UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14C INFORMATION

Information Statement Pursuant to Section 14(c) of the

Securities Exchange Act of 1934

Filed by the Registrant ☑

Filed by a Party other than the Registrant ☐

 

Check the appropriate box:
☐		Preliminary Information Statement
☑		Definitive Information Statement only
☐		Confidential, for use of the Commission Only (as permitted by Rule 14c-5(d)(2))
ERIE INDEMNITY COMPANY
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check all boxes that apply):
☑		No fee required.
☐		Fee paid previously with preliminary materials.
☐		Fee computed on table in exhibit required by Item 25(b) of Schedule 14A (17 CFR 240.14a-101) per Item 1 of this Schedule and Exchange Act Rules 14c-5(g) and 0-11

 

Notice of Annual Meeting of Shareholders

To the Holders of Class A Common Stock and

Class B Common Stock of ERIE INDEMNITY COMPANY:

We will hold our 97th annual meeting of shareholders via webcast at 9:30 a.m., Eastern Daylight Time (EDT), on Tuesday, April 26, 2022. You are invited to join the virtual meeting at www.virtualshareholdermeeting.com/ERIE2022 using your 16-digit control number. Shareholders will not be permitted to attend the meeting in person. This annual meeting of shareholders is being held for the following purposes:

 

1.

To elect 11 persons to serve as directors until our 2023 annual meeting of shareholders and until their successors are elected and qualified;

 

2.

To consider and act upon a proposal to approve the continuation of our Equity Compensation Plan as Amended and Restated; and

 

3.

To transact any other business that may properly come before our annual meeting and any adjournment, postponement or continuation thereof.

This notice and information statement, together with a 16-digit control number and a copy of our annual report to shareholders for the year ended December 31, 2021, are being sent to all holders of Class A common stock and Class B common stock as of the close of business on Friday, February 25, 2022, the record date established by our board of directors. Holders of Class B common stock will also receive a form of proxy. Holders of Class A common stock will not receive proxies because they do not have the right to vote on any of the matters to be acted upon at our annual meeting.

Holders of Class B common stock are requested to complete, sign and return the form of proxy in the envelope provided, whether or not they expect to attend our annual meeting.

 

By order of our board of directors,

Brian W. Bolash

Executive Vice President, Secretary and General Counsel

March 25, 2022

Erie, Pennsylvania

 

 

Erie Indemnity Company — 2022 Information Statement

Table of Contents

 

Introduction			1
Voting at our Annual Meeting			1
Description of our Business			2
Beneficial Ownership of Common Stock			2
Delinquent Section 16(a) Reports			4
Our Board of Directors			5
Introduction			5
Board Diversity			5
Board Diversity Matrix			6
Board Leadership and Executive Sessions			6
Board Oversight of Risk			7
Committees of our Board			8
Director Education			9
Director — Shareholder Communications			9
Proposal 1 — Election of Directors			10
Introduction			10
Background of our Nominating Committee			10
Nominating Procedures			10
Actions Taken for Nominations			11
Candidates for Election			11
Independent Directors			15
Required Vote			15
Compensation Discussion and Analysis			16
Executive Summary			16
Say-on-Pay and Frequency of Say-on-Pay Advisory Vote Results			17
Risk Management in Executive Compensation Plan Design			18
Executive Compensation Philosophy and Structure			19
Executive Compensation Principles			19
Relationship Between Pay and Performance			20
Setting Executive Compensation			21
Principal Components of Executive Compensation			21
Retirement Benefits and Perquisites			25
Policy on Recoupment of Officer Bonuses			25
Policy for Minimum Stock Ownership Levels			25
Anti-Hedging Policy			26
Tax Implications of Executive Compensation			26
Agreements with Executive Officers			26
Executive Compensation			27
Summary Compensation Table			27
Supplemental Table for All Other Compensation			28
Grants of Plan-Based Awards			29
Outstanding Equity Awards			30
Option Exercises and Stock Vesting During 2021			31
Pension Plan and SERP			31
Non-Qualified Deferred Compensation			32
Agreements with Executive Officers			34
Potential Termination or Change in Control Payments			35
Compensation Committee Interlocks and Insider Participation			35
Report of our Executive Compensation and Development Committee			36
CEO Pay Ratio			37
Director Compensation			38
Overview			38
2021 Director Compensation			38
Director Stock Ownership Guidelines			40
Director Education Program			40
Matching Gifts Program			40
Proposal 2 — Approval of the Continuation of our Equity Compensation Plan as Amended and Restated			41
General			41
Purposes of Plan			41
Administration of the Plan			41
Participation			42
Shares Available under the Plan			42
Forms and Terms of Awards			42
Maximum Award			43
Bonus Recoupment Policy and Share Purchase and Retention Policy			43
Forfeiture on Expiration of Award; Termination of Employment			43
Forfeiture for Misconduct			43
Adjustment of Class A Common Stock			43
Amendment or Termination of Plan			43
Plan Benefits			43
Required Vote			44

Related Person Transactions			45
Independent Registered Public Accountants			45
Report of our Audit Committee			46
Audit Fees			48
Annual Report			49
Other Matters			49
Appendix — Erie Indemnity Company Equity Compensation Plan as Amended and Restated			A-1

ERIE INDEMNITY COMPANY

INFORMATION STATEMENT

 

Introduction

Unless the context indicates otherwise, all references in this information statement to “we,” “us,” “our” or the “Company” mean Erie Indemnity Company. Erie Insurance Exchange, or the “Exchange,” has four property and casualty insurance subsidiaries: Erie Insurance Company, Erie Insurance Company of New York, Erie Insurance Property & Casualty Company and Flagship City Insurance Company. We sometimes refer to the Exchange and its property and casualty insurance subsidiaries as the “Property and Casualty Group.” The Exchange also owns 100 percent of the common stock of Erie Family Life Insurance Company, or “EFL,” a life insurance company.

This information statement, which is first being mailed to the holders of our Class A common stock and our Class B common stock on or about March 25, 2022, is furnished to such holders to provide information regarding us and our 2022 annual meeting of shareholders. This information statement is also being furnished in connection with the solicitation of proxies by our board of directors from holders of Class B common stock to be voted at our 2022 annual meeting of shareholders and at any adjournment, postponement or continuation thereof. Our annual meeting will be held via webcast at 9:30 a.m., Eastern Daylight Time (EDT), on Tuesday, April 26, 2022 at www.virtualshareholdermeeting.com/ERIE2022. Holders of Class B common stock will also receive a form of proxy.

Voting at our Annual Meeting

We are not asking holders of our Class A common stock for a proxy and you are requested not to send us a proxy. Only holders of Class B common stock of record at the close of business on February 25, 2022, are entitled to vote at our annual meeting. Each share of Class B common stock is entitled to one vote on each matter to be considered at our annual meeting. Except as otherwise provided in Sections 1756(b)(1) and (2) of the Pennsylvania Business Corporation Law of 1988, as amended, or “BCL,” in the case of adjourned meetings, a majority of the outstanding shares of Class B common stock will constitute a quorum at our 2022 annual meeting.

As of the close of business on February 25, 2022, we had 46,189,068 shares of Class A common stock outstanding, which are not entitled to vote on any matters to be acted upon at our 2022 annual meeting, and 2,542 shares of Class B common stock outstanding, which have the exclusive right to vote on all matters to be acted upon at our 2022 annual meeting.

There are three H.O. Hirt Trusts. Thomas B. Hagen, Jonathan Hirt Hagen and Elizabeth Hirt Vorsheck, or “Mrs. Vorsheck,” all of whom are directors of the Company, are beneficiaries of the trusts. The H.O. Hirt Trusts collectively own 2,340 shares of Class B common stock, which, because such shares represent 92.05 percent of the outstanding shares of Class B common stock entitled to vote at our 2022 annual meeting, is sufficient to determine the outcome of any matter submitted to a vote of the holders of our Class B common stock, assuming all of the shares held by the H.O. Hirt Trusts are voted in the same manner. As of the date of this information statement, the individual trustees of the H.O. Hirt Trusts are Mrs. Vorsheck and Jonathan Hirt Hagen, and the corporate trustee is Sentinel Trust Company, L.B.A., or “Sentinel.” Mrs. Vorsheck and Jonathan Hirt Hagen are both candidates for re-election to the board at our 2022 annual meeting.

