that if any provision of this
Agreement is determined to be invalid or unenforceable, in whole or
part, then all remaining provisions of this Agreement and, to the
extent valid or enforceable, the provision in question shall remain
valid, binding and fully enforceable as if the invalid or unenforceable
provision, to the extent necessary, was not a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, including
the provisions regarding Collateral Assignment, on the day and year first above
written.
POLICYHOLDER
______________________________ ______________________________
Signature of Witness Signature of Policyholder
AT&T CORP.
(As Employer and Assignee)
______________________________ ______________________________
Signature of Witness X. X. Xxxxxxxxxx
Executive Vice President-Human Resources
AT&T SENIOR MANAGEMENT INDIVIDUAL LIFE INSURANCE PROGRAM
(revised 3/3/98)
Program Overview
The Senior Management Individual Life Insurance Program (SMILIP) is an
arrangement where the Company and you purchase a permanent life insurance policy
on your life and share the premium payment. If you die while AT&T is still a
party to the policy, typically before you reach age 65, the death benefit is
also shared between the Company and your designated beneficiary. This type of
arrangement is known in the insurance industry as "Split Dollar." After
attaining age 65 or if later, 15 years from the date of issuance of this policy,
the Company will recoup its premium payments from the cash value build-up in the
policy and cease to have any interest in the policy. The remaining cash value
will be sufficient to give you a "paid-up" death benefit after attaining normal
retirement age, i.e., all premiums will cease and the death benefit of the
policy will be secured for the designated beneficiary with no further cost to
you.
At the time of enrollment your death benefit will be one-and-one-half times
annual salary. Your death benefit will increase annually at 7% to approximate
assumed growth in annual salary over an extended period of time. The premium
cost to you will also increase to reflect your increasing age as well as the
increased death benefit. The Company will pay a significant portion of the
premium. Over time, the Company portion of the premium will decrease.
Although this arrangement is primarily designed to pay a benefit upon your
death, there is also a cash value build-up occurring coincident with the premium
payments that continues after the premium payments cease. Once sufficient funds
have accumulated and the Company no longer has an interest in the policy,
because it has recouped its premiums, you have the option to use some or all of
the remaining cash in lieu of some or all of the death benefit.
Eligibility
SMILIP is available to active AT&T Senior Managers. Employees who are promoted
or hired into Senior Management are immediately eligible to enroll in this
program.
Coverage
Your death benefit will automatically increase 7% on January 1 of each year to
approximate salary increases. Periodically over the life of the policy this
amount may be adjusted by the Company to more closely approximate your actual
salary.
Insurability
If you enroll within 60 days of becoming a Senior Manager, you are guaranteed to
be insured. If you delay enrollment proof of insurability may be required at
that time before a policy can be written or coverage increased. If you are on
disability (i.e., receiving Sickness and Disability Benefits) at the time of
eligibility, enrollment must be delayed until you return to work.
Premium Sharing/Benefit Sharing
SMILIP has its origin in what the insurance industry calls a "Split Dollar"
program. The term "Split Dollar" insurance comes from a concept of the Employer
and the Employee sharing the premium payment on a life insurance policy on the
employee. At age 65 or if later, 15 years from the date of issuance of the
policy, the Company's aggregate premiums are returned from a "special" cash
value built into the policy expressly for this purpose. Should you die before
the Company's aggregate premiums are returned, death benefit payments are made
to both the Company and your beneficiary. However, the benefit the Company
receives does not reduce the death benefit paid to your beneficiary. After the
Company's aggregate premiums are returned, the Company no longer has an interest
in the policy. At that time you will have a "paid up" permanent life insurance
policy with a cash value that can be made available to you at your option.
Sample Senior Manager's Program*
Current Age 50
Annual Premium
Cash Value
Attained Death Senior Senior
Age Benefit Manager Company Manager Company
--- ------- ------- ------- ------- -------
50 $200,000 $ 880 $17,090 0 $ 14,350
55 280,500 1,740 16,232 $ 15,700 101,000
60 393,400 4,092 13,878 85,350 178,500
64 515,700 5,364 12,606 195,700 231,000
65# 515,700 0 0 203,800 0
* This example is for illustrative purposes only and assumes a 7% annual growth
in death benefit (assumed annual salary) and an 8% yield on investment for
the cash value.
The yield on investment is not guaranteed.
# At normal retirement the death benefit becomes constant, premiums cease, the
Company's aggregate premiums are returned and your cash value may continue to
grow.
Premium Period
SMILIP is designed for premiums to be extended over a period of time to ease the
impact on cash flow to both you and the Company. This period is normally from
the time of your enrollment until you reach age 65, however, premiums must be
paid for a minimum of 15 years. Therefore, if you enroll in the program after
age 50, you and the Company will continue premium contributions until the 15
year minimum is reached.
Premium Amount
You will be provided with a personal illustration which reflects the Company's
as well as your annual premiums through the life of the policy.
Premium Waivers
There are no Premium Waivers associated with this policy.
Ownership
There are three options:
Senior Manager as Owner
All paperwork must be signed by Senior Manager as proposed insured and
owner.
