As John and Gary announced a few weeks ago, Cisco is making a number of key, targeted moves across the company as we align operations in support of Cisco's network-centric platform strategy. These moves will include business decisions as we assess our portfolio strategy, simplify operations, and pursue expense management efforts. These efforts will take place in the coming weeks and months, as we move into FY12 to ensure we successfully execute against our five company priorities.
As part of that effort, Cisco has identified an opportunity for a segment of our population in the U.S. and Canada to take advantage of a voluntary early retirement program, similar to the program introduced in 2009. This program was very well-received by employees, and requests have been made to consider offering a similar opportunity now. The program is completely voluntary, and designed to provide a level of security to those who choose to take advantage of it.
You are receiving this email because you meet the eligibility requirements for this voluntary program, which are as follows: U.S. and Canada employees must be at least 50 years old and have a combined age plus years of service with Cisco totaling at least 60, as of July 8, 2011. An overview of the program and timeline is outlined on this site, and I encourage you to review the FAQs as well.
You'll receive a more detailed information package via email and then hard-copy will be mailed to your home on or around May 10. Please review everything in that packet carefully. We understand that this is a decision that requires deep and thoughtful consideration with your family and other advisors. To help you through this process, we will be offering informational WebEx sessions for you and your spouse/partner in the coming weeks. In addition, the HRC has designated support (option 8) specifically for the EER program, with a team of knowledgeable representatives who can address individual questions and consult with you.
Cisco Voluntary Enhanced Early Retirement Program 2011 Key Benefit Features U.S. Program
Eligibility
Must be notified by the Company of eligibility for the Plan on or before July 8, 2011.
Minimum age of 50 with the combination of age and service totaling at least 60 as of July 8, 2011.
Excluded positions: VP and above (grade 900 and above), Distinguished Engineers, Fellows, and Sales'
Chairman's Club winners from FY07 through FY10.
No benefits are payable unless the eligible employee timely executes and delivers the General Release to the Company and the General Release becomes irrevocable.
Severance Pay
U.S. Employees
Severance paid after the General Release becomes irrevocable.
Non-commission incentive employees: One year's regular base pay plus annual incentive target amount (i.e., one year's total target cash).
Commission incentive employees: 80% of one year's regular base pay, plus 80% of annual target commissions (i.e., 80% of one year's total target cash).
Taxed at the Federal supplemental tax rate; not grossed up.
Canada Employees
In addition to the above, for employees with more than 12 full years of service, an additional 0.5 month of base salary plus 0.5 month of annual incentive target amount for each full year of service above 12 years of service as of July 8, 2011; to be calculated at 80% for commissionable employees.
Payment to Cover Medical / Dental / Vision Costs
Lump sum payment to cover 24 months of the participant's elected coverage under the medical/dental/vision plans (paid after the General Release becomes irrevocable). Amount is determined for each participant based upon current medical/dental/vision coverage elections. This amount will be "grossed up" for tax purposes. Participant may elect COBRA or RMAP coverage (if eligible), as provided by the applicable plans.
Life Insurance (Employee and Dependent)
Per life insurance policy, employees may elect portability of group coverage or conversion to personal policy within 30 days of termination. Please contact A.G. Sieben at 1-800-287-6720.
Long-Term Disability, Accidental Death & Dismemberment
Per program policies, employees may convert to personal policy within 30 days of termination. Please contact A.G. Sieben at 1-800-287-6720.
Short-Term Disability, BTA/ MBA
Not available per program policies.
Payment to Cover 401(k) Company Contributions (match, special contribution, and match true-up)
One-time payment equal to approximately 2 years of company matching contributions, paid as a lump sum outside of the 401(k) Plan (paid after General Release becomes irrevocable). Payment will be calculated as 4.5% multiplied by Total 2011 Target Compensation, up to the IRC $245,000 limit, regardless of participant's actual 401(k) participation level. (For purposes of this program, "Total 2011 Target Compensation" is equal to annual base salary for salaried employees or hourly base rate multiplied by 2,080 for hourly employees, plus either (i) annual target bonus for non-commission incentive employees or (ii) annual target commissions for commission incentive employees). Certain former Scientific-Atlanta employees will have this payment calculated as 6.0%, rather than 4.5%. Match "true-up" in the Plan is not included in this program; no tax gross-up is included.
