AEP Pension Plan Summary Plan Description for Active Employees Issued 2016

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1 AEP Pension Plan Summary Plan Description for Active Employees Issued 2016

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3 AEP Retirement Plan (Pension Plan) An important part of your total compensation your total pay and benefits comes from the AEP Total Retirement Program. Combined with retirement benefits from Social Security, the AEP Retirement Savings (401k) Plan and your own personal savings, the AEP Pension Plan is a key source of retirement income. What s Here: Pension Plan Overview... 1 Pension Plan: At-a-Glance... 1 Eligibility... 2 Automatic Enrollment... 2 When Participation Begins... 2 How the Pension Plan Works... 2 Interest Credits... 3 Company Credits... 3 Vesting... 4 Naming a Beneficiary... 5 Receiving Your Benefits... 5 When You Can Receive Payment... 6 Begin Immediate Payment... 6 Defer Payment... 6 Rollovers... 7 Choosing and Changing Your Payment Form... 7 Your Payment Options... 7 Single Lump-Sum Payment (Requires Spouse s Consent if You Are Married)... 8 Monthly Annuity Payments... 8 Combination of Lump Sum and Monthly Annuity... 9 Grandfathered Participants How Grandfathering Works Payment Options for Grandfathered Participants How the Final Average Pay Benefit Is Calculated for Grandfathered Participants Cash Balance Opening Balance for Grandfathered Participants on January 1, Other Special Provisions Former CSP Employees Pre-1978 Participants Who Have Contributions in the Plan Employees With OVEC/IKEC Service Independent Contractors Benefits not Assignable (With Exception for Qualified Domestic Relations Orders) Filing a Claim for Benefits Appealing a Claim Life Events and Your Coverage If You Take a Leave of Absence If You Become Disabled If You Die Important Plan Information Plan Sponsor and Administrator AEP 2016 AEP Retirement Plan SPD

4 Agent for Service of Legal Process Plan Name Plan Type Plan Trustee Plan Recordkeeper Plan Numbers Plan Year Type of Administration Funding Medium Plan Documents Plan Amendment or Termination PBGC Protection Maximum Annual Limit on Retirement Benefit Limits on Payments Top Heavy Provisions Participating AEP System Companies Right of Recovery Your Rights Under ERISA AEP 2016 AEP Retirement Plan SPD

5 Pension Plan Overview This summary contains general information about the pension benefits available to participants eligible under the terms of the American Electric Power System Retirement Plan, as amended from time to time. Effective December 31, 2008, the Central and South West Corporation Cash Balance Retirement Plan was merged with the American Electric Power System Retirement Plan. For ease of reference, this summary refers to the AEP Pension Plan and the CSW Pension Plan as if they continued to be separate plans. If there is a conflict between the plan document and this summary, the plan document will govern. This description of the Plan is not intended as an employment contract or a guarantee of current or future employment. Pension Plan: At-a-Glance When Participation Begins Annual Increases in Your Account Vesting Your Account Balance After you complete one year of service with a Participating Company, you automatically become a participant in the AEP Pension Plan. Since January 1, 2001, the Plan has provided a cash balance benefit, which is funded entirely by the Company s contributions. It costs you nothing to participate in the Plan because all benefits are fully funded by AEP s contributions. Your benefit generally is defined as the balance of your cash balance account, which grows through two annual credits: An interest credit is applied each year until you begin payment of your benefit. The Company credit is a percentage of your eligible pay and is based on your age and service. This credit applies for each year you work for a Participating Company. If you were active on or after January 1, 2008, your benefit is 100% vested after you complete three years of service or immediately upon your death. Prior to January 1, 2008, 5 years of service were required. A recordkeeping account is established to track your benefit over the course of your career. When You Leave Payment Options The cash balance benefit is portable, which means you can take your vested benefit with you when you leave the Company you do not have to wait until a certain age. When you choose to begin receiving your benefits, you have several payment options, including a full lump sum, a monthly annuity, or a combination of partial lump sum with the rest as a monthly annuity. If you have questions about the AEP Pension Plan, call the AEP Benefits Center toll-free at AEP 2016 AEP Retirement Plan SPD 1

6 Eligibility You are eligible to participate in the AEP Pension Plan if you: Are employed by a Participating Company, as the list changes from time to time (please refer to the section titled Participating AEP System Companies for details); Have been employed by a Participating Company for at least one year; Are not covered under the terms of the CSW Pension Plan (although you may become eligible to participate in the AEP Pension Plan cash balance benefit formula if you have incurred a termination of employment from a company participating in the CSW Pension Plan and are then rehired by a Participating Company on or after January 1, 2001); and Are not a member of a collective bargaining unit that has not bargained for coverage under the Plan. Individuals who are not considered by AEP to be its employees or who perform services through an employment agency or as an independent contractor, and other similarly situated service providers, are not eligible to participate in the Plan. Note: If you were participating in the AEP Pension Plan (or in the one-year eligibility waiting period) on December 31, 2000 and continued employment with a Participating Company, you were eligible for special provisions that allowed you to continue to participate in the AEP Pension Plan s final average pay formula, the formula in effect prior to the addition of the cash balance formula effective January 1, These provisions are described under the section titled Grandfathered Participants. Automatic Enrollment You do not have to enroll to begin participating in the Plan. Once you are eligible to begin participating, you are automatically enrolled. When Participation Begins If you are an eligible employee, your Plan participation begins on the first day of the month after you complete one full year of service. A year of service is a consecutive 12-month period during which you are employed part- time or full-time by AEP. When your participation begins, you receive service credit from the date you were hired. This means that your first year of service is counted in determining your vesting service and annual Company credits in the Plan. How the Pension Plan Works The AEP Pension Plan is a defined benefit pension plan that provides a cash balance benefit amount as its primary benefit formula. Company contributions are actuarially determined. All Plan contributions and earnings on those contributions are held in a trust for the purpose of paying pension benefits to all Plan participants and for defraying the reasonable expenses of administering the Plan. Once you become eligible to participate in the Plan, the Company establishes a recordkeeping account to track the growth of your benefit amount over time. Your account grows through annual interest credits and Company credits based on your eligible pay, age and service as follows: Your account on January 1 + Interest Credit + Company Credit, if applicable = Your account on December 31 AEP 2016 AEP Retirement Plan SPD 2