Under the provisions of the H.O. Hirt Trusts, the shares of Class B common stock held by the H.O. Hirt Trusts are to be voted as directed by a majority of the trustees then in office. If at least a majority of the trustees then in office of each of the H.O. Hirt Trusts vote for the election of the 11 candidates for director named below and vote for the continuation of our Equity Compensation Plan as Amended and Restated, then such candidates will be elected as directors and the continuation of the Equity Compensation Plan will be approved, even if all shares of

 

 

2022 Information Statement    1

Class B common stock other than those held by the H.O. Hirt Trusts do not vote for such candidates or for the continuation of the Equity Compensation Plan. We have not been advised as of the date of this information statement how the trustees of the H.O. Hirt Trusts intend to vote at our annual meeting.

Description of our Business

Since 1925, we have served as the attorney-in-fact for the policyholders at the Exchange. The Exchange is a reciprocal insurance exchange organized under Article X of Pennsylvania’s Insurance Company Law of 1921 under which individuals, partnerships and corporations are authorized to exchange reciprocal or inter-insurance contracts with each other, or with individuals, partnerships, and corporations of other states and countries, providing indemnity among themselves from any loss which may be insured against under any provision of the insurance laws except life insurance. Each applicant for insurance from the Exchange signs a subscriber’s agreement, which appoints us as the attorney-in-fact for the subscriber (policyholder) to transact the business of the Exchange on their behalf. As attorney-in-fact, we are required to perform certain services relating to the sales, underwriting and issuance of policies on behalf of the Exchange. We also provide management services to the Exchange and its insurance subsidiaries.

The Property and Casualty Group writes personal and commercial lines of property and casualty insurance coverages exclusively through 2,250 independent agencies comprised of approximately 13,500 licensed agents. The underwriting results of the Property and Casualty Group are pooled. As a result of the Exchange’s 94.5 percent participation in the reinsurance pooling arrangement and its ownership of the other property and casualty insurance entities, the underwriting risk of the Property and Casualty Group’s business is borne by the Exchange.

We charge the Exchange a management fee calculated as a percentage, limited to 25 percent, of all premiums written or assumed by the Exchange. Management fees accounted for 96.5 percent, 97.0 percent and 95.6 percent, respectively, of our revenues for the three years ended December 31, 2019, 2020 and 2021. The management fee rate was 25 percent during 2019, 2020 and 2021, and beginning January 1, 2022, the rate has been set at 25 percent.

Beneficial Ownership of Common Stock

The following table sets forth, as of February 25, 2022, the amount of our outstanding Class B common stock owned by shareholders known by us to own beneficially more than 5 percent of our Class B common stock.

 

Name of Individual or Identity of Group		Shares of Class B Common Stock Beneficially Owned				Percent of Outstanding Class B Common Stock
H.O. Hirt Trusts(1), Erie, Pennsylvania			2,340				92.05%
Hagen Family Limited Partnership(2), Erie, Pennsylvania			153				6.02%

 

(1)

There are three H.O. Hirt Trusts. Thomas B. Hagen, Jonathan Hirt Hagen and Mrs. Vorsheck are three of the beneficiaries of the trusts. As of the date of this information statement, the trustees of the H.O. Hirt Trusts are Jonathan Hirt Hagen, Mrs. Vorsheck and Sentinel. The trustees collectively control voting and disposition of the shares of Class B common stock. A majority of the trustees then in office acting together is required to take any action with respect to the voting or disposition of shares of Class B common stock.

 

(2)

Thomas B. Hagen, the chairman of our board of directors, is the general partner of the Hagen Family Limited Partnership. As general partner, Mr. Hagen has sole voting power and investment power over the shares of Class B common stock held by the Hagen Family Limited Partnership. Mr. Hagen is the father of Jonathan Hirt Hagen. Jonathan Hirt Hagen is also a director of the Company.

 

 

2    Erie Indemnity Company

The following table sets forth, as of February 25, 2022, the amount of the outstanding shares of Class A common stock and Class B common stock beneficially owned by (i) each director and candidate for director nominated by our Nominating and Governance Committee, or “nominating committee,” (ii) each executive officer named in the Summary Compensation Table and (iii) all of our executive officers and directors as a group.

 

Name of Individual or Identity of Group		Shares of Class A Common Stock Beneficially Owned(1)(2)					Vested Share Credits (3)(4)					Percent of Outstanding Class A Common Stock(5)					Shares of Class B Common Stock Beneficially Owned(1)(2)					Percent of Outstanding Class B Common Stock(5)
Directors and Nominees for Director:
J. Ralph Borneman, Jr.				20,000					17,883
Eugene C. Connell(6)				19,896					2,063
Salvatore Correnti				320					1,522
LuAnn Datesh				410					2,802
Jonathan Hirt Hagen(7)				223,730					14,705										1
Thomas B. Hagen(8)				16,762,189					12,355					36.32	%				169					6.65	%
C. Scott Hartz				2,097					16,852
Brian A. Hudson, Sr.				295					2,063
George R. Lucore				1,725					2,802
Thomas W. Palmer				770					13,520
Elizabeth Hirt Vorsheck(9)				3,960,946					12,355					8.60	%
Executive Officers:
Lorianne Feltz				4,899					2,127
Gregory J. Gutting				4,244					5,014
Robert C. Ingram, III(10)				14,504					15,687
Timothy G. NeCastro				15,339					11,983
Douglas E. Smith				5,121					0
All Directors and Executive Officers as a Group (17 persons)(11)				21,172,213	(12)				N/A					45.84	%				170					6.69	%

 

(1)	Information furnished by the named persons.

 

(2)

Under the rules of the Securities and Exchange Commission, or “SEC,” a person is deemed to be the beneficial owner of securities if the person has, or shares, “voting power,” which includes the power to vote, or to direct the voting of, such securities, or “investment power,” which includes the power to dispose, or to direct the disposition, of such securities. Under SEC rules, more than one person may be deemed to be the beneficial owner of the same securities. Securities beneficially owned also include securities owned jointly, in whole or in part, or individually by the person’s spouse, minor children or other relatives who share the same home. The information set forth in the above table includes all shares of Class A common stock and Class B common stock over which the named individuals, individually or together, share voting power or investment power.

 

(3)	Vested share credits of Class A common stock for directors are granted under the Deferred Stock Plan for Outside Directors.

 

(4)	Vested share credits of Class A common stock for officers represent deferrals of short- and long-term incentive compensation under the Company’s Incentive Compensation Deferral Plan.

 

(5)	Less than one percent unless otherwise indicated.

 

(6)	Mr. Connell owns 17,433 shares of Class A common stock directly and 2,063 vested share credits under the Deferred Stock Plan for Outside Directors. Mr. Connell disclaims beneficial ownership of 2,463 shares of Class A common stock owned by his two children who live in his household.

 

(7)

Mr. Jonathan Hagen owns 223,130 shares of Class A common stock directly and one share of Class B common stock directly. Mr. Hagen owns 14,705 vested share credits under the Deferred Stock Plan for Outside Directors. Mr. Jonathan Hagen disclaims beneficial ownership of 600 shares of Class A common stock owned by his children who live in his household.

 

(8)

Mr. Thomas Hagen owns 5,100 shares of Class A common stock directly. Mr. Hagen owns 16,757,089 shares of Class A common stock indirectly of which he disclaims beneficial ownership except to the extent of personal pecuniary interest. Mr. Hagen owns 12,355 vested share credits under the Deferred Stock Plan for Outside Directors. Mr. Hagen owns four shares of Class B common stock directly. Mr. Hagen owns 165 shares of Class B common stock indirectly of which he disclaims beneficial ownership except to the extent of pecuniary interest.

 

(9)	Mrs. Vorsheck owns 69,716 shares of Class A common stock directly and 3,891,230 shares of Class A common stock indirectly through several trusts. Mrs. Vorsheck owns 12,355 vested share credits under the Deferred Stock Plan for Outside Directors.

