8-KLeadership Changes

FIRSTENERGY CORP 8-K Report, Executive Changes (Sep 21, 2007)

Filed September 21, 2007For Securities:FE

Summary

This Form 8-K filing by FirstEnergy Corp. on September 21, 2007, primarily reports on amendments made to two executive compensation plans: the Executive Deferred Compensation Plan (EDCP) and the Supplemental Executive Retirement Plan (SERP). These amendments were principally enacted to comply with the final regulations of Section 409A of the Internal Revenue Code. Key changes impact how and when bonuses can be deferred, when distributions can be elected or modified, and generally prohibit accelerated distributions or in-service withdrawals for post-2004 deferrals. The amendments also introduce specific provisions for supplemental pension benefits, including revised survivorship options and commencement timing tied to age 55 or termination, whichever is later. For the SERP, modifications were made to allow married participants to elect a 50% qualified spousal annuity and to ensure compliance with Section 409A. Notably, a six-month payment delay after separation from service is now applied to post-2004 deferrals for specified highly compensated employees, with interest and dividends continuing to accrue.

Key Highlights

  • 1FirstEnergy Corp. amended its Executive Deferred Compensation Plan (EDCP) and Supplemental Executive Retirement Plan (SERP) on September 18, 2007.
  • 2The primary driver for these amendments was to ensure compliance with Section 409A of the Internal Revenue Code and its final regulations.
  • 3Bonus deferral elections must now be made in the calendar year preceding the year the bonus is earned.
  • 4Distribution elections must generally be made at the time of the deferral election, with strict rules for modifications and a prohibition on accelerated distributions or in-service withdrawals for post-2004 deferrals.
  • 5Supplemental pension benefits for current and future retirees with post-2004 accrued benefits will commence at the later of age 55 or termination, with provisions for modifying commencement dates.
  • 6The SERP was updated to allow married participants to elect a 50% qualified spousal annuity, aligning with competitive practices.
  • 7A mandatory six-month delay in payments following separation from service is now applicable to post-2004 deferrals for certain highly compensated employees, with continued accrual of interest/dividends.

Frequently Asked Questions

The primary reason for the amendments is to comply with the final regulations of Section 409A of the Internal Revenue Code, which governs non-qualified deferred compensation plans. These changes aim to avoid adverse tax consequences for participants.

Generally, distribution elections must now be made at the same time as the deferral election. For post-2004 deferrals, accelerated distributions and in-service withdrawals are prohibited. Changes to the commencement date require at least one year's notice before the original date and must delay payments by at least five years. Payments to specified highly compensated employees for post-2004 deferrals will also be delayed by six months after separation from service.

Yes, for supplemental pension benefits accrued after December 2004, commencement will be at the later of age 55 or the date of termination. Participants can elect survivorship options at the commencement of benefits. Changes to the commencement date for these benefits are also subject to strict rules, requiring at least one year's notice and a minimum five-year delay from the original commencement date.

The SERP was modified to allow married participants to elect a 50% qualified spousal annuity. This change was made to keep the plan competitive and aligned with common industry practices.