Exhibit 10(v)
EXECUTIVE SAVINGS PLANS
INTRODUCTION
At United HealthCare, we are committed to providing you opportunities that
help you prepare for a financially secure future. The 401(k) Savings Plan,
Employee Stock Purchase Plan, and Employee Stock Ownership Plan offer all
eligible employees options for accumulating savings and retirement assets.
However, these plans are subject to restrictive tax legislation. Recognizing
that this legislation limits the amount you can defer into the plans, United
HealthCare created the Executive Savings Plans. These non-qualified deferred
compensation plans allow you to defer virtually as much of your compensation
as you wish through means that leverage the current tax environment.
The non-qualified plans are not subject to the same restrictions placed upon
qualified plans, such as the annual 401(k) dollar deferral limit. The
non-qualified plans are unfunded plans, which means that funds or
contributions are not set aside in a trust and are subject to general
creditors of United HealthCare.
Participating in the non-qualified plans reduces your current take-home pay
by deferring your salary to a future point in time. Before deciding whether
or not to enroll in the non-qualified plans for 1997, be sure to consider
your own tax and financial needs. You may want to consult your personal tax
or financial advisor to weigh how these plans might fit into your long-term
financial goals.
WHAT IS ELIGIBLE COMPENSATION?
Your Part I and II contributions to the non-qualified plans are based on
eligible compensation. For the purposes of the plans, eligible compensation
generally means the same compensation as that used to determine the amount of
elective deferrals under the United HealthCare 401(k) Savings Plan.
PLAN ELIGIBILITY REQUIREMENTS
To participate in the Executive Savings Plans, you must meet certain
eligibility requirements.
1. For all three Parts under the Plans, you must be an employee with at least
two months of service in an eligible class at United HealthCare.
2. Participation under Part II or Part II is available the first day of the
calendar month following completion of the two-month eligibility
requirement.
3. To participate in Part I, you also must participate in the 401(k) Savings
Plan and reach one of the following IRS limits during 1997:
- Earn $160,000 in eligible compensation (increased from $150,000 in
1996)
- Make 401(k) deferrals that reach the 1997 IRS annual limit of $9,500
4. You may only enroll in Part I or Part II during the December 1996
enrollment period or when you become newly eligible during the year.
HOW THE PLANS WORK
PART I -- 401(k) KEEP WHOLE
As long as you participate in the 401(k) Savings Plan, you may participate in
Executive Savings Plan Part I. Part I:
- Enables you to defer from 1 percent to 15 percent of your eligible
compensation on a pre-tax basis after you 401(k) elective deferrals reach
the 1997 IRS dollar limit of $9,500 or you earn $160,000 in eligible
compensation; and
- Provides a United HealthCare matching contribution of 50 cents for each
dollar you defer into your Part I account, up to the first 6 percent of
your eligible compensation. These matching contributions receive the same
investment credits that you elect for your own contributions.
When you reach one of the IRS 401(k) annual limits (listed on previous page),
your Part I deferrals begin as follows:
- If you reach the limit during a Management Incentive Plan (MIP) Bonus
payout or other similar bonus payout that is declared to be equivalent to
MIP, your contributions begin in that same pay period,
OR
- If you reach the limit during a regular payroll, your contributions begin
in the following pay period.
PART II -- STRAIGHT SALARY DEFERRAL
Under Part II provisions, you can defer from 1 percent to 100 percent of all
unearned, 1997 eligible compensation, including bonus payments. Part II
contributions begin with your first eligible pay period in 1997.
PART III -- LIMITED BONUS DEFERRAL
Part III of the Executive Savings Plans is available only to those United
HealthCare executives who are eligible for special bonus amounts that are
declared by United HealthCare's Board of Directors or Compensation Committee
or their designee as being eligible for deferral under Part III of the Plans.
If you are eligible to make deferrals of special bonuses under Part III, you
will be notified in advance. At that time, you will receive a Part III
enrollment form. You can defer from 1 percent to 100 percent of 1997 special
bonuses before they are earned.
INVESTMENTS
You may elect to have your deferrals and matching United HealthCare
contributions credited with investment earnings from one or more of the three
investment credit funds offered under the plans.
Your elections are subject to investment risk. As with any investment if the
returns on the funds you choose are positive, your account balance will have
positive credits. If the returns are negative, your account balance will
decline. Please review the fund information provided with your enrollment
materials before making your decision.
You may change your investment credit choices once each calendar quarter on
any business day during that quarter. To make a change, you must complete
and submit a form to the Plan Administrator. If the form is received by the
Plan Administrator by noon Central time, the change will be effective the
following business day. You may elect to have your future contributions
credited differently from your existing account balance for investment return
purposes. When you make your investment election for 1997, your past and
future account will be credited with investment performance in the same
manner.
YOUR INVESTMENT CREDIT CHOICES
You can elect to have your account credited with the investment performance
of one or any combination of the following three funds:
- LOOMIS SAYLES BOND FUND. The Fund's investment objective is high total
investment return through a combination of current income and capital
appreciation. The Fund seeks to attain its objective by normally investing
substantially all of its assets in debt securities (including
convertibles), although up to 20% of its assets may be invested in
preferred stocks. At least 65% of the Fund's total assets may be invested
in bonds. The Fund may invest any portion
of its assets in securities of Canadian issuers, and a limited portion
of its assets insecurities of other foreign issuers. The Fund will also
invest less than 35% of its assets in securities of below investment
grade quality.
- FIRST AMERICAN EQUITY INDEX FUND. This fund seeks to provide investment
results that correspond to the performance of the Standard and Poor's 500
Composite Stock Price Index (S&P 500). The fund invests at least 65
percent of its assets in common stocks included in the S&P 500.