Tuition Reimbursement
If your approved Tuition Assistance application was submitted to ADP Prior to the announcement date of this Plan (April 26, 2011) and you have already enrolled in an approved course, you will still be eligible for Tuition Assistance benefits even if your course work is completed after your termination of employment with Cisco. You will have up to one (1) year from the date the course is completed to submit all required documentation for reimbursement.
Accrued and Unused PTO
Paid to employee at termination.
Stock
No extended vesting for restricted stock or RSUs.
No acceleration of vesting for any equity-based programs.
Exercise period for vested stock options that are "underwater" as of date of termination of employment (which will be July 8, 2011, unless otherwise determined by the company) will be extended for 24 months after date of termination or the maximum date the option would have expired under its original expiration term, whichever is shorter (but in no case will the extension period be longer than the maximum period permitted under the applicable equity plan). Vested "in-the-money" stock options, determined as of date of termination (which will be July 8, 2011, unless otherwise determined by the company) are exercisable pursuant to the terms of the stock option documents (i.e., no extension). Please check with Stock Plan Services to confirm grant terms.
Outplacement Services
Available for a period of 6 consecutive months; no payment in lieu of participation. Must begin utilizing services no later than 60 days after date of termination. Six-month period of services begins to run on date services first utilized.
Deferred Compensation
No changes can be made to existing deferral elections. Termination distribution elections will be effective for applicable plan years. Not eligible for calendar year 2011 discretionary company matching contribution per Deferred Compensation Plan (DCP) terms. None of the payments provided under the EER program will qualify for deferral into the DCP. Please go to www.alignone.com to review the timing of your distribution elections.
Q. Why is Cisco offering the Enhanced Early Retirement (EER) Program?
A. Cisco is offering this program as an incentive for eligible employees who may have been considering retiring from the company sometime over the next few years to move forward with their planned exit. This program is completely voluntary. It is anticipated the company can achieve cost-savings based on the approval process for replacement
reqs.
Q. Who will have access to eligibility information?
A. The only individuals who have access to information regarding an employee's
eligibility are within the Human Resources function and others solely on a business need-to-know basis. Your manager will not have visibility to who is eligible for this
plan, and they will not be notified unless you decide to participate.
Q. Why did Cisco select the eligibility criteria - a minimum age of 50 and combination of age plus years of service totaling 60 as of July 8, 2011 - for this
program?
A. With the success of the 2009 program, we decided to expand the criteria, taking into account eligibility requirements used by other companies that have implemented
voluntary early retirement programs and also factoring the impact on the business.
Q. I have a colleague who will turn 50 years of age in early August of this year with 10 years of service. Can an exception be made to include him as eligible for the program?
A. No. Eligibility for the EER Program requires (among other things) that an employee be at least age 50, and the combination of age and service must total 60 by no later than July 8, 2011.
Q. Why are certain roles excluded from participating in the EER Program?
A. Only a limited number of roles are excluded from participating in the EER Program (VPs and above, Distinguished Engineers, Fellows, and Sales' Chairman's Club winners from FY07 through FY10). The company made a business decision to retain specific roles to ensure continuity of high-profile, business-critical projects and
initiatives.
Q. Are employees who may be on a Leave of Absence eligible for this program?
A. Yes. Employees who are on an approved leave of absence (and who meet the eligibility requirements) are also eligible for this program, although those eligible employees may have their severance payment reduced if they are eligible to continue
receiving pay related to their leave of absence after their termination date. For example, if an eligible employee on long-term disability leave is eligible to continue receiving long-term disability benefits after termination, the severance payment under the EER Program would be reduced by the amount of long-term disability benefits that the employee would be eligible to receive under the long-term disability plan over the 12-month period following termination.
Q. Is the company providing any resources with whom I may discuss the details of the EER Program?
A. The HRC (http://hrc.cisco.com) will serve as the primary resource for employees. Designated support will be provided (option 8) specifically for the EER program, with a team of knowledgeable representatives who can address individual questions and provide consultation. Eligible employees may elect to talk with HR, family members, or anyone else, including their financial adviser and/or attorney, in reaching a decision of whether or not this offer is appropriate for them. This EER Program is completely voluntary, and we would urge you to discuss the offer of an EER package with anyone whom you feel you need to in order to make an informed decision.