 

 

2022 Information Statement    3

(10)	Holdings for Mr. Ingram are as of his retirement date of 12/31/2021.

 

(11)	Includes Executive Vice President Brian W. Bolash.

 

(12)	Includes actual ownership of Class A common stock, vested share credits under the Deferred Stock Plan for Outside Directors, and vested share credits under the Company’s Incentive Compensation Deferral Plan for executives and senior officers of the Company.

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of 1934, as amended, or the “Exchange Act,” requires that the officers and directors of a corporation, such as us, that has a class of equity securities registered under Section 12 of the Exchange Act, as well as persons who own more than 10 percent of a class of equity securities of such a corporation, file reports of their ownership of such securities, as well as statements of changes in such ownership, with the corporation and the SEC. Based upon written representations we received from our officers and directors and shareholders owning more than 10 percent of any class of our stock, and our review of the statements of changes of ownership filed with us by our officers and directors and shareholders owning more than 10 percent of any class of our stock during 2021, we believe that all such filings required during 2021 were made on a timely basis except as follows: Thomas B. Hagen, a director, inadvertently filed untimely a Form 4 Statement of Changes in Beneficial Ownership on September 30, 2021 to report a single acquisition of 400 shares of our Class A common stock on September 22, 2021.

 

 

4    Erie Indemnity Company

Our Board of Directors

Introduction

Our board of directors is currently comprised of 11 members, all of whom were elected at our 2021 annual meeting to serve for a term of one year. Vacancies on our board of directors may be filled only by persons elected by a majority of the remaining directors, or by our voting shareholders, in accordance with our bylaws. On February 17, 2022, our board of directors accepted our nominating committee’s recommendation to set the number of directors at 11, effective at the 2022 annual meeting.

All directors hold office until their respective successors are elected and qualified, or until their earlier death, resignation or removal. There are no family relationships between any of our directors or executive officers, except for the following:

 

•

Thomas B. Hagen, chairman of our board of directors and chairman of our Executive Committee, or “executive committee,” and Jonathan Hirt Hagen, vice chairman of the board of directors and chairman of our nominating committee, are father and son, respectively; and

 

•

Mrs. Vorsheck, a director and chair of our Charitable Giving Committee, or “charitable giving committee,” is a niece-in-law of Thomas B. Hagen and a first cousin of Jonathan Hirt Hagen.

During 2021, each director attended more than 75 percent of the number of meetings of our board of directors and the standing committees of our board of directors of which such director was a member.

Board Diversity

Pursuant to the rules of the Nasdaq Stock Market (or “Nasdaq”), listed companies are required to have, or explain why they do not have, two diverse directors on their board of directors, including at least one diverse director who self-identifies as female and one diverse director who self-identifies as an underrepresented minority or LGBTQ+ (subject to the exceptions). Our current board satisfies the Nasdaq diversity requirement.

 

 

2022 Information Statement    5

The table below provides certain information regarding the composition of our board. All 11 directors are nominees for election at the 2022 annual meeting. Each of the categories included in the table has the meaning set forth in Nasdaq Rule 5605(f).

Board Diversity Matrix

(As of December 31, 2021)

 

Total Number of Directors

11

Female

Male

Non-Binary

Did Not Disclose Gender

Part I: Gender Identity

Directors

2

9

–

–

Part II: Demographic Background

African American or Black

–

1

–

–

Alaskan Native or Native American

–

–

–

–

Asian

–

–

–

–

Hispanic or Latinx

–

–

–

–

Native Hawaiian or Pacific Islander

–

–

–

–

White

1

8

–

–

Two or More Races or Ethnicities

–

–

–

–

LGBTQ+

–

–

–

–

Did Not Disclose Demographic Background

1

–

–

–

Directors who are Military Veterans: 1

Board Leadership and Executive Sessions

The chairman of our board of directors is elected annually by the remaining directors on our board. In addition to presiding over all meetings of shareholders and of our board of directors, the chairman’s duties include setting priorities, establishing agendas for meetings of the board, providing board leadership, and communicating with the chief executive officer, or “CEO,” on matters of strategic direction. The chairman also serves as an ex officio member of all other board committees of which he is not a designated member.

Our board of directors may, but is not required to, annually elect one of its members to serve as vice chairman of the board and may remove or replace such person at any time and for any reason. The vice chairman of the board performs the duties (including ex officio membership on committees) of the chairman of the board when the chairman is absent or unable to act or during such time as no individual is serving as chairman of the board. The vice chairman of the board also performs such other duties as from time to time may be assigned by the board of directors.

Since our incorporation in 1925, we have generally separated the positions of chairman of the board and CEO of the Company. Although our board of directors has no specific policy regarding separation of these offices and our bylaws permit the chairman to serve as CEO, our board has determined that separating these positions is currently in the best interests of the Company and our shareholders. Given the length of time and different capacities in which our current chairman has served the Company, including as a prior president and CEO, and his status as an independent director under Nasdaq rules, our board believes that separating these positions is an important component of our management succession plan, and allows our chairman to lead the board in its independent oversight of management and our CEO to focus on the day-to-day issues affecting our business.

 

 

6    Erie Indemnity Company

A majority of the directors on our board meet the definition of an “independent director” under Nasdaq rules. Our independent directors meet in executive session without management directors or management present. These sessions generally take place prior to or following regularly scheduled board meetings. The directors met in such sessions five times during 2021.

Board Oversight of Risk

 

 

Risk Committee		Our Risk Committee, or “risk committee,” is responsible for assisting the board in the development and oversight of the Company’s overall risk appetite and advising on the effectiveness of the Company’s ERM framework.   The risk committee periodically communicates with all board committees as applicable, to confirm that such committees are appropriately overseeing the risk within their respective areas of oversight. This committee is also charged with reporting to the Audit Committee, or “audit committee,” any items that may have a material financial statement impact or require financial statement and/or regulatory disclosure. When deemed necessary, the risk committee will report to the audit committee, other significant risks, processes, procedures and controls in place to mitigate material risks and the overall effectiveness of the risk management process.
Audit Committee		Our audit committee focuses on risks related to accounting, internal controls, and financial and tax reporting.   The audit committee also assesses economic and business risks and monitors compliance with ethical standards.
Compensation   Committee		Our Executive Compensation and Development Committee, or “compensation committee,” identifies and oversees risks associated with our executive compensation policies and practices.   With the assistance of a compensation consultant, the Company periodically conducts a comprehensive compensation risk assessment, including a review of all executive and non-executive incentive plans, and evaluates the risks associated with each plan and the effectiveness of certain risk-mitigating factors. The results of these compensation risk assessments are shared with the compensation committee. See Compensation Discussion and Analysis.
Nominating   Committee		Our nominating committee is responsible for identifying and overseeing risks associated with director independence, related person transactions and the implementation of corporate governance policies.   The nominating committee also has responsibility for monitoring corporate governance issues that may arise from time to time and developing appropriate recommendations to address such issues with the board.
Investment   Committee		Our Investment Committee, or “investment committee,” identifies and assesses the business and economic risks relating to the Company’s investments and the investment portfolios of the companies we manage.   These risks include, but are not limited to, market risk, liquidity risk, concentration risk, credit risk, interest rate risk and inflation risk.

 

 

2022 Information Statement    7

Committees of our Board

Our board of directors met six times in 2021. The standing committees of our board of directors are our executive committee, audit committee, compensation committee, nominating committee, charitable giving committee, investment committee, Strategy Committee, or “strategy committee,” and risk committee.

Our executive committee met one time in 2021. This committee has the authority, subject to certain limitations, to exercise the power of our board of directors between regular meetings.

Our audit committee met six times in 2021. Consistent with Section 1405(c)(4) of the Pennsylvania Insurance Holding Companies Act, or the “Holding Companies Act,” and the Sarbanes-Oxley Act of 2002, or “Sarbanes-Oxley,” our audit committee has responsibility for the selection of independent registered public accountants, reviewing the scope and results of their audit and reviewing our financial condition and the adequacy of our accounting, financial, internal and operating controls. Our audit committee operates pursuant to a written charter, a copy of which may be viewed on our website at: http://www.erieinsurance.com.