7 Interest Credits An interest credit is applied to your account balance on December 31 of each year until you begin benefit payments. For the year your payments begin, the interest credit will be applied up to the date your payments begin. The interest credit is based on the average 30-year Treasury Bond rates (called the Applicable Rate) during November of the previous year. For example, your interest credit for 2016 is determined based on the average annual 30-year Treasury Bond rates for November The Plan guarantees a minimum interest credit of 4% per year even if the Applicable Rate is less and there is no cap on the rate. Company Credits A Company credit is applied to your account balance on December 31 each year you work for a Participating Company (please refer to the section titled "Participating AEP System Companies" for details.) You will also receive a final Company credit in the year you terminate employment based on your eligible pay in that year. The amount of the Company credit is a percentage of your eligible pay, based on your age plus years of vesting service. If the total of your age and years of service as of December 31 is... The amount of your annual Company credit is this percentage of your eligible pay: Less than % % % % % 70 or more 8.5% Age and Service Age and years of vesting service are based on whole years completed as of December 31 or the date your employment with AEP terminates, if earlier. For example, if you turn age 45 in March and complete five years of service in October and you remain employed with AEP as of December 31, your age and service total is 50 for that year, and your Company credit will be 5.5% of your eligible pay in that year. If your employment had ended in September, your age and service total would have been only 49 for that year, and your Company credit would have been 4.5% of your eligible pay in that year (instead of 5.5%). Eligible Pay Eligible pay is defined as the earnings payable to you in a calendar year from base pay, overtime pay, shift differential/sunday premium pay and annual incentive plan pay. Certain amounts you contribute toward your benefits on a pretax basis (such as your contributions toward the AEP group health plans, Retirement Savings (401k) Plan, flexible spending accounts, and parking) do not reduce the amount of your eligible pay. AEP AEP Retirement Plan SPD

8 Each year, the IRS calculates the cost-of-living increase on the limit to the amount of eligible pay that can be used to calculate pension benefits in a qualified plan like the AEP Pension Plan. If your eligible pay (as defined above) is greater than the limit for a particular year, your Plan benefits for that year will be calculated only on eligible pay up to the limit. (In 2016, the IRS limit is $265,000, subject to future adjustments for inflation.) Example: How Your Cash Balance Account Grows Let s look at how the cash balance account grows in a year for an employee who: Has an $80,000 cash balance account credit at the beginning of the year; Is 45 years old with seven years of vesting service at the end of the year (the Company credit percentage for an age and service total of 52 is 5.5%); and Earned $60,000 in eligible pay for the year. Assume that the Applicable Rate for November of the previous year was 4.0%. Cash Balance Account on January 1 $80,000 + Interest Credit $3,200 (4.0% x $80,000) + Company Credit $3,300 (5.5% x $60,000) = Cash Balance Account on December 31 $86,500 Vesting To be vested means you are entitled to a benefit when you leave AEP. You generally become 100% vested in your benefits under the AEP Pension Plan after completing three years of vesting service. If you are active on or after January 1, 2008, this means that you are entitled to your benefit when you leave AEP at any age with three or more years of vesting service. (If your employment terminated prior to this date, vesting occurred after five years of service.) Your benefits also become 100% vested if you die before you have completed three vesting years or if you are considered disabled as defined in the AEP Pension Plan document. If your employment with AEP ends and you are not vested, your benefit from the Plan will be forfeited. Vesting service begins on the date your employment begins and ends on the date your employment with AEP ends. Your vesting service includes periods of Company-approved leaves of absence (including disability leave and, upon your return, military leave). If you leave the Company and are later: Rehired by AEP within 12 months after being laid off or otherwise terminated, the period of your absence will also be credited as vesting service. Rehired by AEP, you will also be credited with the full amount of your prior vesting service if you had vested in your Plan benefits at the time your employment previously ended or if you had otherwise been credited with at least five years of vesting service prior to January 1, 2008 (or, if your prior service extended on or after January 1, 2008, three years of vesting service). If you had not yet vested in your benefits, your prior vesting service will be restored to you after you have completed at least one year of service after your rehire date, but only if you are reemployed before you have been considered separated from AEP for the longer of 60 consecutive months or the period of your prior service. AEP AEP Retirement Plan SPD

9 The Plan includes special rules for determining when you are considered separated from AEP. Please contact the AEP Benefits Center, toll-free, at if you would like more information on how to determine your years of vesting service. Leased employees are not eligible to participate in the Plan. However, if you previously were determined to be a leased employee and you later became a regular employee and eligible to participate in the Plan, your past service under the leasing arrangement may be credited to you as vesting service under the Plan. Please refer to the section titled Independent Contractors for more information. Naming a Beneficiary You may designate any person as your beneficiary. If you are married, your spouse is automatically your beneficiary. However, if you are married and you want to name someone other than your spouse as your primary beneficiary, you must obtain your spouse s written and notarized consent. Please be aware that the death benefits payable under the Plan may differ depending on whether your spouse is your sole, primary beneficiary. If you do not properly designate a beneficiary, the Plan provides that the applicable death benefit will be paid in the following order of priority: Your spouse; or, if you have no spouse at the time of your death; Your children, in equal shares; or, if you also have no surviving children at the time of your death; Your parents, in equal shares; or, if you also have no surviving parents at the time of your death; Your brothers and sisters, in equal shares; or, if you also have no surviving siblings at the time of your death; Your estate; or, if no such estate is set up following your death; Such person determined by AEP to be entitled to receive such payment under the applicable provision of law. If your marriage ends, any designation of your spouse as your beneficiary will be considered revoked unless a Qualified Domestic Relations Order (QDRO) directs otherwise. You may designate or change your beneficiary (to the extent determined under the cash balance formula) at any time by completing and submitting a new Beneficiary Designation Form (available online at or by calling the AEP Benefits Center). You also may be able to name a survivor annuitant at the time you commence the payment of your plan benefits if you would select one of the joint and survivor annuity forms of payment made available to you at that time. The Plan s payment options are further described under the section titled Choosing and Changing Your Payment Form and also described in the section titled Your Payment Options. If you are eligible for the grandfathering provisions, please refer to the section titled Grandfathered Participants for additional information about your payment options. Receiving Your Benefits If you leave the Company with a vested benefit having a lump-sum value greater than $5,000, you can choose to begin immediate payment, defer payment (within certain limits), or complete a rollover of your benefit to another eligible retirement plan or account. AEP AEP Retirement Plan SPD

10 If you leave the Company with a vested benefit having a lump-sum value of less than $1,000, the Plan will distribute your benefit in a single lump-sum distribution. If your vested benefit has a lump-sum value of at least $200, you can defer taxes on this distribution by rolling over your benefit to a qualified retirement plan or an Individual Retirement Account (IRA). If your vested benefit has a lump-sum value greater than $1,000 but less than $5,000, and you do not make a distribution election, your benefit will be automatically rolled over in a lump sum to an IRA established in your name at a third-party financial institution with whom the Company has contracted for this purpose. Once in the IRA, your funds will be invested in a way that is intended to preserve the principal amount of the rollover and to provide a reasonable rate of return and liquidity. Please note that you or the account will be responsible for all fees that may be applied to this IRA account - neither the Plan nor the Company will bear any of the expenses associated with the account. For more information regarding the Plan 's automatic rollover provisions, the IRA provider, and the fees and expenses that may be charged to the IRA, please contact the AEP Benefits Center by mail at P.O. Box 9754, Providence RI or by telephone at After your account is transferred, an introductory packet of information regarding your IRA will be sent to you. You would contact the IRA provider directly regarding your IRA account from that time forward. When You Can Receive Payment Begin Immediate Payment When you are no longer employed with AEP, you can begin immediate payment of your benefit by electing one of the available payment options. Each of these payment options is described in detail in the section titled Your Payment Options. Each benefit payment you receive generally will be taxed as ordinary income at the time you receive it. Lump sum payments received before age 59½ may also be subject to a 10% IRS penalty tax (unless an exemption from that tax applies). See each payment method for more information about taxation. Alternatively, you may choose to roll over your distribution to another qualified eligible retirement plan or Individual Retirement Account (IRA), including a Roth IRA. This may allow you to defer taxes and to defer, or even to avoid, the 10% penalty tax. Defer Payment If you choose to defer payment of your benefits after you are no longer employed with AEP, your cash balance account will continue to grow through annual interest credits. You will not receive any Company credits because you will no longer be employed by AEP. Your benefit will not be taxed until you commence payments. You can elect at any time to start benefit payments as of the first of any month after your termination date. In accordance with IRS minimum distribution rules, you must begin receiving benefit payments by April 1 following the year in which you reach age 70½ (or, if later, the year your employment with AEP ended). When you choose to begin receiving your benefit, you will have a choice of payment options. Please refer to the section titled Your Payment Options for more details. AEP AEP Retirement Plan SPD

