Summary Plan Description 2016

Transcription

1 Summary Plan Description 2016 Active and Former Team Members, Beneficiaries and Alternate Payees Retirement Plan TSI M DP

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3 DATE: July 2016 TO: FROM: RE: Benefit Plan Participants Human Resources, TECO Energy IMPORTANT Information regarding your TECO Energy-sponsored benefit plan and your rights under the Employee Retirement Income Security Act of 1974, as amended (ERISA) TECO Energy is required by law under the Employee Retirement Income Security Act of 1974, (as amended) and referred to as ERISA, to provide you with information about your benefits, which is contained in this document called Summary Plan Description. This Summary Plan Description provides information that will help you understand your benefits and rights under the plan in which you participate. Receipt of this document does not require action from you. However, you should retain this document for your records.

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5 TECO Energy Group Retirement Plan Summary Plan Description The Summary Plan Description (SPD) for the TECO Energy Group Retirement Plan (the Plan ) and any subsequent Summaries of Material Modifications (SMMs) are available for viewing online through MyTECOnet or Hard copies are available by request at Participating Companies New Mexico Gas Company, Inc. Peoples Gas System, a division of Tampa Electric Company Tampa Electric Company. TECO Energy, Inc. TECO Partners, Inc. TECO Services, Inc. Material contained in this booklet is current as of January 1, 2016.

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7 RETIREMENT PLAN TABLE OF CONTENTS HIGHLIGHTS... 2 COMMON QUESTIONS AND ANSWERS... 3 FINDING IT FAST... 4 YOUR RETIREMENT PLAN... 4 WHO IS ELIGIBLE... 5 WHEN PARTICIPATION BEGINS... 5 HOW YOUR SERVICE COUNTS... 6 HOW YOUR BENEFIT IS DETERMINED... 7 IF YOU WERE AN ACTIVE PARTICIPANT ON JULY 1, Initial Credits... 7 How Future Benefits Are Earned... 7 PENSION EQUITY FORMULA FACTORS... 8 Final Average Annual Earnings... 8 Your Pension Credits... 9 GRANDFATHERED PARTICIPANTS... 9 WHEN YOU CAN RETIRE... 9 NORMAL RETIREMENT... 9 EARLY RETIREMENT POSTPONED RETIREMENT CALCULATING YOUR PLAN BENEFIT AT NORMAL RETIREMENT Under the Pension Equity Formula Under The Prior Plan Formula For Grandfathered Participants DETERMINING YOUR BENEFIT WHILE AN ACTIVE PARTICIPANT Under The Pension Equity Formula MINIMUM ACCRUED BENEFIT If You Are A Grandfathered Participant DETERMINING YOUR BENEFIT IF YOU RETIRE EARLY Under The Pension Equity Formula If You Are A Grandfathered Participant HOW YOUR BENEFIT WILL BE PAID NORMAL FORM OF PAYMENT OPTIONAL FORMS OF PAYMENT Available Annuity Options LUMP SUM PAYMENTS SPECIAL FORM OF PAYMENT IF YOU RETIRE EARLY CALCULATION OF OPTIONAL FORMS OF PAYMENT CHOOSING A PAYMENT METHOD APPLYING FOR YOUR BENEFIT HOW YOUR BENEFIT IS TAXED IF YOU BECOME DISABLED IF YOU DIE DURING DISABILITY IF YOU DIE BEFORE RETIREMENT i

8 HOW SURVIVOR BENEFITS WILL BE PAID DEATH WHILE ON ACTIVE MILITARY DUTY IF YOU LEAVE BEFORE RETIREMENT WHEN VESTED BENEFITS MAY BEGIN HOW YOUR VESTED BENEFITS WILL BE PAID IF YOU DIE BEFORE VESTED BENEFITS BEGIN IF YOU ARE REHIRED IF YOU TRANSFER SOME INFORMATION ABOUT SOCIAL SECURITY SOCIAL SECURITY TAXES OTHER TYPES OF BENEFITS FOR MORE INFORMATION CIRCUMSTANCES THAT MAY AFFECT YOUR RETIREMENT BENEFIT ADMINISTRATIVE INFORMATION PLAN ADMINISTRATION CLAIMS REVIEW PROCEDURES LEGAL ACTIONS AND LIMITATIONS CLAIMS FILING Time Frames If Your Claim For Benefits Is Reduced or Denied Appealing A Claim Reduction Or Denial Determination OTHER INFORMATION ABOUT YOUR BENEFITS MAXIMUM BENEFITS TOP-HEAVY REQUIREMENTS ASSIGNMENT OF BENEFITS QUALIFIED DOMESTIC RELATIONS ORDER (QDRO) PARTICIPATING COMPANIES AND COLLECTIVE BARGAINING UNITS FAMILY AND MEDICAL LEAVE ACT (FMLA) UNIFORMED SERVICES EMPLOYMENT AND REEMPLOYMENT RIGHTS ACT NO RIGHT TO EMPLOYMENT FUTURE OF THE PLAN ERISA GUIDELINES AND YOUR RIGHTS UPDATING YOUR ADDRESS APPENDIX A SPECIAL PROVISIONS THAT APPLY TO GRANDFATHERED PARTICIPANTS COVERED TAX BASE WHICH FORMULA WILL PROVIDE YOUR BENEFIT? DETERMINE YOUR BENEFIT AT NORMAL RETIREMENT AGE (NRA) AS DEFINED BY SOCIAL SECURITY ADMINISTRATION (SSA) PENSION EQUITY FORMULA PRIOR PLAN FORMULA YOUR BENEFIT THREE YEARS BEFORE NORMAL RETIREMENT AGE (NRA) YOUR BENEFIT FIVE YEARS BEFORE NORMAL RETIREMENT AGE (NRA) APPENDIX B SPECIAL PROVISIONS FOR PARTICIPANTS IN CERTAIN FORMER RETIREMENT PLANS ii

