AGREEMENT
SENIOR MANAGEMENT BASIC 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
__________________________________________ (hereinafter referred
(Name of Employee)
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 the "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 - Basic Life Insurance Agreement
1. Description of Policy: In furtherance of the purposes of the Agreement,
the Policyholder will purchase and own two certain policies of life
insurance on the life of the Employee, being Policy No. ____________
issued by the Metropolitan Life Insurance Company, and Policy No.
____________ issued by the Pacific Life Insurance Company. Said
policies are hereinafter collectively referred to as the "Policy" and
said life insurance companies are hereinafter collectively referred to
as the "Insurer". 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 the entire annual premium
for the Policy (excluding the premium for any supplemental benefits not
part of the Policy at initial issuance). The Employer's contribution to
the premium shall be reduced by any dividend used to reduce premiums.
The Employer shall pay the entire premium directly to the Insurer.
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 beneficiary
designated in the Policy by the Policyholder, or the Policyholder's
Transferee, shall have an interest in the Policy proceeds limited to
an amount equal to the Employee's annual rate of salary payable by the
Employer, rounded to the next higher $1,000 (one thousand dollars),
and determined as of the date of death, or, if earlier, the date of
the Employee's retirement on a disability allowance or a minimum
pension or after becoming retirement eligible. The balance, if any, of
the proceeds of the Policy shall be paid to the Employer. 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.
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, but in no event will the Employer's interest in the Policy
on surrender exceed the cash value under the Policy.
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;
(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 (in some cases later) 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 Basic 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 Basic 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
Basic 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 Basic Life Insurance Program prior to pursuing all rights of
a 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 herein 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)
______________________________ By:______________________________
Signature of Witness ▇. ▇. ▇▇▇▇▇▇▇▇▇▇
Executive Vice President-Human Resources
AT&T SENIOR MANAGEMENT BASIC LIFE INSURANCE PROGRAM
(revised 2/27/98)
Program Overview
The Senior Management Basic Life Insurance Program (SMBLIP) is an arrangement
where the Company and you purchase a permanent life insurance policy on your
life. SMBLIP replaces the Executive Basic Life Insurance Program (EBLIP). There
are several advantages to this program including access to cash value prior to
age 65 and a greater accumulation cash value at age 65.
The Company will pay the entire annual premium for your SMBLIP coverage. Your
W-2 will reflect an imputed income amount associated with the insurance coverage
provided to you under the policy. In certain cases, e.g., your death before
retirement, the total benefits will be shared between the Company and your
designated beneficiary but the Company will share in the death benefit only to
the extent that the total insurance amount exceeds one times your salary rounded
to the next higher $1,000. This type of arrangement is known in the insurance
industry as "Split Dollar."
After attaining normal retirement age 65 (or 15 years of participation in the
program, if later), the Company will recoup its premium payments from the cash
value build-up and cease to have any interest in the policy. The remaining cash
value will be sufficient to maintain your death benefit without further premium
payments.
Your death benefit will change to reflect any change in your salary. At
retirement, your death benefit will become frozen at your final annual salary
rounded to the next higher $1,000. During the period in which the Company makes
premium payments, your imputed income will increase to reflect your increasing
age, as well as any increase in death benefit. After premium payments cease,
i.e., the later of your attaining age 65 or 15 years from the policy issue date,
you will have no further imputed income.
Although this arrangement is primarily designed to pay a benefit upon your
death, there is also a cash value build-up. 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.
AT&T has selected two insurers, Metropolitan Life Insurance Company and Pacific
Life Insurance Company, to provide the SMBLIP coverage. You will therefore have
two policies on your life; one from each insurer, and each insurer will provide
half the defined amount of 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.
SMBLIP 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 companies).
Eligibility
SMBLIP is provided to active AT&T Senior Managers. Employees who are promoted to
or hired as Senior Managers are immediately eligible to enroll in this program.
Coverage
SMBLIP is provided as a replacement to the death benefit coverage provided under
the Executive Basic Life Insurance Plan (EBLIP). The benefit is one times annual
salary rounded to the next higher $1,000.
The death benefit will be updated to reflect changes in your salary. There may
be circumstances where a large increase in salary and, therefore, a
corresponding increase in death benefit, will require providing medical
information to the insurer. By providing this medical information, the insurer
is able to keep the premium payments at the lowest level. A medical information
waiver, signed by you, will be kept on file in the event this circumstance
occurs. This will allow the Company to release to the insurer the required
information from your Company medical records. Higher death benefit coverage
associated with salary increases is guaranteed, no matter what your health
circumstances may be at that time.