11 Rollovers When you elect to begin payment, you may choose a form of payment that is eligible for rollover to another qualified eligible retirement plan such as the AEP Retirement Savings (401k) Plan or another employer-sponsored plan that accepts rollovers or to an Individual Retirement Account (IRA), including a Roth IRA. Amounts that are rolled over (other than to a Roth IRA) are not subject to current income taxes or the 10% IRS penalty tax for early payment. Forms of payment currently available under the Plan that give you the option to complete a rollover include the lump-sum payment option and a combination of a lump sum and monthly annuity option (but only with regard to that portion of your benefit that is paid in a lump sum). Your payment options are further described in the section titled Your Payment Options. Choosing and Changing Your Payment Form You should notify your supervisor when you are ready to retire (even if you have not yet terminated your employment with AEP). Approximately 45 days after your employment termination date, you will receive a retirement kit, which may include information about the benefit amount you may receive under the various payment options (please refer to the section titled Your Payment Options for more details). You can request to receive your retirement kit earlier by calling the AEP Benefits Center or by visiting the AEP Benefits Center web site ( However, your kit cannot be provided to you any earlier than 90 days prior to your commencement date. After you leave AEP, you may receive a separate kit containing information about any other AEP benefits coverage you may be able to continue after your termination of employment. After you receive the kit notifying you of your pension benefits, you can take at least 30 days to choose, change, or cancel your payment option. Please note the following information regarding your election: If you do not want to wait until the 30-day period ends for your election to be effective (the earliest effective date would be the first of the month following your date of termination), you may return your completed election form to the AEP Benefits Center before the 30 days expire. You may change your election up to the date your benefits are scheduled to begin or seven days after you receive the retirement kit, whichever is later. If you are married at the time you elect to have your benefits commence, your spouse must provide written, notarized consent if you: Choose an annuity option that provides your spouse with survivor annuity payments that are less than 50% of your lifetime payments; Name a survivor annuitant other than your spouse; or Choose a lump-sum payment, either partial or full. In any case, you may not change your payment option after payments begin. Your Payment Options When you choose to start receiving your vested benefit, a variety of payment options are available to give you flexibility and choice. It is up to you to select a method that best suits your personal situation. Your payment options include: A single lump-sum payment; One of a number of monthly annuity payment options; or A combination of a partial lump-sum payment with the rest of your benefit value paid as a monthly annuity. AEP AEP Retirement Plan SPD

12 Single Lump-Sum Payment (Requires Spouse s Consent if You Are Married) If you choose the lump-sum payment option, you will receive the amount credited to your cash balance account in a single distribution minus any applicable withholding taxes. If you do not direct the Plan to roll your lump-sum payment over to an eligible retirement plan or IRA, the Plan is required to withhold 20% as federal income taxes for payment to the IRS. The actual tax you pay on your lump-sum payment will depend on your tax situation. You can avoid the tax withholding by directing the Plan to roll the lump-sum payment directly into the AEP Retirement Savings (401k) Plan, another employer s eligible retirement plan that accepts rollovers, or an eligible individual retirement account or individual retirement annuity (IRA). Also, a lump-sum payment made before age 59½ may be subject to an additional 10% IRS penalty tax, except under certain limited circumstances such as: Your employment with AEP ended after you reached age 55; You complete a rollover distribution to an IRA or other qualified plan, including the AEP Retirement Savings (401k) Plan; Payment is being made as the result of your total disability or death; or To the extent payment is being made to an alternate payee under a qualified domestic relations order (QDRO). You should consult your tax advisor to determine the extent to which your payment may be exempted from the additional IRS penalty tax. The lump-sum payment option is available to single and married participants. Important note: Married participants must obtain written, notarized spousal consent to elect this option. Monthly Annuity Payments If you choose a monthly annuity option, you will receive monthly payments for the remainder of your life. Depending on the option you select, your surviving spouse or other named survivor annuitant may continue to receive a monthly payment after your death. If you are married when your benefits commence, your vested benefit value will be paid as a 50% joint and survivor annuity with your spouse as the survivor annuitant unless you elect a different option with the written, notarized consent of your spouse. Monthly annuity payments generally are taxed as ordinary income. To determine the payments available to you under the Plan s annuity options, your vested benefit (cash balance account) is converted to a monthly payment of equivalent value using the actuarial mortality table and interest rate required by the Plan and based on the type of annuity you select, your age and, if applicable, your survivor annuitant s age at the time benefits begin. The Plan offers a variety of monthly annuity payment options to meet different personal needs. These are described below. AEP AEP Retirement Plan SPD

13 Single Life Annuity If you choose the single life annuity option, your cash balance account is converted to a monthly annuity that provides you with payments every month for the remainder of your life. When you die, all payments stop. If you are not married when your benefits commence, your vested benefits will be paid to you as a single life annuity unless you elect a different option. If you are married, you must obtain written, notarized spousal consent to elect this option. Joint and Survivor Annuities Under the joint and survivor annuity payment options, your cash balance account is converted to a monthly annuity that provides you with a lower monthly benefit (compared to the single life annuity) for the remainder of your life; however, when you die, your surviving spouse (or other survivor annuitant that you name) continues to receive a percentage of the payment you were receiving for the rest of his or her life. The percentage can be 50%, 75% or 100%, depending on the option you select. Example For example, let s look at a Plan participant who is not a grandfathered participant and elects to begin payments in the form of a 75% joint and survivor annuity for his or her cash balance benefit. Based on the participant s vested benefit, age and the survivor annuitant s age when payments begin: Assume the participant receives lifetime monthly payments of $1,000 from the 75% joint and survivor form of payment. When the participant dies, the survivor annuitant named by the participant, if then surviving, will start receiving lifetime monthly payments equal to 75% of $1,000 or $750 monthly. When the spouse or other named survivor annuitant later dies, the monthly payments stop and no additional benefit payments are due. However, if the spouse or other named survivor annuitant dies before the participant, payments continue to the participant at $1,000 monthly and stop when the participant dies. Combination of Lump Sum and Monthly Annuity When you begin payment of your vested benefit, you may choose a combination of a partial lump-sum payment and monthly annuity payments. You may receive 25%, 50% or 75% of your vested benefit (cash balance account) as a lump-sum payment with the remainder paid as monthly annuity payments based on a single life annuity or 50%, 75% or 100% joint and survivor annuity. You can choose to receive the following percentages of your vested account balance in a lump-sum payment... 25% 50% 75% 100% With the remainder of your vested account balance converted and paid as one of these monthly annuity options... Single life annuity 50% joint and survivor annuity 75% joint and survivor annuity 100% joint and survivor annuity AEP AEP Retirement Plan SPD