9 IF YOU WERE A PARTICIPANT IN THE FORMER GC SERVICE OR GULFCOAST TRANSIT RETIREMENT PLAN IF YOU WERE A PARTICIPANT IN THE FORMER RETIREMENT PLAN OF SOUTHERN MARINE MANAGEMENT COMPANY AND AFFILIATES IF YOU WERE A PARTICIPANT IN THE FORMER SEBRING UTILITIES COMMISSION RETIREMENT SYSTEM IF YOU WERE A PARTICIPANT IN THE SOUTHERN LABOR UNION PENSION PLAN IF YOU WERE A PARTICIPANT IN THE PEABODY PENSION PLAN OR THE PEABODY HOLDING COMPANY, INC. RETIREMENT PLAN FOR SALARIED EMPLOYEES IF YOU WERE A PARTICIPANT IN THE FORMER PGS RETIREMENT PLAN IF YOU WERE AN EMPLOYEE OF WEST FLORIDA NATURAL GAS COMPANY IF YOU WERE AN EMPLOYEE OF GRIFFIS GAS, INC APPENDIX C SPECIAL PROVISIONS APPLYING TO CERTAIN TPS SUBSIDIARIES APPENDIX D SPECIAL PROVISIONS APPLYING TO CERTAIN NEW MEXICO GAS COMPANY, INC. EMPLOYEES iii

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11 This Summary Plan Description (SPD) summarizes the legal documents that govern the TECO Energy Group Retirement Plan. Every effort has been made to accurately describe the plan in this SPD. If there is a discrepancy between this SPD and the plan document, or if the plan is required to operate in a different manner in order to comply with federal laws or regulations, the plan document, or the appropriate federal laws and regulations, will control. TECO Energy Inc. ( TECO Energy ) intends to continue the plan indefinitely, but reserves the right to change or terminate it at any time. For example, the plan may be changed because of federal regulations, or it may be discontinued for business reasons. After government approval of the plan termination, your benefit would either be distributed in the manner explained in this booklet, or immediately in a single sum cash payment. TECO Energy, as Plan Administrator, has the exclusive discretionary authority to construe and to interpret the terms of the Plan, to decide all questions of eligibility for benefits and to determine the amount of such benefits, and its decisions on such matters are final and conclusive. This summary contains information reflecting the TECO Energy Group Retirement Plan restated as of January 1, 2011 and amendments through December 31, 2015 and applies to any subsequent plan year until amended. 1

12 HIGHLIGHTS To give you an edge in planning for your future, the company provides a Retirement Plan at no cost to you. The plan has changed over the years to reflect a changing workforce. On July 1, 2001, the plan was converted to a pension equity plan. It is designed to reward service like a traditional pension plan while providing flexibility and portability. The plan uses a formula for determining your benefit. It multiplies your final average annual earnings by your cumulative pension credits, which are based on your age and length of service each year. These credits increase with your age and service. If you are an eligible employee you will be a participant of the plan on the first day of the month after completing a year of employment, provided you are at least age 21. Your service will be calculated from the first day of your work prior to age 21. If you were a participant in the plan on July 1, 2001, initial credits were calculated for you as of the date the pension equity formula went into effect. These initial credits were based on the greater of the prior plan formula and the current pension equity formula. The formula for determining the benefit you will actually receive when you leave is determined by your age on July 1, If you were under age 40 on July 1, 2001, your future benefit will be earned under the pension equity formula. If you were age 40 or over on July 1, 2001, you are part of the grandfathered group. As a grandfathered participant, the actual benefit you will receive will be the higher of: o What you would have received had the prior plan formula in effect on June 30, 2001 continued. OR o What you would have received if the pension equity formula had always been in effect. In addition, as a grandfathered participant, all of the payment options available under the formula in effect prior to July 1, 2001 will still be available to you. While normal retirement is based on the date you become eligible for your full Social Security benefit, you become vested in the retirement plan once you complete three years of service. Your plan benefit may be paid in a lump sum or as an annuity. SPECIAL NOTE: The company reserves the right to change, replace or terminate the Retirement Plan at any time. Any changes will be communicated to participants. For more information about the plan, including your rights as a participant and claims appeal procedures, see the Administrative Information section. 2