Q. What if I decline the EER package and find myself faced with an involuntary termination action at a later date after the election period has ended? Can I then accept the EER package?
A. No. The offer of an EER package has a defined window of time (i.e., May 10 to June 24, 2011) in which eligible employees must choose whether or not to accept it.
If you are later affected by a termination action, you will not be eligible to participate in the EER program.
Q. What if I have second thoughts after I've volunteered for the EER Program? What recourse do I have?
A. Eligible employees will have an opportunity to elect whether or not they decide to volunteer for the program from May 10, 2011 to June 24, 2011. Those electing participation in the program will need to sign and return the General Release by June 24. Eligible employees who have signed the General Release may elect to subsequently revoke it within 7 calendar days (and no EER benefits will be paid).
Q. Will this offer be made again at a later date?
A. This EER Program is being offered as a limited, one-time opportunity to exit the company voluntarily and receive the benefits offered under the EER Program. The benefits being provided under this program will only be available to you if you acknowledge your acceptance of the EER Program by June 24, 2011. The company does not foresee using this EER Program or voluntary programs of a similar nature, or providing the same benefits provided in this EER Program, in the future, although the company reserves the right to do so should business conditions require.
Q. Where do I return required documentation?
A. Eligible employees who elect to participate in the program must sign and date the original General Release by June 24, 2011, and return it to the following address:
Cisco Systems, Inc.
Attn: Human Resource Connection
Mail Stop RTP3/2/Terminations
7025 Kit Creek Road
Morrisville, NC 27560
You are responsible for ensuring that the General Release is timely mailed; you should maintain proof of the timely mailing.
The General Release must be sent via a traceable overnight delivery service or
traceable overnight express mail and postmarked on June 24, 2011.
Q. Referencing materials provided, "...payment equal to twenty-four (24) months of group rate premiums for your medical/dental/vision coverage based upon
your coverage elections (both the plan and number of dependents) in effect as of your notification date." If I'm currently in a family plan will Cisco continue to pay for my family plan coverage for 24 months?
A. Cisco will provide you a lump sum payment, which can be used by you to elect and pay for COBRA and/or the Retiree Medical Access Plan (RMAP), if eligible. You are responsible to make a timely election into COBRA coverage or RMAP coverage (if eligible), as described in the applicable healthcare plan documents.
The lump sum payment to cover 24 months of your elected coverage under the medical, dental, and vision plans is determined based upon the medical/dental/vision coverage elections that you had in place as of the beginning of the election period on May 10. Cisco will provide a tax gross-up on this payment.
You may use these funds to cover your costs of COBRA, which normally runs for 18 months, as well as six months of company-offered RMAP, if you are eligible for RMAP. If you are not eligible for RMAP, the six months of company-offered pay can be used to purchase healthcare coverage in the marketplace. Please note, you may use the lump sum payment to purchase your own healthcare coverage in the marketplace.
Q. What are my healthcare options after termination and how can I use the 24 month lump sum payment provided to me?
A. Your Cisco active coverage expires at the end of the month of your termination, and you are eligible to enroll in COBRA or the Cisco Retiree Medical Access Plan (RMAP) for you and your family, subject to the eligibility terms for those plans. You have four options when your Cisco employment ends:
Continue Cisco active medical benefits under COBRA, and then enroll in the RMAP within 60 days after COBRA coverage expires (if you meet the eligibility criteria for RMAP). If you already have COBRA when you enroll in Medicare, your COBRA coverage usually ends on the date you enroll in Medicare. If you have COBRA and become Medicare-eligible, you may wish to enroll in Part B immediately because you may not be entitled to a Special Enrollment Period (SEP) when COBRA ends.
Enroll in the RMAP within 60 days of your last day of work at Cisco, and waive COBRA coverage (subject to RMAP eligibility).
Waive both COBRA and the RMAP. If you waive coverage, you cannot enroll at a later time. If you are eligible for RMAP, this allows you to continue coverage without pre-existing condition limitations, however, you must elect RMAP either at time of termination or at time of your COBRA expiration. RMAP covers eligible dependents, and options exist for pre- and post-65 coverage. After 65, Medicare is primary and RMAP is secondary.