14 Grandfathered Participants You are eligible for grandfathering provisions if on December 31, 2000: You were a participant in the AEP System Retirement Plan (and not the CSW Pension Plan); or You were in the one-year waiting period for AEP System Retirement Plan participation; so long as you remain continuously employed with a Participating Company * on or after January 1, Grandfathering provided protection for your benefit under the former benefit formula as part of the transition to the cash balance formula. As a grandfathered participant, your monthly benefit determined under the Plan s final average pay benefit formula continued to grow for a 10-year transition period. After December 31, 2010, your monthly normal retirement benefit under the Plan was frozen. This means your Plan benefit (as calculated under the final average pay formula) no longer continued to grow due to benefit service and covered pay, and would be no less than the final average pay benefit that you had earned until December 31, How Grandfathering Works When you choose to begin your benefit payments, you will receive calculations of the benefit amount payable under both the final average pay formula and the cash balance formula. You will receive the higher of the two benefit amounts payable under the payment option you select. The final average pay benefit continued to grow through December 31, 2010, based on your benefit service and covered pay. On December 31, 2010, final average pay formula benefit accruals ended. This means that your service and pay after December 31, 2010 do not affect the benefits payable to you under the final average pay formula. However, your monthly normal pension benefit earned under that formula at that time will be protected. Your benefit under the cash balance formula, on the other hand, continues to grow after December 31, 2010 with Company credits added under that formula for as long as you work for a Participating AEP Company and with interest credits added until your benefit payments begin. Payment Options for Grandfathered Participants As a grandfathered participant, you can choose one of the following payment options: Lump Sum: The grandfathered final average pay formula defines a stream of monthly annuity payments that would be payable as your normal retirement date accrued benefit (or, if you continued to work past your normal retirement date, the first day of the month following your termination of employment with AEP.) That benefit is converted to a lump sum amount using the actuarial mortality table and interest rate specified by the Plan as in effect at that time. The amount available to you as a lump sum would be the greater of that amount or the then balance credited to your cash balance account. After you receive the lump sum payment there are no more payments due under the Plan. For additional information see the Single Lump-Sum Payment section. Partial Lump Sum: This option provides a one-time payment of 25%, 50% or 75% of your pension benefit as of your benefit commencement date and pays the remainder in any annuity form available to you. For additional information see the Combination of Lump Sum and Monthly Annuity section. Single Life Annuity: This option provides monthly pension payments during your lifetime with no benefits payable to anyone after your death. This is the normal form of payment if you are not married on your benefit commencement date. * Please refer to the section titled "Participating AEP System Companies" for details. AEP AEP Retirement Plan SPD

15 30% Subsidized Joint & Survivor Annuity: If you satisfy all of the following requirements, you are eligible for a 30% subsidized joint and survivor annuity: Your grandfathered final average pay formula annuity benefit is greater than your cash balance annuity benefit; You are retirement eligible (at least age 55) at your date of termination; and, Your joint annuitant is the spouse to whom you have been married at least one year as of your benefit commencement date. Under this option, you would receive the same amount as you would receive under the single life annuity. If you should die before your spouse, your spouse would receive 30% of the amount you were receiving for his or her lifetime. If you spouse is more than 10 years younger than you, he/she will receive less than 30% of the benefit you were receiving. 40%, 50%, 60%, 75% or 100% Joint and Survivor Annuity: This option provides reduced monthly pension payments for your lifetime. If you die before your beneficiary, 40%, 50%, 60%, 75% or 100% (as elected by you) of the monthly payments you were receiving will then be paid to the individual that you name as your survivor annuitant for his or her lifetime. If your named survivor annuitant dies before you, your monthly payments will continue for the remainder of your lifetime. If you are eligible for the 30% Subsidized Joint and Survivor Annuity, the actuarial value of that subsidized joint and survivor annuity is taken into account in determining the monthly payments available under these options. The 50% joint and survivor annuity is the normal form of payment if you are married on your benefit commencement date. If you are married, you MUST select this form of payment with your spouse as your named survivor annuitant or a form of payment that pays your spouse at least as much as he or she would receive under this option, unless your spouse consents to your alternate election. Once you begin receiving payments, you may not change your survivor annuitant. Also, the following provisions can be added on to each annuity and joint and survivor annuity option if you desire: Pop-up provision This provision restores your benefit to its original unreduced amount (single life annuity) if your survivor annuitant (whether your spouse or a non-spouse) dies before you. Level income provision This provision is designed to pay you a higher benefit from the Plan prior to age 65 (the assumed age that you start Social Security benefits) and a lower benefit after age 65. Depending on the amount of your estimated Social Security benefit used in the calculation, your monthly plan benefit may stop at age 65. If you commence your plan benefit at or after you reach age 55 and your benefit stops at age 65, the payments you receive with this provision added to your annuity option may be eligible for rollover to another eligible retirement plan or IRA. AEP AEP Retirement Plan SPD

16 How the Final Average Pay Benefit Is Calculated for Grandfathered Participants Normal Retirement Benefit The following is the primary formula that is used to calculate the monthly final average pay benefit payable at normal retirement date. Your normal retirement date is based on the later of: Your 65th birthday; or When you have five years of vesting service. 1.1% of the average of your high 36 consecutive months of base pay ( High 36 ) times Your years of Benefit Service (maximum 35 years) PLUS 0.5% of the amount by which your average High 36 exceeds your Average Social Security Covered Compensation times Your years of Benefit Service (maximum 35 years) PLUS 1.33% of your High 36 times Your years of Benefit Service over 35 years (maximum of 10 years) Reduction of Final Average Pay Benefit Payable for Commencement Before Normal Retirement Date If you choose to begin payment of your vested benefit before you reach your normal retirement date, the amount payable under the final average pay formula is reduced because your benefits will be assumed to be payable sooner and over a longer period of time. If your employment with AEP ends on or after age 55, the reduction is one-fourth of one percent for each month from the date you begin payments that is before the date you reach age 62. If your employment with AEP ends before age 55, a full actuarial reduction applies for each month payment begins before your normal retirement date. Final Average Pay Formula Definitions Average Social Security Covered Compensation: The average of the Social Security taxable wage bases in effect for each calendar year during the 35-year period ending with 2010, or if sooner, the calendar year in which you terminate employment or you are considered totally disabled and you do not return to active employment before you commence benefits. Benefit Service: Beginning with your date of employment as an employee of a Participating Company, * you earned one month of benefit service for each month ending on or before December 31, 2010 in which you were paid (sick pay or base pay) for at least one hour of service and for each full or partial month in which you were on a leave of absence and considered totally disabled. * Please refer to the section titled Participating AEP System Companies for details. AEP AEP Retirement Plan SPD