13 COMMON QUESTIONS AND ANSWERS Who pays for the Retirement Plan? Can I make contributions? The company pays for the TECO Energy Group Retirement Plan and makes all the contributions. You cannot make contributions to this plan, but remember that you can contribute to the TECO Energy Group Retirement Savings Plan and receive matching contributions from the company on a portion of your savings. Can I make withdrawals from the Retirement Plan while I m working? Because the plan is designed to help supplement your income during retirement, you cannot make withdrawals while you re an active employee. How will I know what my Retirement Plan benefit will be? While you are an active employee you can use Pension Calculator, located at or to calculate an estimate of your benefit at any given point in time. When can I retire? Once you complete five years of service, you can retire as early as age 50, if the sum of your age and service add up to at least 60. Will I lose my Retirement Plan benefit if I leave the company? If you leave the company after completing three years of service, you ll be eligible for the retirement benefit that you have earned. If you leave the company prior to completing three years of service, you will not receive a benefit from the retirement plan. I was an employee and active participant in the Retirement Plan when the new formula went into effect on July 1, Will my benefit be determined according to the terms of the old formula or the new one? When the company amended the plan to the pension equity formula, the benefit you had already earned was converted to initial pension credits. Accrued benefits (benefits earned to date) were calculated under the terms of the former plan formula and the pension equity formula. Your initial accumulated credits as of July 1, 2001, were the greater of the two formulas. Active participants who were age 40 or older on July 1, 2001 will have their benefit determined under both formulas and will receive a final benefit that is the higher of the two formulas. Active participants who were under age 40 on July 1, 2001 earn benefits under the pension equity formula going forward. 3

14 FINDING IT FAST YOUR SITUATION: How do I participate in the retirement plan? How do my years of service add to the value of my retirement plan benefit? When will I become eligible to retire and receive a benefit from the plan? HERE S WHERE TO FIND IT: Who Is Eligible page 5 How Your Service Counts page 6 When You Can Retire page 9 What will my plan benefit be? Calculating Your Plan Benefit page 10 I want to retire early. How will that affect my Retirement Plan income? What payment options are available to me? I m ready to retire. How do I start receiving a benefit? What happens if I leave the company before I am eligible to retire? I am a grandfathered participant. How is my benefit determined? What kind of federal protections do I have as a plan participant? What do I need to do if I want to appeal a denied claim? How do I find out who the plan administrator is? Determining Your Benefit if You Retire Early page 13 How Your Benefit Will Be Paid page 14 Applying For Your Benefit page 18 If You Leave Before Retirement page 20 Appendix A Special Provisions That Apply To Grandfathered Participants page 34 ERISA Guidelines And Your Rights page 31 Claims Review Procedures page 25 Plan Administration page 25 YOUR RETIREMENT PLAN TECO Energy provides the Retirement Plan for eligible employees. There is no employee contribution. The plan offers: Flexibility when you receive your benefit Portability if you change jobs The chance to retire on your own terms The Retirement Plan gives you an edge as you plan for your future. Best of all, the company pays the full cost. 4

15 WHO IS ELIGIBLE You are eligible for the plan if you are employed by one of the participating companies and not: Paid through a system other than the normal payroll process An individual for whom the company does not make Federal Insurance Contributions Act (FICA) contributions A member of a collective bargaining unit that does not participate in this plan Working for the company as part of an educational cooperative program A temporary or leased employee Once you meet the eligibility requirement, you are automatically a participant when your participation begins as provided below. You only need to complete a Retirement Plan Beneficiary Form. You can name a beneficiary or change your beneficiary at any time if you have access to Employee Self Service or by completing a Beneficiary Designation form. Forms are available on the Human Resources website under HR forms ( If you are married, your spouse is automatically your beneficiary. To name someone other than your spouse as any level of primary beneficiary, you will need written spousal consent, witnessed by a notary public. (A space is provided for this purpose on the Beneficiary Designation form.) If you do not name a beneficiary, or if the person you name dies, your benefit will be paid to your surviving spouse, your surviving children or to your estate in that order. You can change your beneficiary at any time until you begin receiving your benefit. You may be asked to show proof of your age and provide other information in order for your benefit to be determined. WHEN PARTICIPATION BEGINS As an eligible employee, you become a participant on the first day of the month after you complete a year of employment provided you are age 21 by that date. If you are not, you ll become a plan participant on the first day of the month after reaching age 21. However, your service will start from your first day of work. 5

16 SPECIAL TERMS YOU SHOULD KNOW Throughout this plan summary, you will see references to these terms: Pension Equity Formula This is the formula that went into effect on July 1, 2001 when the retirement plan benefit formula was converted to a pension equity formula. Under this type of formula, the benefit is defined as a lump sum based on cumulative credits at retirement or termination, multiplied by final average annual earnings. Credits increase with age and service. This is the formula that is used to determine the benefit for anyone who became a participant after July 1, 2001 and for all future benefits for any participant in the plan on July 1, 2001 who was under age 40. Prior Plan Formula This is the formula that was in effect on June 30, The benefit is defined as a monthly annuity, based on final average annual earnings, your service up to a maximum of 35 years and covered tax base. The prior plan formula is used for grandfathered participants. Grandfathered Participant If you were an active participant in the plan on July 1, 2001 and you were age 40 or older on that date; you are considered a grandfathered participant. As a grandfathered participant, these special provisions apply to you: o Your benefit will be determined in two ways: under the pension equity formula as if that formula had been in effect throughout your career with the company and under the prior plan formula, as if that formula had remained in effect throughout your career with the company. Whichever formula provides you with the higher benefit is the benefit that you will receive. (The prior plan formula is described in Appendix A.) o All payment options that were offered under the plan prior to July 1, 2001 will still be available to you. HOW YOUR SERVICE COUNTS Your length of service is important for two main reasons. It s used to determine: How much your benefit would be When you will become eligible for a benefit Plan service starts on your date of hire and ends when you leave the company. It also includes time you are away from the company for one of the following reasons: You are on a temporary layoff as long as you return to work immediately when recalled by the company You are on a military leave while your reemployment rights are protected by law You are on an approved leave of absence not longer than one year You are on leave to work for a union You are totally disabled and continue to accrue plan service (see "If You Become Disabled" on page 18) You leave the company and are rehired within one year of your termination 6