Our compensation committee met five times in 2021. Consistent with Section 1405(c)(4.1) of the Holding Companies Act and our bylaws, our compensation committee has responsibility for recommending to our board of directors, at least annually, the competitiveness and appropriateness of the salaries, short- and long-term incentive plan awards, terms of employment, non-qualified retirement plans, severance benefits and perquisites of our CEO, executive vice presidents and such other named executives as required by rules of the SEC or Nasdaq listing standards, and such other responsibilities as our board of directors may designate. See Executive Compensation — Compensation Committee Interlocks and Insider Participation. Our compensation committee operates pursuant to a written charter, a copy of which may be viewed on our website at: http://www.erieinsurance.com.

Our nominating committee met four times in 2021. Consistent with Section 1405(c)(4.1) of the Holding Companies Act and our bylaws, our nominating committee has responsibility for identification of individuals believed to be qualified to become members of our board of directors and to recommend to our board of directors nominees to stand for election as directors; identification of directors qualified to fill vacancies on any committee of our board; and evaluation of the procedures and process by which each committee of our board of directors undertakes to self-evaluate such committee’s performance. Our nominating committee operates pursuant to a written charter, a copy of which may be viewed on our website at: http://www.erieinsurance.com.

Board Committee Composition

Members and chairs of the standing committees of our board of directors are identified in the table below.

 

Name

Audit

Charitable Giving

Executive

Compensation

Investment

Nominating

Strategy

Risk

J. Ralph Borneman, Jr.

⬛

Chair

Eugene C. Connell

⬛

⬛

⬛

⬛

Chair

Salvatore Correnti

⬛

Chair

⬛

LuAnn Datesh

⬛

⬛

Jonathan Hirt Hagen(1)

⬛

⬛

⬛

Chair

⬛

Thomas B. Hagen(2)

Chair

C. Scott Hartz

⬛

⬛

Brian A. Hudson, Sr.

Chair

⬛

⬛

George R. Lucore

⬛

⬛

⬛

⬛

Thomas W. Palmer

⬛

Chair

⬛

Elizabeth Hirt Vorsheck

Chair

⬛

⬛

⬛

⬛

 

(1)	As vice chairman of our board of directors, Mr. Jonathan Hagen serves as an ex officio member of the risk committee.

 

(2)	As chairman of the board of directors, Mr. Hagen serves as an ex officio, non-voting member of our audit committee and a voting member of all other committees, except for the risk committee. Mr. Hagen has deferred his ex officio membership on the risk committee to the vice chairman of the board.

 

 

8    Erie Indemnity Company

Director Education

We encourage our directors to further their knowledge and advance their skills as directors of a public company. To that end, we offer a director education program which provides each director with access to various resources to assist him or her with enhancing those skills necessary to be an effective director. See Director Compensation — Director Education Program.

Director — Shareholder Communications

Our shareholders may communicate with our board of directors through our corporate secretary. Shareholders who wish to express any concerns to any of our directors may do so by sending a description of those concerns in writing addressed to a particular director, or in the alternative, to “Non-management Directors” as a group, care of our corporate secretary at our headquarters, 100 Erie Insurance Place, Erie, Pennsylvania 16530. All such communications that are received by our corporate secretary will be promptly forwarded to the addressee or addressees set forth in the communication.

Recognizing that director attendance at our annual meeting provides our shareholders with an opportunity to communicate with directors about issues affecting us, we actively encourage our directors to attend our annual meeting. All of our current directors attended our 2021 virtual annual meeting.

 

 

2022 Information Statement    9

Proposal 1

Election of Directors

Introduction

The election of directors by the holders of our Class B common stock is governed by provisions of the Holding Companies Act, in addition to provisions of the BCL and our bylaws. The following discussion summarizes these statutory and bylaw provisions and describes the process undertaken in connection with the nomination of candidates for election as directors by the holders of Class B common stock at our annual meeting.

Background of our Nominating Committee

Section 1405(c)(4.1) of the Holding Companies Act provides that the board of directors of a domestic insurer must establish one or more committees comprised solely of directors who are not officers or employees of the insurer or of any entity controlling, controlled by or under common control with the insurer. Such committee or committees must have responsibility for, among other things, recommending candidates to be nominated by the board of directors, in addition to any other nominations by voting shareholders, for election as directors by the voting shareholders. Section 1405(c)(5) of the Holding Companies Act provides that the above provisions shall not apply to a domestic insurer if the person controlling such insurer is an insurer, an attorney-in-fact for a reciprocal exchange, a mutual insurance holding company or a publicly held corporation having a board of directors and committees thereof which already meet the requirements of Section 1405(c)(4.1). For purposes of the Holding Companies Act, we are deemed to control the Exchange and its subsidiaries, and our board of directors and its committees are in compliance with Section 1405(c)(4.1).

Section 3.09 of our bylaws is consistent with this statutory provision and provides that (i) our board of directors must appoint annually a nominating committee that consists of not less than three directors, each of whom is not an officer or employee of us or of any entity controlling, controlled by or under common control with us, and (ii) our nominating committee must, prior to each annual meeting of shareholders, determine and nominate candidates for the office of director to be elected by the holders of Class B common stock to serve terms as established by our bylaws and until their successors are elected and qualified.

In accordance with this bylaw provision, on April 20, 2021 our board of directors designated a nominating committee consisting of Jonathan Hirt Hagen, chair, Thomas W. Palmer and Mrs. Vorsheck. As chairman of our board, Thomas B. Hagen also serves ex officio as a voting member of the nominating committee. Consistent with the Holding Companies Act, none of these persons is an officer or employee of us or of any entity controlling, controlled by or under common control with us. Each member of our nominating committee is an independent director as defined in the rules applicable to companies listed on the Nasdaq.

Nominating Procedures

Under Section 2.07(a) of our bylaws, nominations of persons for election to our board of directors may be made at any meeting at which directors are to be elected (i) by or at the direction of our board of directors upon the recommendation of our nominating committee or (ii) by any holder of our Class B common stock.

With respect to nominations by or at the direction of our nominating committee, except as is required by rules promulgated by Nasdaq, the SEC or the Holding Companies Act, there are no specific, minimum qualifications that must be met by a candidate for our board of directors, and our nominating committee may take into account such factors as it deems appropriate. Our nominating committee generally bases its nominations on our general needs as well as the specific attributes of candidates that would add to the overall effectiveness of our board of directors. Specifically, among the significant factors that our nominating committee may take into consideration are judgment, skill, experience with businesses and other organizations of comparable size, the interplay of the candidate’s experience with the experience of other directors, and the extent to which the candidate would be a desirable addition to our board of directors and any committee of our board of directors.

Although we do not have a formal policy or guidelines regarding diversity of membership of our board of directors, our Company recognizes the value of having a board that encompasses a broad range of skills, expertise,

 

 

10    Erie Indemnity Company

contacts, industry knowledge and diversity of opinion. As required by Nasdaq, the Company has collected statistical information regarding certain Nasdaq defined diversity categories with regard to our board of directors (See Our Board of Directors — Board Diversity Matrix), however, our board has not attempted to define “diversity” or otherwise require that the composition of our board include individuals from any particular background or who possess specific attributes.

Our nominating committee utilizes the following process to identify and evaluate the individuals that it selects, or recommends that our board of directors select, as director nominees:

 

•

Reviews the qualifications of any candidates who have been recommended by a holder of Class A common stock or Class B common stock in accordance with our bylaws.

 

•

Considers recommendations made by individual members of our board of directors or, if our nominating committee so determines, a search firm. Our nominating committee may consider candidates who have been identified by management but is not required to do so.

 

•

Evaluates the background, experiences, qualifications and suitability of each candidate, including the current members of our board of directors, in light of the current size and composition of our board of directors and the above discussed significant factors.

After such review and consideration, our nominating committee recommends a slate of director nominees to the board of directors.

Actions Taken for Nominations

Our nominating committee met on February 14, 2022 for the purposes of evaluating the performance and qualifications of the current and proposed members of our board of directors and nominating candidates for election as directors by the holders of Class B common stock at our annual meeting.