17 High 36: The 36 consecutive months of base pay earned during the 10 years of your employment with a Participating Company * ending upon the earlier of December 31, 2010 or the date your AEP employment terminated, that produces the highest annual average. At any time you have fewer than 36 months of employment with a Participating Company taken into account, your pay during your entire period of employment with AEP (or the period ending December 31, 2010, if shorter) is used. Cash Balance Opening Balance for Grandfathered Participants on January 1, 2001 If you are a grandfathered participant, your cash balance benefit was credited with an opening balance on January 1, The opening balance was calculated as follows: The Plan determined the present lump sum value of the final average pay normal retirement benefit (age 65 benefit) you had earned as of December 31, This amount was the basis for your opening balance. Present lump sum value refers to the amount needed today to invest at an assumed rate of return to provide a stream of monthly payments beginning at a later date. An interest rate of 5.78% and an IRS-prescribed mortality table (the 1983 Group Annuity Mortality (GAM) unisex tables) were used to determine the lump-sum present value of your December 31, 2000 final average pay benefit (based upon your then High-36 and Benefit Service). Then a credit was added to your account for the early retirement subsidy that AEP provides to those who leave AEP at or after age 55 and begin payment before age 65. The credit was based on an assumed commencement of the final average pay benefit earned as of December 31, 2000, at the later of age 62 or your actual age. Finally, the calculation included a transition credit, which was an amount equal to a percentage of your eligible pay for the calendar year The percentage was based on your total age and service as of December 31, For the transition credit, eligible pay included pay you received in 2000 from base pay, overtime pay, shift differential/sunday premium pay and annual incentive plan pay. Opening Account Balance for Grandfathered Participants on January 1, 2001 EQUALS Present lump sum value of the final average pay normal retirement benefit earned as of 12/31/2000 and payable at age 65 PLUS Credit for early retirement at age 62 (or current age as of 12/31/2000, if older) PLUS Transition credit based on age, service and eligible pay in 2000 For example, here s how the opening account balance was calculated for a Grandfathered Participant who: Was 45 years old with 15 years of service (both vesting service and benefit service) on December 31, Earned $50,000 in eligible pay for 2000 ($47,000 in base pay, $1,000 in overtime pay, $0 in shift differential/sunday premium pay, and $2,000 in incentive pay). Had earned a monthly benefit (payable at age 65) of $680 as of December 31, This amount is based on the employee s benefit service as of December 31, 2000 and his High 36 months of base pay of $3,750. AEP AEP Retirement Plan SPD

18 The lump-sum payment of the $680 monthly benefit if it was paid at age 65 would be $88,400. The Plan used an interest rate of 5.78% and the IRS-prescribed mortality table to calculate this amount, which was the basis for the opening balance calculations shown above. As of December 31, 2000, when the employee was age 45, the present value of this amount ($88,400) was determined to be $28,700. This reflects the assumption that the account will accrue interest for 20 years until the employee reaches age 65 at an annual interest rate of 5.78%. Present lump sum value of the final average pay normal retirement benefit was: The credit for age 62 early retirement subsidy was: Company Credit for an age and service total of 60 was 7% of $50,000: $28,700 + $7,800 + $3,500 = $40,000 Other Special Provisions The Grandfathered Participant's Opening Account Balance on January 1, 2001: Former CSP Employees If you are a former employee of Columbus Southern Power (CSP; formerly the Columbus and Southern Ohio Electric Company) who was a participant in the C&SOE Retirement Plan on January 1, 1987, your grandfathered benefit is based on the greater of: The AEP final average pay formula benefit for all service; or The prior C&SOE formula benefit for service through December 31, 1986 plus the AEP final average pay formula benefit for service after that date. If this provides the larger benefit, you will have the option to accept the portion of your benefit provided by the prior C&SOE formula adjusted as provided in the former C&SOE Plan or actuarially increased to build the value of the applicable adjustments into that portion of the benefit. The greater of those two amounts was used to calculate the opening cash balance account value of former CSP participants entitled to such accounts. Pre-1978 Participants Who Have Contributions in the Plan If you were an AEP Pension Plan participant before 1978, you were required to make certain contributions to the Plan for each month you participated. The Plan permits such pre-1978 participants who have terminated employment with AEP but have not reached the Plan s normal retirement age or otherwise commenced their benefits, to withdraw their aggregate contributions plus the interest credited by the Plan on those contributions. Participants electing to withdraw their pre-1978 contributions generally have their accrued benefit under the Plan reduced by the value of the amount withdrawn, if they were vested in the employer-provided benefit. If they were not vested in the employer-provided benefit at the time of withdrawal, such employer-provided benefit was forfeited at the time of the withdrawal of the pre-1978 contributions plus interest. However, the Plan did offer certain pre-1978 participants an opportunity to withdraw their contributions during the period from May 1, 1981 through June 30, Participants who made the special withdrawal election in 1981 are no longer considered pre-1978 participants and all of their benefit service (including their pre-1978 benefit service) is taken into account in computing their accrued benefit under the Plan s final average pay formula as if all of their benefit service is post-1977 service. AEP AEP Retirement Plan SPD

19 If a pre-1978 participant has not elected to withdraw his contributions from the Plan or if such a participant withdrew his/her contributions and, upon reemployment, later repaid them (plus interest), his or her benefit attributable to benefit service prior to 1978 will be calculated under the pre-1978 formula. The benefit attributable to the pre-1978 formula also would have been included in the opening balance for his or her cash balance account. Note: Employees who (a) terminated employment and withdrew their contributions prior to January 1, 1976, or who (b) made the special election to withdraw their pre-1978 contributions in 1981, are not eligible to repay contributions upon rehire. Employees With OVEC/IKEC Service Retirement plan benefits for employees with service in both this Plan and the Retirement Plan for Employees of Ohio Valley Electric Corporation and Indiana-Kentucky Electric Corporation, as amended, will be coordinated according to the special provisions in each of the plans. Independent Contractors Individuals who are not compensated directly by AEP or who are compensated under a fee or contract arrangement are not eligible to participate in the Plan. However, if you satisfied the requirements to be considered a leased employee while working at a Participating Company * and later became an employee of a Participating Company*, your past service as a leased employee may be considered as service directly to AEP for purposes of determining when you become eligible to participate and your years of vesting service under the Plan. Generally, to be considered a leased employee, you would have to have been providing services on a substantially full-time basis for a least 12 months under the primary direction and control of a Participating Company.* Generally, you will be considered full-time for this purpose if you performed at least 1,500 hours of service for the AEP System in any consecutive 12-month period. Benefits not Assignable (With Exception for Qualified Domestic Relations Orders) Your rights and the rights of any beneficiary to benefits under the Plan generally cannot be transferred to anyone else. Plan benefits generally are not subject to attachment, execution, garnishment, sequestration, or other legal process. However, if, as a result of a divorce or other action taken pursuant to a State domestic relations law, you are responsible for child support, alimony or marital property rights payments, all or part of your retirement plan benefits may be assigned provided that the assignment is directed by a qualified domestic relations order (QDRO) that has been issued by a court. The Plan has implemented special procedures for determining whether a particular court order satisfies the requirements to be considered a QDRO. Participants and beneficiaries may obtain a copy of the Plan s QDRO review procedures without charge by contacting the firm engaged to review such orders. You can obtain that contact information by calling the AEP Benefits Center at * Please refer to the section titled Participating AEP System Companies for details. AEP AEP Retirement Plan SPD