17 In determining your length of service, you will receive 1/12th of a year of service for each month or partial month worked. Your total plan service will be the sum of all your periods of employment. Besides playing a part in determining how much your benefit will be, your length of service is important in another way: It also determines when you will become eligible for a benefit. This is known as vesting. Once you complete three years of service or reach age 65 (whichever occurs first), you will be 100 percent vested in the benefit you have accrued. As a vested participant, you are entitled to the full value of the benefit you have earned if you leave the company for any reason. WERE YOU HIRED AS PART OF AN EDUCATIONAL COOPERATIVE PROGRAM? If so, this service will also be counted if you become eligible for the plan later on. HOW YOUR BENEFIT IS DETERMINED Your Retirement Plan was redesigned effective July 1, On that date, a pension equity formula for determining your benefit went into effect. If you become a participant after that date, your benefit is determined by the pension equity formula. IF YOU WERE AN ACTIVE PARTICIPANT ON JULY 1, 2001 If you were a participant on July 1, 2001, initial credits were determined for you under the pension equity formula for service prior to July 1, Initial Credits Initial credits are the pension equity credits you were given as a participant in the plan on July 1, These credits were determined as the greater of: The pension equity formula as if it had been in effect since your date of hire to July 1, 2001 OR The present value of your accrued benefit under the prior formula as of July 1, 2001 divided by your final average annual earnings How Future Benefits Are Earned All future benefits you earn under the plan from July 1, 2001 to your separation date will depend on your age as of July 1, 2001 as follows: If you were under age 40 on that date, all future benefits are determined by the pension equity formula. 7

18 If you were age 40 or older, you are part of the grandfathered group. Your benefit will be calculated in two ways: according to the pension equity formula and according to the prior plan formula as if it had continued until your separation. You will receive the greater of the two benefits. (See Appendix A for more information.) A FAST, EASY WAY TO ESTIMATE YOUR BENEFIT Active employees can utilize Pension Calculator, located at or to calculate an estimate of your benefit. It s a tool that gives you an edge in retirement planning. Information regarding your default user name and password (and how to reset your password) are available on the log in screen. PENSION EQUITY FORMULA FACTORS Two factors determine your retirement benefit under the pension equity formula: Your final average annual earnings The sum of your pension credits Final Average Annual Earnings Your benefit is designed to replace a portion of your pay at its peak. That s why your benefit is based on your final average annual earnings. This average will be the larger of your annual earnings for the: Last 60 consecutive months of employment or for all your months of employment if less than 60 OR Five calendar years in your career during which you received the highest annual earnings whether or not these years are consecutive For the purposes of determining retirement plan benefits, annual earnings is your total compensation (up to the government-imposed limits) as reported on your W-2 form, including pre-tax contributions you make to the Retirement Savings Plan plus any pre-tax contributions you make towards your other benefits programs. However, annual earnings will not include reimbursed expenses, excess life insurance premiums, proceeds from the sale of stock options, deferred compensation, severance pay, moving expenses, stock-based compensation (other than stock-based compensation given in satisfaction of short-term incentive compensation payouts) or any forms of indirect compensation. Annual earnings will also not include any differential wage payments made while you are serving in active duty in the military. 8

19 Your Pension Credits Each year, you get an annual credit that is based on your age and years of service: AGE PLUS SERVICE AS OF 12/31 EACH YEAR Less than 40 2% % % % % % 90 or more 13% PENSION CREDIT FOR THE YEAR When it comes time to determine your benefits, your annual pension credits are added together for a total cumulative pension credit. This figure will be used to determine your benefit. Remember, if you were an active plan participant on July 1, 2001, your initial credits will be added to any pension credits you earn after July 1, If you are a participant who was employed by TPS McAdams Operations Company or New Mexico Gas Company, Inc., your pension equity credits are determined by a different formula or your service credits are calculated differently; see Appendix C and D for details. GRANDFATHERED PARTICIPANTS If you are a grandfathered participant, your benefit will also be calculated according to the prior plan formula (the formula in effect on June 30, 2001). See Appendix A for more information about provisions that apply only to grandfathered participants. WHEN YOU CAN RETIRE The plan is designed to provide you with choices. You can choose to retire early or to postpone your retirement. And unlike many traditional-style pension plans, the redesigned Retirement Plan allows you to receive the value of your vested benefit if you leave the company before you retire. NORMAL RETIREMENT Your normal retirement age is the age you become eligible for unreduced Social Security benefits. For example, age 65 is the full Social Security entitlement age for people born before 1938, but it phases in up to age 66 for those born in 1938 through If you were born after 1954, full entitlement gradually phases in until it reaches age 67 for those born after For your normal retirement age, see the table on the next page. 9