Continue active medical benefits under COBRA, and then purchase other coverage on the open marketplace if not RMAP eligible.
Q. Will all EER eligible employees be eligible for RMAP?
A. No, not all EER eligible employees will be eligible for RMAP. For example, one of the requirements is that you must have completed five years of service at Cisco upon
your termination from the company. Please consider your options carefully before making your decision to decline or accept the EER benefits.
Q. What are the eligibility requirements for RMAP coverage?
A. 2011 RMAP eligibility is as follows:
You are eligible for coverage under the RMAP plan if you meet all of the following on
the last day of your employment:
Are at least age 50.
Have completed at least five (5) full years of service at Cisco.
Are enrolled in (or eligible to enroll in) a Cisco Systems, Inc. group medical plan.
Additionally, coverage can continue after you reach age 65 and become eligible for Medicare. Your spouse or domestic partner's coverage can continue after age 65 as well. Coverage is available for eligible dependent children also.
Your Cisco original hire date is used to determine the length of service for eligibility in the RMAP plan. If you leave Cisco and are later rehired as a Cisco employee, you will receive credit for your prior service.
If you became a Cisco employee as a result of an acquisition, your original hire date from the acquired company will be considered for the purpose of calculating your service credit.
Q. Reference materials indicate "...allow for up to 24 months after termination (or until expiration date of grant if less than 24 months) to exercise any vested stock options that are underwater at termination..." Two-part question:
a) If the underwater stock option comes "into the money" during the 24-month period, does sale of the option need to happen at that point, or can the "retiree" continue to hold for the entire 24-month period?
b) What about vested stock options that are "above water" at the time of
termination (and most likely only barely above water)? Must they be sold within
90 days of termination?
A.
a) The retiree can continue to hold the underwater options for sale at any point during the 24-month extended exercise period following termination, or until the expiration date of the grant if less than 24 months.
b) Unless provided otherwise in your stock option agreement, unvested stock options generally expire upon termination of your service with Cisco and vested stock options expire three months following such termination. You will also need to look carefully at your grant agreements and the terms of this EER Program related to stock options.
Q. I have RSUs grants that have an annual vesting in September 2011. Will I receive these RSUs or will they be cancelled?
No, stock vesting ceases on one's termination date. Therefore, unvested stock at the time of termination will be cancelled.
Q. Through the Cisco Deferred Compensation Plan (DCP), I was able to make elections for the 2010 Plan Year (which covered deferrals for FY11 bonus) and the 2011 Plan Year (which covered deferrals for CY11 base salary and FY12 bonus). How are my DCP elections impacted if I accept the EER program?
A. First, if you declined to enroll in the DCP for the 2010 or 2011 plan years, you cannot make elections now, due to IRS regulations. Second, if you have enrolled in the DCP and you volunteer for this EER Program, you will not be able to make changes to your base salary, commission and bonus deferral elections for the 2010 and 2011 plan years. Those elections are irrevocable. Third, your termination from Cisco triggers your distribution elections for any plan year that you participated in the DCP. None of the payments provided under this EER Program will qualify for deferral to the DCP under the DCP plan rules. Please go to www.alignone.com to review the timing of your distribution elections (payout), or call Ann Brantley at Clark Consulting for any questions on your account. Phone: 214-661-3538.
Q. Will Cisco provide any financial workshops to help me manage the lump sum and evaluate my 401(k) holdings?
A. Eligible employees are encouraged to consult with their personal financial advisor around the details of their EER package. You may contact Cisco's 401(k) administrator, JP Morgan at 1-866-668-9506, for questions pertaining to your 401(k)
account.
Q. How will the 401(k) matching contribution payment be calculated?
A. The matching contribution payment will be calculated by adding annual base salary and target bonus and/or commission to get a total eligible compensation amount, up to the IRS limit of $245,000 for 2011. For eligible hourly employees, the "annual base salary" will be calculated by taking your base hourly rate and multiplying it by 2,080. This total eligible compensation amount will then be multiplied by 4.5% and then doubled to represent two years of contributions. (Certain former Scientific Atlanta employees who may be eligible for the "special contribution" will have a 6% factor used rather than the 4.5% factor.) The 401(k) matching contribution will not be grossed up for taxes.
