What is the primary purpose of these amendments to the SORP?

The primary purpose of these amendments is to update the Supplemental Officers' Retirement Plan (SORP) for certain participants, introduce a new benefits formula and early retirement provisions, and critically, to ensure compliance with Section 409A of the Internal Revenue Code, which governs deferred compensation arrangements.

Who are the "Non-Grandfathered Participants" and how are their benefits affected?

Non-Grandfathered Participants are defined as active employees not already earning a benefit in the SORP by January 1, 2008, or those participants who had not reached age 50 by January 1, 2009. Their benefits will now be calculated using a new formula that factors in final average pay, up to 25 years of service (with different multipliers for the first 20 years versus the subsequent 5), and their vested percentage. This new formula also imposes a maximum benefit cap of 45% of final average pay.

Are there any protections for existing participants under the old benefit formula?

Yes, the amendments include a protection clause for Non-Grandfathered Participants. They are guaranteed to receive a SORP benefit that is no less than the benefit they had accrued as of December 31, 2008, under the previously applicable formula. This ensures that participants do not lose benefits already earned.

What are the new rules regarding when benefits can be paid out?

Under the amended SORP, benefits for participants will generally begin on the earliest of: (i) the later of attaining age 60 and the first day of the seventh month following separation from service, (ii) disability, or (iii) death. Participants also have various options for how their benefits are paid, including annuity forms and, subject to Section 409A rules, potential lump-sum payments for a portion of their benefit.

ADP 8-K: Leadership Changes

Summary

Automatic Data Processing, Inc. (ADP) filed an 8-K on August 20, 2008, reporting on amendments to its Supplemental Officers' Retirement Plan (SORP) approved by the board of directors on August 14, 2008. These changes primarily affect "Non-Grandfathered Participants," defined as active employees not already earning a benefit in the SORP by January 1, 2008, or participants who hadn't reached age 50 by January 1, 2009. The amendments revise the benefits formula, early retirement factors, and available benefit payment forms, and crucially, ensure compliance with Section 409A of the Internal Revenue Code. For investors, the key takeaway is the adjustment to executive compensation and retirement benefits. The new formula for Non-Grandfathered Participants caps benefits at 45% of final average pay and introduces a tiered service credit calculation. Importantly, these participants are protected by a grandfather clause ensuring they receive no less than the benefit accrued under the old formula as of December 31, 2008. The filing also details new provisions for benefit commencement dates and payment options, all designed to align with new tax regulations while potentially moderating future retirement payouts for a segment of their officers.

Key Highlights

1ADP's Board of Directors approved amendments to the Supplemental Officers' Retirement Plan (SORP) on August 14, 2008.
2Amendments impact "Non-Grandfathered Participants," affecting their benefit formulas and early retirement factors.
3A new benefit formula for Non-Grandfathered Participants is introduced, calculated based on final average pay, years of service (up to 20 years at 2%, plus 5 years at 1%), and vested percentage.
4The maximum annual benefit for Non-Grandfathered Participants is capped at 45% of their final average annual pay.
5Non-Grandfathered Participants are guaranteed to receive a SORP benefit no less than what they had accrued as of December 31, 2008, under the previous formula.
6Amendments ensure the SORP complies with Section 409A of the Internal Revenue Code regarding deferred compensation.
7New provisions outline benefit commencement dates (e.g., earliest of age 60/separation, disability, or death) and available payment options, including lump sum elections under specific conditions.

AUTOMATIC DATA PROCESSING INC 8-K Report, Executive Changes (Aug 20, 2008)

Summary

Key Highlights

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