Our bylaws provide that our board of directors shall consist of not less than seven, nor more than 16, directors, with the exact number to be fixed from time to time by resolution of our board of directors. At its meeting on February 14, 2022, our nominating committee recommended that the size of our board of directors be set at 11 persons and that all 11 incumbent directors as of such date be nominated to stand for re-election as directors by the holders of Class B common stock at our annual meeting.

On February 17, 2022, our board of directors accepted the report and recommendation of our nominating committee, set the number of directors to be elected at our annual meeting at 11 and approved the nomination of J. Ralph Borneman, Jr., Eugene C. Connell, Salvatore Correnti, LuAnn Datesh, Jonathan Hirt Hagen, Thomas B. Hagen, C. Scott Hartz, Brian A. Hudson, Sr., George R. Lucore, Thomas W. Palmer and Elizabeth Hirt Vorsheck for election as directors by the holders of Class B common stock at our annual meeting. If elected, such persons would serve until our 2023 annual meeting of shareholders and until their successors are elected and qualified.

Candidates for Election

Unless otherwise instructed, the proxy holders will vote the proxies received by them for the election of the nominees named below. All of the nominees are currently directors of the Company. If a nominee becomes unavailable for any reason, it is intended that the proxies will be voted for a substitute nominee selected by our nominating committee. Our board of directors has no reason to believe the nominees named will be unable to serve if elected.

 

 

2022 Information Statement    11

The biography of each director nominee below contains information regarding that person’s principal occupation, positions held with the Company, age (as of April 1, 2022), service as a director, business experience, other public company director positions currently held or held at any time during the past five years, involvement in certain legal or administrative proceedings, if applicable, and the experiences, qualifications, attributes or skills that caused our nominating committee to conclude that the person should serve as a member of our board of directors:

 

J. Ralph Borneman, Jr., CIC, CPIA
Age: 83 Director since 1992		President, Chief Executive Officer and Chairman of the Board, Body-Borneman Insurance & Financial Services LLC, insurance agency, Boyertown, PA, 2005 to present; President, Chief Executive Officer and Chairman of the Board, Body-Borneman Associates, Inc., insurance agency; President, Body-Borneman, Ltd. and Body-Borneman, Inc., 1967-2005, insurance agencies he co-founded.   Mr. Borneman has extensive knowledge of, and more than 55 years of experience with, the business of insurance, agency matters, sales and marketing, and insurance distribution strategies. He is a past President of the Professional Insurance Agents Association of Pennsylvania, Maryland and Delaware and has prior experience as a director of other public companies.

 

Eugene C. Connell, FCAS, CFA, CPCU
Age: 67 Director since 2017		Independent Investor and Advisor, Erie, PA, since 2011; Chief Executive Officer, RendrFX, Inc., video software, 2017-2018; Deputy Secretary, Commonwealth of Pennsylvania Department of Labor and Industry, Harrisburg, PA, 2013-2014; Executive Vice President, Property/Casualty Products, Risk Lighthouse, LLC, an economic risk intelligence firm, Atlanta, GA, 2012; Senior Vice President and Chief Actuary (1988-2011) and Chief Risk Officer (2005-2011), Erie Insurance Group, Erie, PA.   Mr. Connell has more than 40 years of experience in the insurance industry, including a 23-year career with the Company during which he held several senior leadership positions, including Chief Actuary and Chief Risk Officer. He has extensive experience in actuarial science; automobile, property and workers compensation insurance; development of property and casualty insurance products; financial planning and modeling; investments; insurance regulation; and risk management. Mr. Connell also satisfies the SEC requirements of an audit committee financial expert and has been so designated by the Company’s board of directors.

 

Salvatore Correnti, CFA, CCM, FLMI
Age: 61 Director since 2018		Director, Builders Insurance (A Mutual Captive Company), Atlanta, GA, since 2013; Director, Oil Casualty Investment Corporation Ltd, Bermuda, from March 2017 to March 2022; Adjunct Professor, Towson University, Towson, MD, from 2015 to 2021; Non-Executive Vice-Chair of the Board of Directors of Conning Holdings Corporation, Hartford, CT; Conning Holdings Ltd, UK, 2012-2017; Chief Executive Officer of Conning Holdings/Conning Asset Management, 2003-2012.   Mr. Correnti has extensive experience with investments and insurance having held executive positions at USF&G, Swiss Re, and Conning. In his current role as a director of Builders Insurance, he serves as chair of the Investment Committee and serves on the Audit and Governance Committees. Mr. Correnti also has executive management experience serving six years as head of asset-liability management, five years as a chief operating officer, and then for nine years as chief executive officer of a global asset management company with more than $120 billion in assets under management.

 

 

12    Erie Indemnity Company

LuAnn Datesh, ESQ.
Age: 67 Director since 2016		Vice President, General Counsel and Corporate Secretary, Olympus Energy LLC, an oil and natural gas company, Canonsburg, PA since May 2019; a director and shareholder, Sherrard, German & Kelly, P.C., September 2016-May 2019; Vice President, CNX Gas Corporation, an oil and gas company, Canonsburg, PA, February 2016-September 2016; Vice President, CONSOL Energy, Inc., an energy company, 2011-2016; Assistant General Counsel, CONSOL Energy, Inc., 2009-2011.   Ms. Datesh has significant experience with the legal, governance and risk management aspects of another publicly-held, regulated company where she was an officer of multiple subsidiaries. She also has executive management experience overseeing a wide variety of corporate transactions and an extensive background in corporate law, finance, business counseling and managing large real estate holdings.

 

Jonathan Hirt Hagen, J.D.
Age: 59 Director since 2005		Vice Chairman of the Board of our Company since 2013 and Chairman of the Board of our affiliated insurance companies since 2018; Co-Trustee of the H.O. Hirt Trusts, Erie, PA, since 2015; Vice Chairman, Custom Group Industries, Erie, PA, machining and fabrication manufacturing companies, from 1999-2017; private investor, since 1990.   Mr. Hagen, as the grandson of our late founder and longtime leader of the Company, H.O. Hirt, and son of Chairman Thomas B. Hagen and the late longtime director Susan Hirt Hagen, has a thorough knowledge and understanding of our operations, history and culture. He is one of three trustees of the H.O. Hirt Trusts which control a majority of our voting stock. His extensive business and legal educational background, prior insurance experience and service on our board also give him broad knowledge of the insurance industry, business law and corporate governance issues. In addition, he has experience with his family’s business interests, as a private investor and as a director of another public company.

 

Thomas B. Hagen
Age: 86 Director since 2007 Prior Board Service 1979-1998		Chairman of the Board of our Company (since 2007) and of our affiliated insurance companies (2007-2018), an employee (1953-1995) and former agent of the Company, including service as President (1982-1990) and Chairman and CEO (1990-1993); Owner and Manager, Historic Erie Restorations LLC, since 2018; Chairman, Custom Group Industries, Erie, PA, complex fabrications, heating platens and precision machining manufacturing companies, since 1997; General Partner, Hagen Family Limited Partnership, since 1989.   Mr. Hagen is the son-in-law and close associate of our late co-founder and longtime leader of the Company, H.O. Hirt. Mr. Hagen has extensive ERIE and insurance industry knowledge and experience through his long association with ERIE starting in 1953 and subsequently serving in a variety of leadership roles, including as our CEO. He has held leadership positions in various insurance industry and business trade groups, including past Chairman of the Pennsylvania Chamber of Business & Industry and past Chairman of the Insurance Federation of Pennsylvania. He also has broad executive management and leadership experience having served on various civic and business boards of directors, including the boards of three other public companies, one of them NYSE listed. He has served as Pennsylvania’s Secretary of Commerce and Secretary of Community & Economic Development, and is a retired Captain in the U.S. Navy Reserve. He controls the second largest voting and the largest non-voting shareholding interests in our Company.