Q. Am I still eligible for the 401(k) end-of-year true-up contribution for 2011?
A. Only employees who are age 60 (the 401(k) plan's retirement age) and who terminated from Cisco during 2011 are eligible for a "true-up" contribution for 2011 (see page 9 of Cisco 401(k) plan Summary Plan Description for the information on the "true-up" and page 14 for the definition of "retirement"). You can adjust your 401(k) contributions at any time during the year to optimize your own contributions from regular pay, incentive pay, and catch-up contributions prior to your termination on July 8, 2011. Only contributions made prior to your termination date will be eligible for the company match and true-up contributions under the plan. Payments made under this EER Program are not eligible for deferrals into the 401(k) plan.
A. No, PTO cannot be used to extend the July 8, 2011, exit date. All accrued and unused PTO as of the exit date will be paid out as a lump sum to the exiting employee.
Q. May I use PTO to bridge the last xxx number of days before my termination date?
A. If your manager approves the PTO request and work obligations can be fulfilled, an employee may use accrued PTO up to and including the termination date.
Q. Will my manager treat me differently if I accept the EER program?
A. Cisco made the decision to offer this benefit to eligible employees on a voluntary basis. Managers have been instructed that this is an individual employee decision and should not have any impact on the treatment of eligible employees regardless of their decision. If, at any time, you believe that your manager is treating you differently, either because you chose to participate or decline to participate in the EER Program, please contact your manager's manager or your HR manager.
Q. How will actual work be transferred to others? What is the process?
A. The exiting eligible employee and his/her manager should work together to transition work to other team members or to an internal replacement backfilling the position. This should be done within the timeframe prior to the employee's termination date.
Q. I don't want to utilize the Outplacement Service. May I receive the cost of that offering in cash? How long do I have to utilize the Outplacement Services?
A. Outplacement is provided as a service for those participants who wish to utilize it. If a participant elects to not use outplacement, then no cash replacement will be made available. Outplacement services must be initiated no later than 60 days after the termination date.
Q. Will someone accepting the EER package and terminating employment with Cisco be eligible for unemployment benefits?
A. Eligible employees contemplating participation in the EER Program are advised to check with local unemployment offices around eligibility for unemployment benefits as regulations may vary from state to state. Employees who accept the program will be classified as Voluntary/Retirement within Cisco's Human Resource Management System.
Q. If I accept the EER package and terminate from Cisco, am I eligible for rehire as a regular employee? Can I return as a contractor/consultant?
A. One of the conditions for receiving the EER package is that you will be ineligible to return to Cisco as a regular employee, contractor, or consultant for a minimum time period of two years after your termination date. If you accept a position (in any capacity, including, but not limited to, as an employee, temporary worker, consultant or independent contractor) working directly or indirectly at the company within a two (2)-year period following your termination date, the payments that you received under the EER Program will be subject to forfeiture, in which case you would be required to repay these amounts to the company.
The company may choose to make an exception to this requirement if you accept a position with the company because the entity for which you work is acquired by the company, but is under no obligation to do so.
Q. What happens if I am participating in the Tuition Reimbursement program?
A. If your approved Tuition Assistance application was submitted to ADP prior to the announcement date of this program (April 26, 2011) and you have already enrolled in the approved courses, you will still be eligible for Tuition Assistance benefits even if your course work is completed after your termination of employment with Cisco. You will have up to one year from the date the course ends to submit a request for reimbursement.
Q. If there is a bonus paid under the FY11 Professional and Leadership Incentive Plan, will I be considered "eligible" for a bonus award if I accept the EER package?
A. No. But in recognition of the fact that non-commission employees would not be eligible for an FY11 P&LI Plan Bonus, the severance payment under the EER Program for non-commission employees includes a payment equal to 100% of annual target incentive in addition to base salary.
Q. As a commissioned employee (CA, Cisco Capital, or Sales), will I be eligible to receive payment for all earned commissions after I've left Cisco?
A. Your separation from employment under the EER Program will be treated as a voluntary termination by Cisco and you will be eligible for commissions in accordance with the terms and conditions of your commission incentive plan and the rules associated with voluntary termination from Cisco under that plan.