Owner at Enrollment is not the Senior Manager
Another option is for you not to take ownership, but rather another,
i.e., individual, trust, etc., apply for ownership of the policy. It is
of particular importance that if the owner of the policy is not you,
the owner must sign the applications as the "Applicant/Owner" and you
must sign as the "Proposed Insured".
Transfer of Ownership
The owner of this policy may subsequently transfer ownership to
another, i.e., an individual, trust, etc.
Since ownership has long term and/or irrevocable implications, we urge you to
consult with an attorney and/or tax advisor before making this decision.
Cash Value
This program is designed to provide you with a pre- and post-retirement death
benefit. However, in addition to the death benefit, there is a cash value
build-up. That is, part of each premium is placed in an "investment fund" to
earn income. Investment earnings beyond the amounts necessary to increase the
death benefit (as your salary increases) build on a tax advantaged basis in the
policy.
Cash Availability
Cash Build-up
Your share of the cash build-up will not begin until several years into
the policy but will build quickly after that. As with any cash amount,
the longer it is left intact the greater the amount will be.
Loans
The cash value attributed to you may be withdrawn in the form of a loan
after the Company no longer has an interest in the policy. There are
certain restrictions and tax implications associated with a loan. We
suggest that you speak with your financial counselor/tax advisor before
taking such a step.
Income Stream or Lump Sum
It is possible, after the Company no longer has an interest in the
policy, to convert all or any portion of the policy from a death
benefit to either an income "stream" (i.e., an annuity) or a lump sum
cash payout. The extent to which you convert to income or cash will
cancel or reduce the valuable death benefit. Once you convert, it is
not possible to re-establish the original death benefit.
Secured Benefit
Changes to the tax law over the years have required an increasing portion of the
Senior Management benefit programs to be paid from Company operating income.
SMILIP allows the Company to contribute towards the cost of this program on a
timely basis while securing the benefit payment from a third party (the
insurance company).
Early Retirement, Termination or Demotion
If, at retirement, you are "Pension Eligible" or "Retirement Eligible" and you
have not reached normal retirement age (65), the death benefit will continue to
increase until age 65. Both you and the Company will continue to pay premiums
until you reach age 65 or if later, 15 years from the date of issuance of the
policy. At that time the premiums will cease and the Company's aggregate
premiums will be returned to the Company.
For purposes of the SMILIP, you will be considered "Pension Eligible" if you
retire with a Disability Allowance or Minimum Retirement Benefit under the AT&T
Senior Management Long Term Disability and Survivor Protection Plan. You will be
considered "Retirement Eligible" for purposes of the SMILIP if you retire after
having satisfied one of the following minimum age and length of service (as
determined under the AT&T Management Pension Plan) combinations: (a) any age and
30 years of service; (b) age 50 and 25 years of service; (c) age 55 and 20 years
of service; or (d) age 65 and 10 years of service.
Whether or not you are Pension Eligible or Retirement Eligible, if you leave the
Company, and without the Company's consent or an appropriate waiver, establish a
relationship with a competitor of the Company or engage in activity in conflict
with or adverse to the interests of the Company under the standards of the AT&T
Non-Competition Guideline and as determined by the AT&T Executive Vice President
- Human Resources, the process will be the same as with retirement/termination
without being Pension Eligible or Retirement Eligible.
If you separate from the Company without being Pension Eligible, Retirement
Eligible or are demoted to a non Senior Manager position, the Company's
aggregate premiums will be immediately returned to the Company. You can, at your
option, either maintain the policy by continuing to pay the total premium, i.e.,
both your amount and the amount previously paid by the Company, use the
remaining cash value (if any) to buy paid up life insurance, or withdraw any
remaining cash value and cancel the policy.
Contractual Agreement
One of the unique aspects of this insurance policy is the existence of a
contract between you and AT&T. This agreement has no relationship to employment
or any other benefit but rather defines the responsibilities of both the Company
and you in the operation of the policy. You will own the policy and determine
the beneficiary. The Company will hold the policy and have a "Collateral
Assignment" from the owner (you or another you name) entitling AT&T, as long as
it has a collateral interest in the policy, to an amount equal to its premiums
paid. This document is a legal agreement and as such includes a significant
amount of detail and warrants your careful review before signing. Although
somewhat unique to life insurance, a collateral assignment is similar in context
to an automobile loan where the car becomes "collateral" for the money lent to
buy it. In this case, a portion of the value and benefit of the policy is the
collateral the Company receives for contributing premium payments to "buy" the
life insurance policy. The agreement is satisfied when the premium paid by the
Company is returned. Some of the major sections of the agreement are:
- Description of the policy
- How the premiums are paid
- How the proceeds are paid
- How the agreement terminates
- Claims procedure
- Description of the assignment
Taxes
Split Dollar life insurance policies have been in existence for decades. The IRS
has issued several rulings over this period which treat these policies favorably
from a tax perspective. However, the Company does not assure any particular tax
treatment and recommends that you review your own situation with your personal
attorney and/or tax advisor.
Enrollment
You will be provided with enrollment documents for completion. Enrollment in
SMILIP and any future changes (i.e., assignment of ownership, beneficiary
change, etc.) is processed through Executive Human Resources.