 

 

2022 Information Statement    13

C. Scott Hartz, CPA
Age: 76 Director since 2003		Retired senior executive and private investor, principally in start-up technology related ventures; Director of EMMA Health Technologies, a manufacturer of medical devices, since January 2019; Managing Director, InRange Investor Group, LLC, since November 2019; Director, Averatek, an SRI International “spin out” nano technology-based material science company; Chief Executive Officer, The Hartz Group, strategy and technology consulting, Bala Cynwyd, PA since 2003.   Prior to joining the Company’s board, Mr. Hartz spent 32 years with PwC Consulting, the last seven years as Global Chief Executive Officer for a world-wide organization with a 30,000 person professional staff. Mr. Hartz has a strong background in information technology, cyber-security, consulting and investments. He has prior experience in executive management, as a director of another public company and as an Advisory Board member of a national non-profit organization.

 

Brian A. Hudson, Sr.,  CPA, CGMA, CTP
Age: 67 Director since 2017		Director, MidPenn Bank, since January 2021; Retired Executive Director and Chief Executive Officer, Pennsylvania Housing Finance Agency, Harrisburg, PA, 2003-February 2020; Director, Federal Home Loan Bank of Pittsburgh, 2007-2017.   Mr. Hudson has 15 years of experience as chief financial officer and 14 years as chief executive officer of a multi-billion dollar corporation and instrumentality of the Commonwealth of Pennsylvania. In addition to being a Certified Public Accountant (CPA) and holding a Chartered Global Management Accountant (CGMA) designation, Mr. Hudson is a Certified Treasury Professional (CTP). Until 2017, he was a member of the Board of Directors, and Chair of the Audit Committee, of the Federal Home Loan Bank of Pittsburgh and has more than 35 years of experience in managing a large investment portfolio and the placement of bond issues. Mr. Hudson satisfies the SEC requirements of an audit committee financial expert and has been so designated by the Company’s board of directors. He also has experience as a director of another public company.

 

George R. Lucore, AAM, AIM, AIT, CIC, CPCU, LUTCF
Age: 71 Director since 2016		Managing Director, PAFLA Properties, LLC, property management, since 2009; Executive Vice President — Field Operations of the Company, 2008-2010.   Mr. Lucore had a 36-year association with the Company during which he held several senior and executive leadership positions in addition to management roles in several of our field offices. He has extensive knowledge of the insurance industry, including agency, marketing and distribution systems; was previously involved with the geographic expansion of the Erie Insurance Group into a number of states; and has taught courses in risk management and life and health insurance at the college level.

 

Thomas W. Palmer, ESQ.
Age: 74 Director since 2006		Of counsel to the law firm of Marshall & Melhorn, LLC, Toledo, OH, since 2019; Member (including service as a managing member) of Marshall & Melhorn, LLC, 1972-2019.   Mr. Palmer has significant experience with business and corporate law, business dispute resolution, corporate governance, financial reporting and family-owned enterprises. He also has prior experience as a director of another public company.

 

 

14    Erie Indemnity Company

Elizabeth Hirt Vorsheck
Age: 66 Director since 2007		Co-Trustee of the H.O. Hirt Trusts, Erie, PA, since 2007; more than 40 years’ experience as managing principal of family business interests; private investor; and 21 years’ experience as principal of a family charitable foundation and other charitable initiatives.   Mrs. Vorsheck is a granddaughter of H.O. Hirt, the late founder and longtime leader of the Company, a daughter of F.W. Hirt, the late founder of Erie Family Life Insurance Company, who served the Erie Indemnity Company in many distinguished positions, culminating his lifelong career as Chairman of the Board having built and expanded the Erie Insurance Group of companies, and niece of Thomas B. Hagen and the late Susan Hirt Hagen. Mrs. Vorsheck is one of three trustees of the H.O. Hirt Trusts which control a majority of our voting stock. In addition, she individually directly controls a significant shareholding interest in the Company.

Independent Directors

Our board of directors has determined that each of the following directors and director nominees satisfies the definition of an “independent director” as set forth in the rules promulgated by Nasdaq:

 

Eugene C. Connell		Thomas B. Hagen		Thomas W. Palmer
Salvatore Correnti		C. Scott Hartz		Elizabeth Hirt Vorsheck
LuAnn Datesh		Brian A. Hudson, Sr.
Jonathan Hirt Hagen		George R. Lucore

Director J. Ralph Borneman, Jr. does not meet the Nasdaq definition of an independent director since he is an owner and executive officer of an insurance agency that receives commission payments from the Company. See Related Person Transactions.

Required Vote

Cumulative voting rights do not exist with respect to the election of directors. A director nominee shall only be elected if the total votes cast by the voting shareholders for the election of such director nominee represents a majority of the Class B shares outstanding and entitled to vote at our annual meeting. An abstention will count as a vote against the proposal.

 

OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE CANDIDATES FOR DIRECTOR NOMINATED BY OUR NOMINATING COMMITTEE.

 

 

2022 Information Statement    15

Compensation Discussion and Analysis

The Compensation Discussion and Analysis provides a detailed description of our executive compensation philosophy and programs, and the decisions the compensation committee of the board of directors has made pursuant to those programs. SEC regulations require disclosure of information about the compensation of our named executive officers, or “NEOs.” This includes our CEO, our CFO, and the next three most highly compensated officers of the Company. The following discussion focuses on the compensation of our NEOs for 2021, identified in the table below.

2021 Named Executive Officers

 

Principal executive officer		Timothy G. NeCastro
		President and Chief Executive Officer
Principal financial officer		Gregory J. Gutting
		Executive Vice President and Chief Financial Officer
Next three most highly compensated officers		Lorianne Feltz
		Executive Vice President, Claims and Customer Service
		Robert C. Ingram, III
		Former Executive Vice President and Chief Information Officer(1)
		Douglas E. Smith
		Executive Vice President, Sales and Products

 

(1)	Effective December 31, 2021, Mr. Ingram retired from the Company.

The Summary Compensation Table and supplemental tables thereunder report compensation calculated for our NEOs in accordance with the rules and regulations of the SEC.

Executive Summary

Our executive compensation program is developed and monitored by our compensation committee. We provide a mix of fixed and variable compensation that is intended to motivate our executives to execute on short- and long-term objectives that build sustainable long-term value for our enterprise. Base salary is established after consideration of external competitiveness and the level of experience of each executive. Variable compensation is based on a “pay-for-performance” philosophy and tied to our corporate strategy. The outcome of current year performance is recognized by our Annual Incentive Plan, or “AIP,” and longer-term performance is measured over a three-year period and rewarded by our Long Term Incentive Plan, or “LTIP.”

Our AIP utilizes goals that are based on operational results, or “company performance goals,” and individual accomplishments, or “individual performance goals.” For our 2021 AIP, company performance goals included (1) the Property and Casualty Group’s growth in direct written premium, or “DWP,” (2) the Property and Casualty Group’s growth in policies in force, or “PIF,” and (3) statutory combined ratio.

Since statutory combined ratio is significantly impacted by policyholder driving behaviors which remained unpredictable going into 2021 due to the continuation of the COVID-19 pandemic, particularly in the first nine months of the year, we compared our annual performance of this metric to the total property and casualty insurance industry for the first nine months of 2021, as reported by AM Best, with the target being performance equal to the industry. For the last three months of the year, we compared our results to an absolute target based on the Company’s operating plan and projections for the fourth quarter of 2021 (see Annual Incentive Plan below for more information).

 

 

16    Erie Indemnity Company

For 2021, our results were as follows:

 

AIP Corporate Measures(1)		2021 Target				2021 Year End Result				Payout (as a % of Target)
Direct Written Premium			2.2	%			3.3	%			155.0	%
Policies in Force			3.1	%			3.2	%			110.0	%
Statutory Combined Ratio(2)
January 2021 — September 2021			99.6	%			98.7	%			130.0	%
October 2021 — December 2021			101.0	%			119.6	%			0.0	%
OVERALL CORPORATE PERFORMANCE											119.5	%

 

(1)	Corporate measures weightings: Direct Written Premium (35%), Policies in Force (15%), Statutory Combined Ratio (50%)

 

(2)	Performance for statutory combined ratio for the period January 2021 — September 2021 is based upon performance relative to the property and casualty insurance industry.

