Summary
This 8-K filing from Emerson Electric Co. (EMR) dated September 1, 2005, reports on the termination and transition of its split dollar life insurance program for its CEO and four other highly paid executive officers. This action was taken in response to interpretations of Section 402 of the Sarbanes-Oxley Act of 2002, which has been understood to restrict loans to executive officers, potentially including certain split dollar arrangements. The company has ceased premium payments and withdrawn previously paid premiums. As a transition, executives could either cancel their policies and receive the cash value or convert them to term life insurance policies where Emerson would continue to pay premiums as long as the officer remains employed. All Named Officers elected to convert their policies to term life insurance with $200,000 in coverage and annual premiums under $5,000 per policy.
Key Highlights
- 1Emerson Electric Co. is terminating its split dollar life insurance program for its top five executives.
- 2The termination is a proactive measure due to regulatory interpretations of the Sarbanes-Oxley Act of 2002 (Section 402) concerning executive loans.
- 3The company has stopped paying premiums and is withdrawing prior payments made under the split dollar agreements.
- 4Executives were offered a choice to cancel the policy for its cash value or convert it to a term life insurance policy.
- 5All five Named Officers have chosen to convert their policies to term life insurance.
- 6The new term life insurance policies each provide $200,000 in coverage.
- 7The annual premium for each converted term life policy is less than $5,000.