8-KMaterial Agreements

VERIZON COMMUNICATIONS INC 8-K Report, Material Agreement (Dec 23, 2004)

Filed December 23, 2004For Securities:VZ

Summary

Verizon Communications Inc. (VZ) filed an 8-K on December 23, 2004, to disclose the modification of executive compensation arrangements related to split-dollar insurance policies. These arrangements were initially established for Messrs. Seidenberg, Babbio, and Barr in exchange for their waiver of previously earned bonus payments. The company has determined not to make further premium payments on these policies due to provisions in the Sarbanes-Oxley Act of 2002 and the lack of SEC guidance. As a consequence of this decision, the previously waived bonus amounts, along with an estimated market-based accrual, will be returned to the executives' individual deferral accounts under the Verizon Income Deferral Plan. While Verizon expects to eventually recover the premiums paid, the policies will remain with the executives at a reduced benefit level. This filing provides transparency regarding the company's handling of these executive compensation instruments in light of regulatory changes.

Key Highlights

  • 1Verizon will cease making premium payments on split-dollar insurance policies for executives Seidenberg, Babbio, and Barr, effective immediately.
  • 2The decision is driven by provisions within the Sarbanes-Oxley Act of 2002 and the absence of SEC guidance on such arrangements.
  • 3Previously waived deferred bonus payments, totaling approximately $6.3 million ($3.8M for Seidenberg, $2.0M for Babbio, $500K for Barr), will be restored to their deferral accounts.
  • 4An additional amount, representing market-based account accrual since the waiver date, will also be returned to the executives' deferral accounts.
  • 5The split-dollar insurance policies will remain the property of the executives but with a reduced benefit level.
  • 6Verizon anticipates recovering all insurance premiums previously paid towards these policies in the future.
  • 7The arrangements were initially designed to be cost-neutral to Verizon at the time of inception.

Frequently Asked Questions

Verizon is suspending premium payments due to provisions within the Sarbanes-Oxley Act of 2002 and the lack of specific guidance from the Securities and Exchange Commission (SEC) on how these provisions apply to such arrangements.

The amounts previously waived by Messrs. Seidenberg, Babbio, and Barr, along with an amount that would have accrued in a market-based investment account, will be returned to their respective individual deferral accounts under the Verizon Income Deferral Plan.

Verizon expects to eventually recover all of the insurance premiums previously paid towards these policies. The policies will remain with the executives but at a reduced benefit level.

No, the arrangements were designed to be cost-neutral to Verizon at the time they were entered into. The present value after-tax costs of the insurance premiums paid by Verizon were intended to be equivalent to the after-tax costs of the waived deferred compensation obligations.