20 Filing a Claim for Benefits If you believe that you are entitled to receive a Plan benefit that has not been provided or offered by the Plan or that the determination of the benefit amount being offered or paid to you is inaccurate, you may file a written claim at the following address specifying the basis for the claim: AEP Benefits Center P.O. Box 9754 Providence RI Unless your claim is approved, the Plan administrator will notify you in writing of the total or partial denial of your claim within 90 days. The Plan administrator may request an extension of up to 180 days if special circumstances require, in which case you will receive a written explanation of the reason for the extension within the initial 90-day period. Notice of a partial or full denial of your claim will include: The specific reasons for the denial of your claim, Specific reference to the provisions of the Plan and/or trust agreement upon which the denial of the claim was based, A description of any additional material or information necessary for you to perfect your claim and an explanation of why such material or information is necessary, and An explanation of the appeal procedure specified in the next paragraph, and the time limits applicable to such procedures, including a statement of your right to bring a civil action under section 502(a) of the Employee Retirement Income Security Act of 1974 (ERISA) following an adverse benefit determination on review. If your claim involves a determination of whether you have become disabled and the plan administrator relied upon an internal rule, guideline, protocol or other similar criterion, the notice of the denial of your claim also would include the specific internal rule, guideline, protocol or other criterion relied upon or a statement that a copy of such internal rule, guideline, protocol or other criterion will be provided to you free of charge upon request. Appealing a Claim You may appeal a partial or full denial of your claim by filing a notice of appeal within 60 days after your receipt of the notice from the plan administrator. Your notice of appeal should be sent to: American Electric Power Service Corporation Attn: Retirement Plan Appeal Committee 1 Riverside Plaza, 15 th Floor Columbus, OH AEP AEP Retirement Plan SPD

21 Upon receipt of a timely notice of appeal, the Committee will conduct a full and fair review of your claim. In reviewing your claim, the Committee has discretionary authority to determine whether and to what extent you are eligible for benefits and to construe the terms and provisions of the Retirement Plan. The Committee will mail or deliver to you its written decision on the appeal based on the facts and the Committee s interpretation of pertinent provisions of the Plan and/or the trust agreement generally within 60 days after its receipt of your notice of appeal. However, the Committee may extend that 60-day period up to 60 additional days if the Committee determines that special circumstances require an extension. If it decides that such an extension is required, the Committee will notify you of the extension within the initial 60-day period. When delivered to you, the Committee s decision on your appeal will state The specific reasons for the Committee s decision; The specific provisions of the Plan or trust agreement on which the decision was based; A statement you are entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to your claim for benefits; and A statement of your right to bring an action under Section 502(a) of ERISA. If your appeal involves a determination of whether you have become disabled and the Committee relied upon an internal rule, guideline, protocol or other similar criterion, the notice of the denial of your appeal also would include the specific internal rule, guideline, protocol or other criterion relied upon or a statement that a copy of such internal rule, guideline, protocol or other criterion will be provided to you free of charge upon request. The Committee s decision will be final and binding on all interested parties. During the review of your claim or notice of appeal, you or your representative will be given an opportunity to review documents that are pertinent to the claim and to submit issues and comments in writing. If you request a hearing on the claim and the Committee concludes such a hearing is advisable and schedules such a hearing, you would be permitted to present your case in person or by an authorized representative at the hearing. Life Events and Your Coverage If You Take a Leave of Absence While you are on an unpaid leave of absence, you will not receive company credits because you are not receiving pay from AEP. Grandfathered participants did not receive benefit service credit under the final average pay formula while on an unpaid leave of absence. However, cash balance interest and vesting service still would be credited during the leave. Company credits resume on the date you return to work. While you are on a paid leave of absence, you continue to earn Company credits, benefit service (if applicable), interest credits, and vesting service. Keep in mind that if you are on an approved leave of absence, you cannot take a distribution from the Plan because you still have an employment relationship with AEP. AEP AEP Retirement Plan SPD

22 Provisions for Absence Due to Qualified Military Service An employee who is on a qualified military leave and returns to the Company after the leave will not be treated, for Plan purposes, as having a break in service. These employees will be credited with vesting service and, if applicable, benefit service, for the period of the qualified military leave, and as having received compensation from AEP for Plan purposes based on the rate of base pay the employee would have received if not for the qualified military leave of absence. You will be considered as having returned from qualified military leave if your service was in the uniformed services [as defined in the Uniformed Services Employment and Reemployment Rights Act ( USERRA )] and you return to employment with the Company within the period that USERRA guarantees your reemployment rights. If you go on a qualified military leave on or after January 1, 2009 and receive differential pay but do not return to the Company after the leave, you will be treated as receiving pay during active service for the Company in an amount no less than the differential pay you received. If You Become Disabled The AEP Pension Plan specifies that you may be considered disabled if you are unable to work at your own occupation solely because of sickness or injury for a period of up to 24 months. After the expiration of 24 months, your illness or injury must render you unable to work at any gainful occupation for which you may be able (or may reasonably become qualified by education, training or experience) to perform. If you were determined to be disabled while you are a participant in the AEP Pension Plan prior to September 1, 2013, you continued to receive annual interest credits, company credits and benefit service for as long as you remained a disabled employee through August 31, 2013 (or, in the case of benefit service, for the period it was applicable), unless you sooner elected to have your benefits distributed by the Plan. Effective September 1, 2013, the Plan was amended to discontinue annual company credits for disabled participants after the later of September 1, 2013 or the date the elimination period under the AEP System Long Term Disability Plan has been satisfied, except that annual company credits will be applied during the post-september 1, 2013 period of disability with regard to any eligible annual incentive plan compensation paid during the disability period (provided you had not elected to commence distribution of your Plan benefits). Vesting service continues to accrue each year you remain disabled. Through August 31, 2013, company credits continued to be based on age, vesting service and eligible pay. However, for the period that Plan benefits accrued while disabled prior to September 1, 2013, eligible pay under the cash balance formula was based solely on your rate of base pay on the date of disability (subject to the applicable IRS limits on eligible pay). Annual incentive plan compensation also may be considered eligible pay even if paid after September 1, 2013 while you are disabled. Contact the AEP Benefits Center at if you have any questions about your benefits while on disability. If You Die If You Die Before Benefit Payments Begin If you die on or after January 1, 2003 while actively employed by AEP, your Plan benefits become 100% vested even if you had fewer than five years (three years on or after January 1, 2008) of vesting service with AEP. If you had a vested benefit under the Plan at the time of (or by reason of) your death and your death occurs prior to your beginning benefit payments, your beneficiary will be eligible to receive a benefit. AEP AEP Retirement Plan SPD