20 IF YOU WERE BORN THIS YEAR: 1937 or before or after NORMAL RETIREMENT AGE* YOUR NORMAL RETIREMENT AGE IS: months months months months months months months months months months 67 * Your normal retirement age for purposes of the Retirement Plan follows current Social Security rules. EARLY RETIREMENT Your early retirement age is the earliest date you: Reach age 50 if your age and years of plan service added together equal 60 or more Reach age 55 If you've reached your early retirement age, you can retire on the first day of any month after you complete five years of service. POSTPONED RETIREMENT You may continue working for the company after you reach your normal retirement age. You can stay on and work up to the age permitted by applicable state or federal law. If you decide to work after your normal retirement age, you will continue to earn pension credits. Note: If you are a grandfathered participant, the prior plan formula caps service at 35 years. Under the pension equity formula, there is no service cap. CALCULATING YOUR PLAN BENEFIT The retirement plan formula was redesigned effective July 1, This section tells you how to calculate your plan benefit at normal retirement, while you are an active participant, and if you want to retire early. 10

21 AT NORMAL RETIREMENT The way your benefit is calculated when you retire depends on your age when you became a participant in the plan. If you are a grandfathered participant, your benefit will always be calculated under the pension equity formula, and it will also be calculated under the prior plan formula. Under the Pension Equity Formula Every participant will have his or her benefit calculated by the pension equity formula for all service earned after July 1, The formula is: AGE PLUS SERVICE AS OF 12/31 EACH YEAR: Less than 40 2% % % % % % 90 or more 13% PENSION CREDITS FOR THE YEAR: You are credited each year with a pension credit based on your age and service. These credits are added up for a cumulative pension credit when you retire. To determine your benefit, you multiply your final average annual earnings by your cumulative pension credits. If you are a participant who was employed by TPS McAdams Operations Company or New Mexico Gas Company, Inc., your pension equity credits are determined by a different formula or your service credits are calculated differently; see Appendix C and D for details. Remember: If you were a participant in the plan on July 1, 2001, the benefit you earned for service up to that date has already been calculated for you as your initial credits. These initial credits will be added to the pension credits you earn after July 1, (See page 7 for details.) For Example: Let s say you were hired at age 40 on January 1, Therefore, your benefits are calculated under the pension equity formula. Let s assume that you continue to work for the company until your normal retirement age (age 67) and that your final average annual earnings at that time will be $45,000. Using these assumptions, and the pension equity formula, your benefit is determined in three easy steps: 1. Determine the credits you will earn each year until you leave the company. Based on the formula and using your age and service at the end of each year, your credits at normal retirement are as follows on the next page: 11

22 YEAR: AGE: + SERVICE: = AGE + SERVICE POINTS: IF AGE + SERVICE AS OF DEC. 31 OF EACH YEAR ARE: THE PENSION CREDIT EARNED FOR THE YEAR WILL BE: CUMULATIVE PENSION CREDITS: = 41 3% 3% = 43 3% 6% = % 9% = 47 3% 12% = 49 3% 15% = 51 5% 20% = 53 5% 25% = % 30% = 57 5% 35% = 59 5% 40% = 61 7% 47% = 63 7% 54% = % 61% = 67 7% 68% = 69 7% 75% = 71 9% 84% = 73 9% 93% = % 102% = 77 9% 111% = 79 9% 120% = 81 11% 131% = 83 11% 142% = % 153% = 87 11% 164% = 89 11% 175% = 91 13% 188% = or more 13% 201% = 95 13% 214% Total pension credits: 214% 2. Multiply the total pension credits from above by your final average annual earnings to arrive at the lump sum amount payable under the pension equity plan, which in this case would be 214% x $45,000 or $96,300. So, in this case you could receive a lump sum benefit of $96,300 from the retirement plan. 3. Lump sum payments based on the pension equity formula are converted to annuities based on regulated interest rates in the year of distribution of your benefit. The value of your annuity could increase or decrease in future years depending on the rates in effect during the calendar year in which you elect to receive your benefit. Under The Prior Plan Formula For Grandfathered Participants If you are a grandfathered participant, your benefit will also be calculated according to the formula in effect before July 1, 2001 (the prior plan formula). See Appendix A for details. 12

23 DETERMINING YOUR BENEFIT WHILE AN ACTIVE PARTICIPANT While an active participant, you earn a portion of your benefit each year. The benefit you have earned at any point in time is called your accrued benefit. Once you complete three years of service or reach age 65 (whichever occurs first) while a TECO Energy (or participating company) employee, you will be assured of receiving this benefit, even if you leave the company before retirement. Under The Pension Equity Formula Determining your accrued lump sum benefit under the pension equity formula is easy. You simply multiply your accumulated credits by your final average annual earnings. This lump sum is converted to an annuity form of payment based on actuarial factors prescribed by the IRS. MINIMUM ACCRUED BENEFIT The IRS requires that your accrued annuity benefit must meet a certain minimum amount. It is unlikely that this minimum will exceed the amount described above. Pension Calculator can perform this detailed calculation for you using the following components: Service at retirement age Service at Normal Retirement Age (NRA) Annuity factor at Normal Retirement Age (NRA) Early retirement factor Annuity factor at retirement age If You Are A Grandfathered Participant If you are a grandfathered participant, you would determine your benefit under the pension equity formula and the prior plan formula. See Appendix A for how your accrued benefit is determined under the prior plan formula. DETERMINING YOUR BENEFIT IF YOU RETIRE EARLY Once you complete five years of service, you can retire as early as age 50 if your age and years of service added together total at least 60. Otherwise, you can retire at age 55 with at least five years of vesting service. Under The Pension Equity Formula Your early retirement benefit using the pension equity formula is determined the same way it is for normal retirement benefits, and will be subject to the minimum accrued benefit described above. 13

