Deferred Compensation Program Amendments

 

Section 409A of the Internal Revenue Code imposes new requirements for certain
nonqualified deferred compensation arrangements. The IRS has published
transition relief and proposed regulations under Section 409A. The regulations
are not expected to be finalized until some time in 2006. In this interim period
before regulations are finalized, companies are required to comply in good faith
with Section 409A. Formal plan amendments to comply with Section 409A are not
required to be adopted until December 31, 2006 (after the regulations have been
finalized). However, certain plan amendments, as summarized below, were adopted
in order to comply with the IRS transition relief under Section 409A.

 

Edison International Executive Severance Plan. Provides that any cash severance
payments will be made within the required timeframe to avoid application of
Section 409A (generally, payments must be completed within two and a half months
following the year in which the severance occurs).

 

Section 409A Transition Relief for SCE Executive Retirement Plan. Allows
participants to change certain payment elections under the plan, as permitted by
the IRS transition relief under Section 409A.

 

Section 409A Transition Relief for EIX Executive Deferred Compensation Plan.
Allows participants to cancel certain deferral elections and change certain
payment elections under the plan, as permitted by the IRS transition relief
under Section 409A. Terminates the Excess 401(k) deferral feature of the plan
effective as of January 1, 2006. Increases the matching contribution rate in the
plan from 50% of base salary deferrals up to 6% of compensation not eligible for
matching in the qualified 401(k) plan to 100% of base salary deferrals up to 6%
of compensation not eligible for matching in the qualified 401(k) plan.

 

Section 409A Transition Relief for EIX Director Deferred Compensation Plan.
Permits participants to cancel certain deferral elections and change certain
payment elections under the plan, as permitted by the IRS transition relief
under Section 409A.

 

Section 409A Transition Relief for Stock Option Dividend Equivalents. Employees
eligible to participate in the Executive Deferred Compensation Plan have been
given a deferral opportunity under that plan with respect to dividend
equivalents. Dividend equivalent payments held in suspense pending greater
clarity as to certain Section 409A implications of the awards will, to the
extent not deferred, be made in a lump sum payment (with interest for the period
the payments were held in suspense). Dividend equivalents that are credited or
vest after December 2005 will be paid each January (absent a deferral election).