23 If you are married and your spouse is your beneficiary, your spouse can elect a lump-sum payment or life annuity. When your surviving spouse elects to begin payment of this benefit, he/she may choose a form of payment that is eligible for rollover to an Individual Retirement Account (IRA), including a Roth IRA. Amounts that are rolled over are not subject to current income taxes. Forms of payment currently available under the Plan that would give your surviving spouse the option to cause a rollover include the lump-sum payment option and combination of lump-sum and monthly annuity options (but only with regard to that portion of the benefit that is paid in a lump sum). If you are married and named a beneficiary who is not your spouse (and there is a spousal waiver and notarized consent on file) or if you are not married at the time of your death, the benefit will be paid to your beneficiary as a single lump-sum payment within a reasonable time after your death. Effective January 1, 2010, your non-spouse beneficiary may elect a direct rollover to an inherited IRA. Distributions from an inherited IRA must be made in accordance with the minimum distribution rules of the Plan from which the rollover is made. Generally, this means that distributions from the inherited IRA must be paid in full within five years of the participant's death (five-year rule) or must begin within 12 months of the participant's death and be paid over the beneficiary's life expectancy (life expectancy rule). If the direct rollover is completed before the end of the year following the year of the participant's death, a special rule may permit the beneficiary's inherited IRA to use the life expectancy rule, even though the Plan generally uses the five-year rule. Regardless of your beneficiary designation, if the lump-sum value of your retirement Plan death benefit is $5,000 or less, it will be paid as a single lump-sum distribution. The amount of the death benefit payable to your beneficiary depends on a number of factors. If you are not a grandfathered participant (or, if you are a grandfathered participant and your beneficiary is not a spouse to whom you had been married for at least one year at the time of your death) and you die prior to beginning your benefit payments, the benefit payable to your beneficiary will be the balance then credited to your cash balance account. If you are a grandfathered participant and your beneficiary is the spouse to whom you had been married for at least one year at the time of your death and you die prior to beginning your benefit payments, your spouse will be entitled to the greater of the benefit value provided by the balance then credited to your cash balance account or that provided under the Plan s final average pay formula. The amount of the death benefit provided to a surviving spouse under the final average pay formula is set forth in the Plan document and takes into account whether your death occurs while you remain actively employed with AEP and whether you had reached age 55: If you die after age 55 while an AEP employee If you die after age 55 while currently employed by AEP, the benefit payable under the final average pay formula to your qualifying spouse generally would be the survivor annuity your spouse would have received if you had retired with an immediate joint and 60% survivor annuity on the day before your death, provided that the Plan would subsidize the payments with the value of a 30% survivor annuity. (Note exception: If your qualifying spouse is more than ten years younger than you, the subsidized 30% survivor annuity benefit will be actuarially reduced for each year by which your surviving spouse is more than ten years younger than you.) If you die before age 55 while an AEP employee If you die before age 55 while currently employed by AEP, the benefit payable under the final average pay formula to your qualifying spouse generally would be the survivor annuity the spouse would have received if you had terminated employment on your date of death and survived to age 55. Payment to your spouse assumes that you then elected an immediate joint and 60% survivor annuity commencing upon the first day of the month following your reaching age 55 and then died as of the day your benefit would have started. AEP AEP Retirement Plan SPD

24 If you die while no longer employed by AEP and had not reached age 55 while an AEP employee If you die while no longer employed by AEP and had not reached age 55 prior to your termination with AEP, the benefit payable under the final average pay formula to your qualifying spouse generally would be the survivor annuity your spouse would have received if you had elected an immediate joint and 50% survivor annuity. Payment assumes commencing your benefit on the first day of the month following the later of the date you would have reached age 55 or your date of death, and then you died as of the day your benefit would have started. If you die while no longer employed by AEP but had reached age 55 while an AEP employee If you die while no longer employed by AEP and were at least age 55 while you were still an AEP employee, the benefit payable under the final average pay formula to your qualifying spouse generally would be the survivor annuity the spouse would have received if you had retired with an immediate joint and 60% survivor annuity on the first day of the month immediately following your death, and then you died as of the day your benefit would have started. This benefit determination will include the provision that the Plan would subsidize the payments with the value of a 30% survivor annuity. (Note exception: If your qualifying spouse is more than ten years younger than you, the subsidized 30% survivor annuity benefit will be actuarially reduced for each year by which your spouse is more than ten years younger than you). If you die after benefit payments begin If you die after you begin receiving your benefit payments from the Plan, your survivor annuitant (if any) named at the time your benefit payments began will be paid in accordance with the terms of the benefit option you elected. No further benefits would be payable from the Plan at the time of your death if you elected and received a single lump-sum payment. Important Plan Information Plan Sponsor and Administrator This benefit plan is sponsored by American Electric Power Service Corporation (AEP) and its subsidiaries and affiliates that have adopted the Plan for the benefit of their employees. Please refer to the section titled Participating AEP System Companies for details. The Plan Administrator designated under the Plan is: American Electric Power Service Corporation 1 Riverside Plaza 15th Floor Columbus, OH (614) Agent for Service of Legal Process AEP has also been designated as agent for service of legal process. Process may be served on AEP at the above address to the attention of the Legal Department. Service of legal process may also be made upon the Plan trustee. Plan Name American Electric Power System Retirement Plan AEP AEP Retirement Plan SPD

25 Plan Type Defined benefit pension plan Plan Trustee BNY Mellon Trustee of American Electric Power System Retirement Plan BNY Mellon Center 500 Grand Street, Room Pittsburgh, PA Amounts available to fund Plan benefits are held in certain group annuity contracts issued by Aetna Life Insurance Company, the Equitable Life Assurance Society of the United States and The Prudential Life Insurance Company of America. Plan Recordkeeper Information and forms relating to Plan benefits generally are maintained by the AEP Benefits Center. You may contact the AEP Benefits Center online at or by calling (1-888-AEP-BENE). Plan Numbers Documents and reports for this plan are filed with the Unites States Department of Labor under two numbers: Company's Employer Identification Number (EIN): Plan Number: 001 Plan Year The Plan Year for this plan for purposes of maintaining the Plan's fiscal records is January 1 through December 31. Type of Administration The Plan is administered under the supervision of the Plan administrator, although various services are also provided by the Plan trustee and Plan recordkeeper. Funding Medium The Plan's assets are held in trust (called the American Electric Power Master Retirement Trust) by the plan trustee. Plan Documents This Summary Plan Description (SPD) provides a summary of the benefits available to eligible employees. Full details of the Plan are contained in the Plan's governing documents. If a provision described in this SPD differs from the provision of the applicable Plan document, the Plan document prevails. Copies of the governing Plan documents are available from the Plan administrator upon written request. You may be asked to pay reasonable costs for copying the documents. AEP AEP Retirement Plan SPD