The performance goals for our LTIP are DWP growth, statutory combined ratio and return on invested assets, or “ROIA.” The LTIP is designed to reward participants based upon performance relative to an established peer group (see Long Term Incentive Plan below for the composition of the peer group). Performance below that of the peer group results in payouts below target; performance equal to that of the peer group results in payouts at target; and performance better than the peer group results in payouts in excess of target. To achieve a maximum payout, our three-year DWP growth must exceed the peer group results by 450 basis points; statutory combined ratio must be lower than the peer group results by 600 basis points; and our ROIA must exceed the peer group results by 262.5 basis points.

To date, we have information on 11 of the 12 measurement quarters for the 2019-2021 LTIP performance period and we expect performance relative to our peer group to be less than the 2018-2020 performance period, as illustrated below.

 

LTIP Measure		Performance Period				ERIE Result				Peer Group Result				Basis Points Difference				Under/Over      Performance
Direct Written Premium			2018-2020				4.6	%			3.6	%			102.0			over
			2019-2021	*			3.4	%			5.1	%			-172.0			under
Statutory Combined Ratio			2018-2020				100.5	%			98.6	%			190.6			under
			2019-2021	*			100.5	%			99.0	%			151.8			under
Return on Invested Assets			2018-2020				5.35	%			5.01	%			33.9			over
			2019-2021	*			7.34	%			6.62	%			72.3			over

* Results for the 2019-2021 performance period are projected.

Our DWP growth underperformed our peers. Our combined ratio is projected to be higher than the peer group for the 2019-2021 LTIP performance period. Our ROIA is expected to be better than the peer group. We expect the overall performance factor used to determine the payments to our NEOs under the LTIP to be less than the prior year.

Additional information regarding our financial results for the year ended December 31, 2021, is provided in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K filed with the SEC on February 24, 2022.

Say-on-Pay and Frequency of Say-on-Pay Advisory Vote Results

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or “Dodd-Frank Act,” gives our Class B voting shareholders the right to approve, on a non-binding advisory basis, the compensation paid to our NEOs as disclosed in our information statement. At our 2020 Annual Meeting of Shareholders, our voting shareholders unanimously approved the compensation of the Company’s NEOs. After considering the results of the vote, our compensation committee determined that no material changes to our compensation programs were necessary.

Companies subject to the “say-on-pay” rules are required to hold a shareholder vote at least once every six calendar years to determine the frequency of the say-on-pay vote — annually, biennially or triennially. In 2017, our Class B voting shareholders selected, on a non-binding advisory basis, “every three years” as the preferred

 

 

2022 Information Statement    17

frequency for having the opportunity to vote on the compensation of our NEOs. Our next advisory votes on the compensation of our NEOs and the preferred frequency of such vote will take place at our 2023 Annual Meeting.

Risk Management in Executive Compensation Plan Design

The compensation committee evaluates the risks associated with the annual and long-term incentive compensation programs for our executive and senior leaders. This evaluation, conducted annually, is intended to minimize the risk that such programs will promote behavior that could negatively impact the value of the Company or the Exchange. The compensation committee ensures that performance measures used in these programs align with our overall business strategy.

There was one material change to our AIP in 2021 with the addition of a third company performance goal, increase in PIF. The compensation committee determined the change did not create undue material risk to the Company. Other tools used to manage executive compensation risk and promote effective governance are identified in the table below.

Measures Used to Mitigate Compensation Risk

 

Recoupment of Bonuses		Our policy on recoupment of officer bonuses allows us to recover bonuses paid under our AIP and LTIP under certain circumstances. See Policy on Recoupment of Officer Bonuses.
Committee Discretion		Our compensation committee has the discretion to reduce awards to any individual participant in the incentive plans.
Peer Group Comparison		The compensation committee compares our property and casualty insurance results to a peer group of companies in our LTIP. The committee closely monitors our results and those of our peers during each three-year performance period to determine whether we are performing above or below the industry and the impact on plan performance.(1)
AIP Funding Qualifier		Company financial results are considered before making payments to individuals to ensure payouts are not made if overall performance is poor.
Multiple Performance  Measures		Both the annual and long-term incentive plans use multiple goals, thereby diversifying the risk associated with any single measure of performance.
Maximum Payout  Opportunity		We limit the amounts that may be earned under any award of performance-based compensation.
Policy for Minimum  Stock Ownership Levels		We believe that requiring executives to hold shares of our stock for an extended period of time discourages them from taking risks for short-term or immediate gain. See Policy for Minimum Stock Ownership Levels.
Plan Governance		All of our incentive plans have written plan documents. Depending on the plan, amendments require the approval of either the board, the compensation committee and/or our Human Resources Division.
Anti-Hedging Policy		This policy prohibits directors and officers of the Company who are subject to the Policy for Minimum Stock Ownership Levels, as well as their spouses and any individuals residing in the same household, from engaging in transactions that are designed to offset a decrease in the market value of company stock.

 

(1)

We use two peer groups in our executive compensation program. The LTIP peer group, against which our long-term performance is measured, represents a significant share of the industry’s property and casualty premium and our compensation committee believes that this group is representative of our competition. Our executive compensation benchmarking peer group is composed of companies we consider to be competitors for policyholders and employees, and similar to us in terms of lines of business, net premiums written and/or asset size.

 

 

18    Erie Indemnity Company

Executive Compensation Philosophy and Structure

The goal of our executive compensation program is to attract, motivate, retain and reward executives in a fiscally responsible manner that balances the interests of our shareholders with those of the policyholders of the Exchange. To achieve this objective, we design executive compensation programs that encourage our executives to strive for performance that exceeds the industry average. We provide a mix of fixed and variable compensation that is intended to motivate our executives to execute on short- and long-term objectives that build sustainable long-term value. We achieve these objectives by providing the elements of executive compensation identified in the table below.

Components of our Executive Compensation Program

 

Base Salary		Represents a fixed level of cash compensation for the executive’s competencies and the regular duties they perform in their role. Base salaries are linked to other compensation elements, including target award opportunities for short- and long-term incentive plans.
AIP		A performance-based annual incentive program that provides each executive an opportunity to earn a cash award based on the achievement of pre-determined goals or other performance objectives during a one-year period.
LTIP		A long-term incentive program that provides an opportunity for each executive to earn an award based on the achievement of performance objectives, as measured against a pre-defined peer group, that create long-term value for our shareholders and the policyholders of the Exchange.
Benefits		Benefits that include an unfunded, non-qualified supplemental retirement plan, or “SERP,” that enables eligible participants to earn benefits in excess of those that can be earned under our tax-qualified defined benefit pension plan, or “pension plan,” and an unfunded, non-qualified deferred compensation arrangement, or “deferred compensation plan,” that enables eligible participants to defer receipt of all or part of their base salary and/or AIP award to a later date. We offer an unfunded, non-qualified “incentive compensation deferral plan” that enables eligible participants to defer receipt of their AIP or LTIP award. We provide the following matching contributions in our 401(k) plan: 100 percent of the first three percent of pay contributed by the employee, and 50 percent of the next two percent of employee contributions.

Executive Compensation Principles

Our executive compensation program includes industry best practices.

 

What We Do
		✓		Pay for Performance. A significant percentage of total target direct compensation is pay at-risk and connected to performance.
		✓		Link Performance Measures and Strategic Objectives. Performance measures for incentive compensation are linked to operating priorities.
		✓		Consult with Independent Compensation Advisor. The committee retains an independent consultant to review our executive compensation programs and practices.
		✓		Target Pay at the 50th Percentile of Peers. We target total direct compensation at the 50th percentile of our peers.
		✓		Benchmark to Peers. We benchmark our executive compensation program and review the composition of the peer group annually.
		✓		Limit the Maximum Payout Opportunity. We establish maximum amounts that may be earned under any award of performance-based compensation.
		✓		Require Minimum Levels of Stock Ownership. We require executives to hold shares of our stock for an extended period of time because we believe it discourages them from taking risks for short-term or immediate gain.
		✓		Recoup Compensation Under Certain Circumstances. Awards made to executives are subject to recoupment in specified situations.