24 If You Are A Grandfathered Participant If you are a grandfathered participant, your early retirement benefit will also be calculated using the prior plan formula (see Appendix A for details). HOW YOUR BENEFIT WILL BE PAID Retirement is about choices you ll have many choices to make about your finances, your free time and your lifestyle. With the Retirement Plan, you also have choices on how to receive your benefit. The plan features a normal form of payment and several optional payment arrangements that you can choose from. There are special payment arrangements for grandfathered participants. These special arrangements are also highlighted in this section. Note: Under the pension equity formula, your benefit is expressed as a lump sum. All monthly benefits are determined as annuity equivalents of this lump sum payment. NORMAL FORM OF PAYMENT If the total present value of your benefit is less than $1,000, you will receive your entire benefit as a lump sum. Such payment will relieve the company of all obligations to you in the future with regard to the plan. If the present value of your benefit is greater than $1,000, the normal form of payment under the pension equity plan provides a lifetime income. If you are married your benefit is reduced so that 50% of your reduced benefit will continue to be paid to your spouse or beneficiary at your death. The amount of the reduction to your benefit depends on your age and your spouse s or beneficiary s age at the time benefits begin. OPTIONAL FORMS OF PAYMENT For greater flexibility the plan offers optional payment arrangements in addition to the normal form of payment. These options include alternative annuity forms which provide reduced monthly payments or a lump sum payment. You will be given an explanation of each option along with an election form to complete. If you are married and you d like to elect an alternative form of payment, your spouse must also sign the form. The spousal consent must be witnessed by a notary public. If you elect one of the survivor options and your beneficiary dies after benefits to you have begun, your benefit will revert to your life annuity without survivor benefit. Available Annuity Options While the normal form of payment for a single employee is a life annuity, a married employee may also elect this option with spousal consent. Under the life annuity option, you will receive a benefit for as long as you live. At your death, all benefit payments will end. 14

25 The other available annuity options are shown below: IF YOU CHOOSE THIS OPTION: YOU WILL RECEIVE A REDUCED BENEFIT FOR: 50% Survivor Option as long as you live. At your death, 50% of your reduced benefit will continue to your beneficiary. 75% Survivor Option as long as you live. At your death, 75% of the reduced amount will continue to your beneficiary. 100% Survivor Option as long as you live. At your death, 100% of the reduced amount will continue to your beneficiary. 10-Year Certain And Life Option as long as you live. If you die before receiving 120 payments (10 years), the monthly payments will continue to your beneficiary or estate until all 120 payments have been made. LUMP SUM PAYMENTS As already mentioned, the pension equity formula determines your benefit as a lump sum. If you elect a lump sum, your payment can be: Paid directly to you Directly rolled over to your individual retirement account (IRA), to a Roth IRA or to another employer s qualified plan Directly rolled over to your TECO Energy Group Retirement Savings Plan account Taking your benefit directly may result in tax consequences; so be sure to keep the following points in mind: The lump sum amount you receive will be taxed as ordinary income. Twenty percent will be withheld for federal income taxes, and any remaining tax obligation would be your responsibility. Please consult a tax advisor for more information. If you are under age 59½ when you receive the lump sum payment, it will usually be subject to a 10% penalty tax for early distribution, unless you retire on or after age 55. To avoid these consequences, simply roll your payment directly over to your individual retirement account (IRA), to a Roth IRA, to another employer s qualified plan or to your Retirement Savings Plan account. 15

26 SPECIAL FORM OF PAYMENT IF YOU RETIRE EARLY If you retire early and want reduced benefits to begin, you can choose a special payment arrangement. It s called the Level Income Option, and it pays an increased monthly benefit from the plan until you first become eligible for Social Security. Once you are eligible for Social Security benefits (age 62), you will receive a smaller monthly benefit from the plan. In this way, your total combined monthly income from both the plan and your estimated Social Security income will be approximately the same level throughout your retirement years. Your monthly pension benefit will reduce at age 62 regardless of whether or not you begin your Social Security benefit at age 62. If you elect the Level Income option and are married at early retirement, your spouse will receive half of the benefit you would have received if you had elected the 50% Survivor Option. Alternatively, you can elect this option, with notarized spousal consent, without a survivor benefit at death. MORE INFORMATION ON THE LEVEL INCOME OPTION To determine the initial and ultimate benefit payment amounts, we make the best estimate of what your Social Security benefit will be when you reach age 62. There are certain variables in this Social Security calculation that the company cannot know with certainty at the time you retire. Therefore, we make assumptions about these variables, including: You will have no earnings toward Social Security after you retire from TECO Energy Earnings prior to your employment at TECO Energy are estimated using a 6% salary scale over a full career You were not previously employed by an organization that did not withhold Social Security (such as municipal, state or U.S. governments, U.S. Armed Forces, etc.) Increases to the Social Security taxable wage base each year between your retirement date and age 62 There will be no changes in current Social Security law Fluctuations in any of these assumptions will affect the accuracy of your estimated Social Security benefit. The higher the estimate of your Social Security benefit, the higher your initial retirement plan benefit amount, and correspondingly, the lower your retirement plan benefit amount after age 62. Note: Regardless of what your actual Social Security benefit is, the retirement plan benefit payment will reduce to the ultimate amount the company calculates. 16