26 Plan Amendment or Termination AEP expects to continue the Plan, but reserves the right to terminate or change it at any time. Any change to the Plan may not result in a reduction of the benefit you have then accrued under the Plan (generally, your then cash balance account or, if you are a grandfathered participant, your final average pay formula age-65 monthly benefit). If the Plan is terminated or partially terminated, affected participants will immediately become fully vested in their accrued benefits. Unless otherwise specified at the time the Plan is terminated, no additional benefits shall accrue under the Plan for any participant after the date the Plan is terminated. Pension fund assets will then be used to provide benefits to retirees, beneficiaries and active participants in accordance with the priorities set forth in the Plan document and applicable laws and regulations. PBGC Protection Your pension benefits under the Plan are insured by the Pension Benefits Guaranty Corporation (PBGC), a federal insurance agency. If the Plan terminates (ends) without enough money to pay all benefits, the PBGC will step in to pay pension benefits. Most people receive all of the pension benefits they would have received under their Plan, but some people may lose certain benefits that are not guaranteed. The PBGC guarantee generally covers: Normal and early retirement benefits; Disability benefits if you become disabled before the Plan terminates; and Certain benefits for your survivors. The PBGC guarantee generally does not cover: Benefits greater than the maximum guaranteed amount set by law for the year in which the Plan terminates; Some or all of benefit increases and new benefits based on plan provisions that have been in place for fewer than 5 years at the time the Plan terminates; Benefits that are not vested because you have not worked long enough for the Company; Benefits for which you have not met all of the requirements at the time the Plan terminates; Certain early retirement payments (such as supplemental benefits that stop when you become eligible for Social Security) that result in an early retirement monthly benefit greater than your monthly benefit at the Plan's normal retirement age; and Non-pension benefits, such as health insurance, life insurance, certain death benefits, vacation pay, and severance pay. Even if certain of your benefits are not guaranteed, you still may receive some of those benefits from the PBGC depending on how much money your plan has and on how much the PBGC collects from employers. For more information about the PBGC and the benefits it guarantees, contact the AEP Benefits Center at or contact the PBGC s Technical Assistance Division, 1200 K Street N.W., Suite 930, Washington, D.C or call (not a toll-free number). The toll-free number is TTY/TDD users may call the federal relay service toll-free at and ask to be connected to Additional information about the PBGC s pension insurance program is available through the PBGC's website on the Internet at AEP AEP Retirement Plan SPD

27 Maximum Annual Limit on Retirement Benefit The federal tax code limits the annual benefit amount that can be provided through a qualified plan like the AEP System Retirement Plan. The Plan cannot pay benefits that exceed these annual limits. The maximum annual benefit varies by the age at which benefits begin to be paid and the payment form. The IRS annually announces the adjustment to the Plan s maximum benefit limit that will apply for each year. You will be notified if these limits apply to you. Limits on Payments The payment options that are offered by the Plan may be limited at times that the Plan is determined to be significantly under-funded. For example: For any period that the Plan funding percentage is determined to be at least 60% but less than 80%, the Plan may not make any lump sum payment greater than 50% of the value of the benefit that is payable. If the Plan's funding percentage is determined to become less than 60% or, if the employer files a Chapter 11 bankruptcy, the Plan may not make any payments in excess of that provided under a single life annuity. Top Heavy Provisions The federal tax regulations also include certain rules intended to ensure that tax-qualified plans like the AEP Pension Plan are nondiscriminatory. Among these are rules that constrain the portion of the Plan s benefits that may be provided to the employer s key employees that is, its more highly paid officers and significant shareholders. A plan that provides an excessive portion of its benefits to key employees is considered by the IRS to be a top-heavy plan. When a plan becomes top heavy, special minimum benefit rules and accelerated vesting rules automatically become applicable. Only a very small percentage of the plan s participants consist of key employees. However, in the unlikely event that the plan becomes top heavy, the plan would implement the applicable benefit accrual and vesting provisions. Participating AEP System Companies Eligibility to participate in the plan depends, in part, on employment with a Participating AEP System Company. The list of Participating AEP System Companies includes the following as of January 1, 2016, but their inclusion may change for various reasons, including an amendment to the plan, or disposition of AEP s interest in the company: American Electric Power Service Corporation AEP Energy Services, Inc. AEP Energy Partners, Inc. AEP Generating Company AEP Generation Resources Inc. AEP Onsite Partners, LLC AEP Pro Serv, Inc. AEP Texas Central Company AEP Texas North Company Appalachian Power Company CSW Energy, Inc. Dolet Hills Lignite Company, LLC Indiana Michigan Power Company Kentucky Power Company Kingsport Power Company Ohio Power Company Public Service Company of Oklahoma River Transportation Division I&MP Southwestern Electric Power Company Wheeling Power Company This list is not complete. If you want more information on whether and when a particular AEP System Company participated in the plan, please call the AEP Benefits Center toll-free at AEP AEP Retirement Plan SPD

28 Right of Recovery The amount of your Plan benefits will be adjusted if: There is a misstatement of any information included in Company records that is taken into account in determining your eligibility for or entitlement to benefits; You do not report required information when applying for or receiving Plan benefits; or Any error is made in calculating your benefits. If a benefit is overpaid or duplicated, you are expected to repay the Plan within 60 days. If you do not, the Plan may reduce or refuse future benefits, as allowed by law, until the overpayment is repaid. The Plan may also take any additional action that is permitted by law. No interest will be charged on the amount of any overpayment or duplication of benefits and, unless required by law, no interest will be paid on any underpayment of benefits or on any benefit payments that have been delayed for any reason. Your Rights Under ERISA As a participant in the American Electric Power System Retirement Plan you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA provides that all Plan participants shall be entitled to: Receive Information About Your Plan and Benefits Examine, without charge, at the Plan administrator s office and at other specified locations, such as worksites and union halls, all documents governing the Plan, including insurance contracts and collective bargaining agreements, and a copy of the latest annual report (Form 5500 Series) filed by the Plan with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefit Security Administration. Obtain, upon written request to the Plan administrator, copies of documents governing the operation of the Plan, including, as applicable, insurance contracts and collective bargaining agreements, and copies of the latest annual report (Form 5500 Series) and updated Summary Plan Description. The administrator may make a reasonable charge for the copies. Receive a summary of the Plan s annual financial report. The Plan administrator is required by law to furnish each participant with a copy of this summary annual report. Obtain a statement telling you whether you have a right to receive a pension at normal retirement age (your age 65 or such later date that you have at least five years of service) and if so, what your benefits would be at normal retirement age if you stop working under the Plan now. If you do not have a right to a pension, the statement will tell you how many more years you have to work to get a right to a pension. This statement must be requested in writing and is not required to be given more than once every twelve (12) months. The Plan must provide the statement free of charge. Prudent Actions by Plan Fiduciaries In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan. The people who operate your Plan, called fiduciaries of the Plan, have a duty to do so prudently and in the interest of you and other Plan participants and beneficiaries. No one, including your employer, your union, or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a pension benefit or exercising your rights under ERISA. AEP AEP Retirement Plan SPD

29 Enforce Your Rights If your claim for a pension benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules. Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of Plan documents or the latest annual report from the Plan and do not receive them within 30 days, you may file suit in a Federal court. In such a case, the court may require the Plan administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the administrator. If you have a claim for benefits that is denied or ignored, in whole or in part, you may file suit in a state or Federal court. In addition, if you disagree with the Plan s decision or lack thereof concerning the qualified status of a domestic relations order or a medical child support order, you may file suit in Federal court. If it should happen that Plan fiduciaries misuse the Plan s money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a Federal court. The court will decide who should pay court costs and legal fees. If you are successful the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous. Assistance with Your Questions If you have any questions about your Plan, you should contact the Plan administrator. If you have any questions about this statement or about your rights under ERISA, or if you need assistance in obtaining documents from the Plan administrator, you should contact the nearest office of the Employee Benefit Security Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Suite S-2524, Washington, D.C or call (toll-free). You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefit Security Administration. AEP AEP Retirement Plan SPD

30 AEP Benefits Center