- PBHG GROWTH FUND. The fund seeks capital appreciation and invests
primarily in common stocks of small and medium capitalization companies
believed to have an outlook for strong earnings growth and the potential
for strong earnings growth and the potential for significant capital
appreciation. The average market capitalizations or annual revenues of
holdings in the portfolio may fluctuate over time as a result of market
valuation levels and the availability of specific investment opportunities.
You may elect to have your accounts credited with investment performance in
any combination of the investment credit funds in one percent increments as
long as your investment percentage totals 100 percent. Remember, however,
that as unfunded plans, the investment credit funds are only measuring tools
to determine the value of your account under the plans, and Untied HealthCare
is not required to purchase such investments.
ACCOUNT INFORMATION
You will receive a quarterly statement showing the status of your account
credits in the plans.
In addition, beginning April 1, 1997 you will have daily access to
information about your account.
VESTING
Vesting under the Executive Savings Plans Part I is based on your years of
service with United HealthCare beginning with your date of hire. You are
always 100 percent vested in your own deferrals, as well as the investment
earnings or losses on them. Eligible participants who are hired on or after
January 1, 1997, will become vested in the United HealthCare matching
contribution after completing two years of service with United HealthCare.
Active and former participants prior to January 1, 1997 are 100% vested in
deferrals, matching contributions and the investment earnings and losses on
them.
DISTRIBUTIONS FROM THE PLANS
TIMING
We all know that life is full of changes. That's why each year when you
elect to participate in the Executive Savings Plans, you should consider your
personal financial goals and needs.
For 1997, active and former participants will elect a single distribution
option for all three parts of the Executive savings Plans for all past and
future account credits. If you are an active or former participant and have
already elected to receive a distribution to be paid out in February 1997,
your request will be honored. All other prior distribution requests are void
unless currently in a payout status. Distributions after February 1997, will
be available only upon termination, permanent total disability or death. You
can expect to receive your lump sum or installment distribution beginning the
February following the end of the calendar year in which the distribution
event occurs.
DISTRIBUTION OPTIONS
You have three distribution options to choose from. The option you choose
will be used for all parts of the Plans.
- LUMP SUM: For example, if you terminate employment on January 12, 1997,
your lump sum distributions date will be in February 1998.
- THREE-YEAR INSTALLMENTS: The three installments are paid annually
beginning the February following the end of the calendar year in which your
distribution event occurs. For example, if you terminate employment on
November 1, 1997, your installments will be paid in February 1998, February
1999 and February 2000.
- FIVE-YEAR INSTALLMENTS: The five installments are paid annually beginning
the February following the end of the calendar year in which your
distribution event occurs. For example, if you terminate employment on
April 25, 1997 your installments will be paid in February 1998, February
1999, February 2000, February 2001 and February 2002.
Keep in mind: once you have chosen a distribution option, you cannot change
it. Be sure to choose carefully.
TAXATION
For all parts under the plans, your distribution is made in either a single
lump sum payment or in three or five installments and is immediately taxable
on receipt. No
special tax treatments or early withdrawal penalties apply, as the Executive
Savings Plans are non-qualified plans.
SEQUENCE OF DEDUCTIONS
Your deductions are taken from your paycheck in the following order:
- First, 401(k) Savings Plan contributions (if applicable)
- Next, Part I deferrals
- Then, Part III deferrals
- Finally Part II deferrals
Note: The actual deferral percentage is based on your entire compensation
and bonus amount. If the amount you elected to have deducted exceeds your
paycheck, deductions will be taken until your paycheck is depleted. In that
case, all of your elections for that pay period will not be fulfilled.
Once your deferral election is made, it is irrevocable. However, you may
stop your deferral during the year under Part I and/or II. Once the
deferrals are suspended, they may not be resumed until the following calendar
year.
If you wish to stop your payroll deductions, call the Plan Administrator at
(612)936-1605 to obtain the appropriate Executive Savings Plans cancellation
form.
THE EXECUTIVE SAVINGS PLANS AT A GLANCE
WHAT TO DO NEXT
Decide if participating in Part I and/or Part II is right for you. You may
find it helpful to consult with a tax or financial advisor. Then, if you
decide to enroll, complete and return the Executive Savings Plans Part I
and/or Part II enrollment and election forms included in your packet. If you
do not designate a beneficiary, your benefits will be paid in accordance with
the Plan's provisions in the event of your death.
As an important component of United HealthCare's competitive benefits
program, the Executive Savings Plan Part I and Executive Savings Plan Parts
II and III offer you a tremendous opportunity to save for your future. The
plans also enable you to defer taxes associated with your deferred
compensation until termination, total permanent disability or death. For
purposes of obtaining favorable state tax treatment for eligible
distributions, the Executive Savings Plan has been separated into two
separate plans beginning in 1997, the Executive Savings Plan Part I and the
Executive Savings Plan Parts II and III. However, the Plan Administrator and
election procedures are the same for both plans. As a result, these
communications collectively refer to both plans as the "Executive Savings
Plans" or "Plans."
There are three separate parts to the Executive Savings Plans, allowing you
to design a deferral strategy that meets your needs:
PART 1 -- 401(k) KEEP WHOLE
- Allows you to defer, on a pre-tax basis, from 1 percent to 15 percent of
your eligible compensation after you reach one of the IRS 401(k) limits.
- Provides a United HealthCare matching contribution of 50 percent of the
first 6 percent of your deferral.
PART II -- STRAIGHT SALARY DEFERRAL
- Lets you defer all or a portion of your unearned, eligible compensation.
PART III -- LIMITED BONUS DEFERRAL
- Enables you to defer all of or a portion of special bonuses to a future
point in time.