27 CALCULATION OF OPTIONAL FORMS OF PAYMENT The current formula (effective July 1, 2001) defines the plan benefit in terms of a lump sum value. Optional forms of payment are based on the interest rate and mortality table found in Internal Revenue Code Section 417(e). CHOOSING A PAYMENT METHOD When choosing a payment method, it s important to remember that: You cannot change your payment arrangement once benefits have begun If you are married at retirement, the normal payment form will provide a benefit to your spouse after you are deceased If you are married and want to select an optional payment form other than the Level Income Option with survivor benefit you need written spousal consent; your spouse s signature must be witnessed by a notary public If you had elected one of the survivor options and your spouse or beneficiary dies after payments have begun, the benefit payable to you will revert to your life annuity without survivor benefit. ARE YOU MARRIED AND CHOOSING A LUMP SUM PAYMENT? Your spouse must consent to that decision by signing the appropriate form in the presence of a notary public. SPECIAL PAYMENT PROVISIONS FOR GRANDFATHERED PARTICIPANTS If you are part of the grandfathered group, that is, you were a participant in the plan on July 1, 2001 and you were age 40 or older, there are a few special provisions that apply when receiving your benefit: At age 55, the normal form of benefit for married employees in the grandfathered group will not be actuarially reduced as long as you have been married to the same person for one or more years at your death. The lifetime benefit paid to your surviving spouse will be half of the benefit you were receiving (50% joint and survivor option). If you elect the Level Income Option and you have been married for one or more years at your death, your spouse will receive half of your normal benefit. If you retire after reaching age 50, you have the option of electing the 10-year Certain And Life Option. Under this option, you will receive a reduced benefit for as long as you live. If you die before receiving 120 payments (10 years), the monthly payments will continue to your beneficiary or estate until all 120 payments have been made. If you elect one of the survivor options and your beneficiary dies after benefits to you have begun, your benefit from that point forward will increase to the amount you would have received under the life annuity without survivor benefit. 17

28 APPLYING FOR YOUR BENEFIT Before you retire you will need to submit a completed Retirement Application. You must return this application form to TECO Energy, Inc., Retirement and Savings Department, P.O. Box 111, Tampa, FL at least 90 days before the date you plan to retire. Retirements are always effective on the first of the month. You will receive retirement information that describes the various ways your benefit can be paid. It s important to remember that, under the post-july 1, 2001 formula, none of the options are more valuable than another; they are simply different ways of receiving your accrued benefit. However, under the prior plan formula for the grandfathered group, the annuity for retirement is typically more valuable than the lump sum. This is due to the unreduced 50% survivor benefit and the early retirement subsidy applicable to employees retiring at age 55 or older. You will receive personalized information regarding the relative value of the lump sum option. The company encourages you to seek financial planning advice before making a distribution decision. Payments are generally paid as of the date of retirement. You may be able to defer the receipt of your benefit. Additional information is available by contacting the Retirement and Savings Department. To protect you or your beneficiary if a request for a benefit is denied, you or your beneficiary can take steps to appeal a denied claim. For information on appealing a denied claim see the Claims Review Procedures section. HOW YOUR BENEFIT IS TAXED Upon distribution, pension payments are subject to regular income taxes. You have the choice of having the trustee withhold taxes from your payments or paying taxes on your own. Before you begin receiving benefits, you will be notified of your choices for the withholding of taxes. You will also receive an election form to complete and an explanation of the special tax treatments that may be available if you elect to receive a lump sum. IF YOU BECOME DISABLED If you become disabled after age 25, after completing at least one year of service and are receiving company-provided disability benefits, you will continue to earn plan service under certain conditions while you are disabled and still employed by a Participating Company. As a result, you will continue to accumulate credits under the pension equity formula. If you are a grandfathered participant, you will continue to earn service under the prior plan formula. 18