Conversion Rights
If you are a participant in the Executive Basic Life Insurance Plan at the time
you become eligible for SMBLIP, for a limited period of time you have the right
to convert your coverage under EBLIP to a separate individual policy provided by
the insurance carrier. We suggest you discuss this with your financial advisor
before exercising or declining this right. You may exercise this right by
contacting Harris, Crouch, ▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇, Inc., the administrator for
EBLIP, at 1-800-510-2050.
Program Illustration
You will be provided with a personal illustration based on your current salary.
This illustration reflects your costs and benefits, as well as the Company's,
over the life of the policy. It provides a picture of how the policy works and
what your tax on imputed income might be, using an assumed salary growth. The
actual ongoing life insurance amounts will be different from this illustration.
Premium Period
SMBLIP is designed for premiums to be extended over a period of time to ease the
impact on cash flow to the Company. This period is normally from the time of
your enrollment until the first policy anniversary after you reach age 65.
However, in all cases, premiums must be paid for a minimum of 15 years.
Therefore, if you enroll in the program after age 50, the Company will continue
premium payments and you will continue to recognize income until the 15 year
minimum is reached.
Imputed Income
SMBLIP offers a cost-effective life insurance program for Senior Managers. The
cost to you of the SMBLIP will be the income tax payable on the amount of your
imputed income.
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 provide the
death benefit coverage build on a tax advantaged basis in the policy. The
policy's cash value is the basis for your subsequent "premium free" death
benefit.
Cash Availability
Under SMBLIP you have considerable flexibility. After the Company interest has
been satisfied, you may reduce your death benefit and utilize the policy cash
value in a number of ways. For example:
a) Loans
The cash value attributed to you may be withdrawn in the form of a loan.
There could be tax implications as well as death benefit diminution
associated with a loan.
b) Income Stream or Lump Sum
It is possible 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 death benefit. Once you convert, it is not possible to
re-establish the original death benefit.
We suggest that you consult with your financial advisor before exercising these
options.
Insurability
If you enroll within 60 days of becoming a Senior Manager you will be guaranteed
to be insured. Your imputed income rate will not depend on your health or
smoking status. It will differ from others depending only on age and amount of
death benefit. Enrollment after 60 days may require a medical questionnaire or
examination.
Transfer/Assignment of Ownership
After you enroll in the program, you may transfer ownership to another, e.g., an
individual, trust, etc. Another option is for you to not take ownership, but
rather another individual or trust, etc., may apply for ownership of the policy.
It is of particular importance that if the original owner of the policy is not
you, that the owner sign the applications as the "Applicant/Policyowner" and you
sign as the "Proposed Insured". Since these transfers are generally construed to
be irrevocable, we urge you to consult with an attorney and/or tax advisor
before making this decision.
Early Retirement or Termination
If, at retirement, you are "Pension Eligible" or "Retirement Eligible" and you
have not reached normal retirement age (65), the Company will continue to pay
premiums until you reach age 65 or 15 years of participation in the program, if
later. During this period you will continue to have imputed income based on your
age and the amount of insurance in force. At the end of this period, i.e., the
later of the policy anniversary immediately following your attainment of age 65
or the 15th policy anniversary, the premiums will cease and the aggregate
Company premiums will be returned to the Company.
For purposes of the SMBLIP, 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 SMBLIP 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.
If you separate from the Company without being Pension Eligible or Retirement
Eligible, the aggregate amount of Company premiums paid up to that point will be
immediately returned to the Company from the cash value of the policy. You can,
at your option, either maintain the policy by paying the policy premiums, or you
may use the remaining cash value (if any) to buy other "self-supporting" life
insurance, or you may withdraw any remaining cash value and cancel the policy.
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.
Demotion
If you are demoted to a position which is not a Senior Manager, the effect is
the same as if terminated from the Company. You will however, automatically
become re-eligible for coverage under the Executive Basic Life Insurance Plan
(EBLIP).
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, or another, will own the policy and
determine the beneficiary. The Company will hold the policy and have a
"Collateral Assignment" from the owner entitling AT&T, as long as it has a
collateral interest in the policy, to any death benefit amounts in excess of one
times your annual salary rounded to the next higher $1,000, and all cash values
up to an amount equal to its cumulative premiums paid. This document is a legal
agreement and as such includes a significant amount of detail and warrants
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 cash value and death 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 aggregate premiums paid by the Company are
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
The Agreement is included with the enrollment documents and requires signature
of the owner of your policy (i.e. you, another individual, trustee, etc.).
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
AT&T has selected Metropolitan Life Insurance Company and Pacific Life Insurance
Company to provide the coverage. This is to provide the best combination of
premium rates and Senior Manager protection. As such, there is some duplication
of forms. Once enrollment has been completed, however, this two insurer approach
should have a minimal impact on you. Enrollment, and any future changes to your
policy (i.e., assignment of ownership, beneficiary change, etc.) is processed
through AT&T Executive Human Resources.