29 IF YOU DIE DURING DISABILITY If you die during disability and had three years of service, your beneficiary will have a choice in how the benefit will be paid: as a lump sum or the annuity equivalent of this lump sum payment. The lump sum amount is the same lump sum that could have been payable to you. The annuity option is actuarially equivalent to the lump sum based on the beneficiary s life expectancy. If you are single, your beneficiary s benefit will be determined only from the pension equity formula and plan provisions in effect as of July 1, Note: If you are part of the grandfathered group and die while on disability and you were married for one or more years at your death, your surviving spouse will never receive less than the benefit he or she would have received under the prior plan formula. Your spouse will have the following choices: To receive a lifetime benefit from the plan, determined by the prior plan formula. This benefit will be equal to 50% of the amount you would have received had you terminated employment immediately before your death and had elected the 50% Survivor Option. To receive the pension equity lump sum or its annuity equivalent. To receive a lump sum benefit equal to the present value of your prior plan accrued benefit or its annuity equivalent. If you were single or not married for one or more years at the time of your death, the benefit payable will be only that portion of your benefit determined by the pension equity formula and the plan provisions in effect as of July 1, 2001 (not under the provisions of the prior plan formula). The Retirement and Savings Department will provide your beneficiary with the payment options that are available. IF YOU DIE BEFORE RETIREMENT The plan provides an automatic survivor benefit to your beneficiary if you were to die before retirement but after completing three years of vesting service. If you are married, your beneficiary is your spouse, unless your spouse gives his or her notarized consent to name someone else as your beneficiary. If you are single, you may name anyone you wish. When you become a participant, you will designate your beneficiary. You can name or change your beneficiary designation at any time if you have access to Employee Self Service or by completing a Beneficiary Designation form and returning it to the Retirement and Savings Department. Beneficiary designation forms are available on the TECO Energy Human Resources website ( or from the Retirement and Savings Department. 19

30 HOW SURVIVOR BENEFITS WILL BE PAID Your beneficiary will have a choice in how the benefit will be paid: as an immediate lump sum or an immediate annuity equivalent of this lump sum payment. The lump sum amount is the same lump sum that would have been payable to you. The annuity option is actuarially equivalent to the lump sum based on your beneficiary s life expectancy. If you are single, your beneficiary s benefit will be determined only from the pension equity formula and plan provisions in effect as of July 1, DEATH WHILE ON ACTIVE MILITARY DUTY If you die on or after January 1, 2007 while performing qualified military service (as defined in Code Section 414(u)), your beneficiary will be entitled to any additional benefits (other than benefit accruals relating to the period of qualified military service) provided under the plan as if you had resumed employment and then terminated employment on account of death. Note: If you are part of the grandfathered group and were married for one or more years at your death, your surviving spouse will never receive less than the benefit he or she would have received under the prior plan formula. Your spouse will have the following choices: To receive a lifetime benefit from the plan, determined by the prior plan formula. This benefit will be equal to 50% of the amount you would have received had you terminated employment immediately before your death and had elected the 50% Survivor Option. To receive the pension equity lump sum or its annuity equivalent. To receive a lump sum benefit equal to the present value of your prior plan accrued benefit or its annuity equivalent. If you were single or not married for one or more years at the time of your death, the benefit payable will be only that portion of your benefit determined by the pension equity formula and the plan provisions in effect as of July 1, 2001 (not under the provisions of the prior plan formula). The Retirement and Savings Department will provide your beneficiary with the payment options that are available. IF YOU LEAVE BEFORE RETIREMENT An important feature of the plan is its vesting provision. Vesting means you have a right to receive a plan benefit, even if you leave the company before retirement. If you are vested, you will be eligible to receive the benefit that you have earned up to the date of your separation. You become vested when you reach age 65 or complete three or more years of service. 20

31 WHEN VESTED BENEFITS MAY BEGIN Generally, your vested benefit can be paid as a lump sum payment right away. If the lump sum value is over $1,000, you will also have the option of receiving an immediate annuity. The annuity is the actuarially equivalent value of the lump sum. Or if you prefer, the payment of your benefit can be deferred. Participants who have deferred their vested benefit can contact the Retirement and Savings Department to obtain the appropriate form to request their benefit. Deferred vested participants are eligible to receive their vested benefit when their age and service total 60 (minimum age 50 if service ended after July 1, 2001 and they have a minimum of 5 years of service). If service ended prior to July 1, 2001, deferred vested participants are eligible to receive their vested benefit when they attain age 55 and have a minimum of 5 years of service. Plan benefits always begin on the first day of the month. The Retirement and Savings Department must receive your completed form at least 90 days before the date you want your benefit to begin. Note: The pension plan benefit using the prior plan formula is designed based on your Normal Retirement Age (NRA). If you retire early your benefit will be reduced because of the following two reasons: First Reason: You didn t work until your Normal Retirement Age (NRA) Second Reason: You want your benefit payments to start before your Normal Retirement Age (NRA). Grandfathered participants retiring three years prior to their Normal Retirement Age will not have their benefit reduced per reason #2 above, but their benefit will be adjusted per reason #1 above. HOW YOUR VESTED BENEFITS WILL BE PAID Your benefit will be paid in the standard form unless you elect to receive your benefit in an optional form. If you are married, your spouse will have to consent to an alternate payment form. For example, if you are married, your vested benefit will automatically be paid under the 50% Survivor Option, unless your spouse consents to an alternative payment form. IF YOU DIE BEFORE VESTED BENEFITS BEGIN If you die before your vested benefit begins, your beneficiary will have the choice of receiving your benefit in a lump sum or the annuity equivalent of this lump sum payment. If you are part of the grandfathered group and were married for one or more years at your death, your spouse will never receive less than the benefit you would have received under the former plan. (See Appendix A for information on how your benefit is determined under the prior plan formula.) 21