 

 

2022 Information Statement    19

What We Don’t Do
		✘		No Accelerated Vesting of Performance Shares. Our LTIP does not provide for accelerated vesting of performance shares in the event of a termination of employment, other than for retirement, death, or disability.
		✘		No Excessive Perquisites. Our executives receive minimal perquisites and do not receive tax gross-ups, except for guest travel, residential home security, and personal use of the company aircraft.
		✘		No Stock Options. We do not offer stock options or stock appreciation rights (SARs).
		✘		No Employment Agreements. We do not have employment agreements with any of our executive officers.

Relationship Between Pay and Performance

Our variable pay compensation is tied to (1) each executive’s individual performance and (2) the performance of the Company and the Exchange, thereby supporting our performance-based compensation philosophy. Because our executives have a greater ability to influence our performance and financial results through their decisions, the percentage of their total compensation comprised of variable pay increases with level of responsibility.

 

Variable compensation opportunities (long- and short-term incentive target awards) comprised approximately 76 percent of our CEO’s total target annual compensation in 2021, 49 percent of which was in the form of long-term awards tied to corporate performance. Variable compensation opportunities comprised approximately 60 percent of our other NEOs’ total target annual compensation in 2021, 36 percent of which was in the form of long-term awards. We believe that tying a meaningful portion of our NEOs’ target earnings opportunity to variable compensation, while providing competitive levels of base salary, strikes an appropriate balance between achievement of operational goals and the pay earned by our executives.

 

 

20    Erie Indemnity Company

Setting Executive Compensation

Our compensation committee determines the compensation philosophy and policies for our executive officers, including our CEO and executive vice presidents. The committee is responsible for establishing principles that guide the design of compensation programs for all executives. In doing so, it reviews the performance of each executive and establishes individual compensation levels. The committee considers the nature and extent of each executive’s skills, scope of responsibilities, performance and effectiveness in supporting our long-term goals. The committee engaged Aon, an independent consultant, to assist it with the development and setting of executive compensation for 2021. In preparing the 2021 benchmark and survey data, Aon utilized the following best practice methodologies:

 

Benchmark Positions		Competitive compensation levels for our executives were determined by matching each position to survey benchmark positions in the market.
Third-Party   Compensation Data		Compensation data was obtained from published insurance industry and general industry sources and from third party consulting firms, including Mercer Consulting, Willis Towers Watson and Aon. Our existing compensation levels were analyzed and compared at the 50th percentile on a size-adjusted basis for similar positions.
Peer Group		Compensation data was obtained for a peer group of property and casualty companies. We consider these insurance companies to be our competitors for policyholders, and in some cases employees, and similar to us in terms of lines of business, net premiums written and/or asset size.

Changes were made to the composition of the peer group used in our base salary analysis for 2021. To align with a change made to our LTIP peer group in 2019, State Auto Insurance Companies was removed, and Westfield Insurance was added.

2021 Executive Compensation Benchmarking Peer Group

 

In 2021, we paid Aon $30,722 for consulting services and $11,500 for compensation survey participation. We paid McLagan Partners, Inc., a division of Aon, $5,500 for compensation survey participation. Our compensation committee has reviewed these services and determined that they do not impair the independence of Aon.

Principal Components of Executive Compensation

The principal components of our executive compensation program are base salary and bonus opportunities under our AIP and LTIP. Each of these items is discussed below.

Base Salary

The committee set the 2021 base salaries of the NEOs, effective March 1, 2021. The adjustments were based on performance and/or market comparisons.

 

Name		2021 Annual Base Salary		2020 Annual Base Salary
Timothy G. NeCastro		$970,000		$950,000
Gregory J. Gutting		$560,000		$550,000
Lorianne Feltz		$440,000		$430,000
Robert C. Ingram, III		$552,500		$542,500
Douglas E. Smith		$440,000		$430,000

 

 

2022 Information Statement    21

Annual Incentive Plan

The 2021 AIP payouts for our NEOs were based on the attainment of company and individual performance goals established at the beginning of 2021. Our compensation committee believes that an appropriate balance of corporate and individual performance goals results in increased differentiation of rewards and improved line of sight among participants. Therefore, the weighting between corporate and individual performance goals is based on a NEO’s role within the organization. For each of our NEOs, company performance measures are weighted 80 percent and individual performance measures are weighted 20 percent.

Once the target percentages, expressed as a percent of base salary, were determined for the NEOs, our compensation committee, with support from our board of directors, established AIP performance measures intended to drive strong organizational performance. At the end of each year our board of directors and management review our historical results, operating goals and industry estimates to identify those areas where performance-based incentives would have the greatest impact on helping us achieve our strategic objectives in the following year. As the result of this process, a new company performance goal was added to our AIP in 2021 — increase in policies in force. This metric is a production measure and balances well with the existing company performance goals of increase in direct written premium and statutory combined ratio.

The compensation committee then established a minimum, or “threshold,” a target and a maximum level of achievement for each company performance measure. The maximum was intended to incent participants to achieve a maximum performance payout. If the target for a performance measure is achieved, then the performance measure will be deemed to be earned at 100 percent. If the maximum result for a performance metric is achieved, then the performance measure will be deemed to be earned at 200 percent. Results at or below threshold result in a zero payout and achievement at levels between threshold and target and between target and maximum are determined via linear interpolation.

For 2021, we set the performance outcomes for the statutory combined ratio measure differently than in previous years. Since statutory combined ratio is significantly impacted by policyholder driving behaviors which remained unpredictable going into 2021 due to the continuation of the COVID-19 pandemic, particularly in the first nine months of the year, we compared our performance of this goal to the total property and casualty insurance industry for the first nine months of 2021, with the target being performance equal to the industry. For the last three months of the year, we compared our results to an absolute target based on the company’s operating plan and projections for the fourth quarter of 2021. Actual results for the fourth quarter were negatively impacted by catastrophe and reinsurance activity.

The company performance goals for the NEOs are shown in the table below.

2021 AIP Company Performance Goals

 

Company Goal		Actual Result				Threshold				Target				Maximum
% increase in Direct Written Premium(1)			3.3	%			0.2	%			2.2	%			4.2	%
% increase in Policies in Force(2)			3.2	%			2.1	%			3.1	%			4.1	%
Statutory Combined Ratio(3)
January 2021 — September 2021(4)			98.7	%			101.6	%			99.6	%			96.6	%
October 2021 — December 2021			119.6	%			103.0	%			101.0	%			98.0	%

 

(1)	The year-over-year percentage increase in the Property and Casualty Group’s DWP.

 

(2)	The year-over-year percentage increase in the Property and Casualty Group’s PIF.

 

(3)	The statutory combined ratio of the Property and Casualty Group measures the underwriting profitability of our property and casualty insurance business without consideration of investment earnings or federal income taxes.

 

(4)

We compared our combined ratio to the total property and casualty insurance industry for the first nine months of 2021, as reported by AM Best. Target performance was defined as performance equal to the industry. Threshold was set at 200 basis points above the industry, and maximum was set at 300 basis points below the industry.

The committee believes these company performance goals promote growth (measured by the increase in DWP and PIF) and foster a strong underwriting discipline (measured by the statutory combined ratio).

 

 

22    Erie Indemnity Company

2021 AIP Individual Performance Goals

Each NEO was assigned individual goals related to their scope of responsibility and aligned with our overall strategic priorities. These goals account for 20 percent of each NEO’s AIP award and may be qualitative or quantitative in nature. Our compensation committee has determined that achievement of these individual goals would require substantial and sustained performance by the NEOs; however, we believe that disclosure of these goals could cause competitive harm.

2021 AIP Targets and Awards

The 2021 target and level of achievement relative to target for AIP awards earned appear in the table below. AIP bonuses were paid on March 15, 2022 and are shown in the Summary Compensation Table under the heading “Non-Equity Incentive Plan Compensation.”

 

Name		AIP Target as a % of Base Salary				Achievement Relative to Threshold, Target or Maximum
Timothy G. NeCastro			110%			Above Target
Gregory J. Gutting			60%			Above Target
Lorianne Feltz			60%			Above Target
Robert C. Ingram, III			60%			Above Target
Douglas E. Smith			60%			Above Target

We continued our use of a funding qualifier for the 2021 AIP. The compensation committee determined that it would be appropriate to first consider our overall financial results before making payments to individuals based on achievement of the specific performance goals set forth above. The funding qualifier is a corporate performance threshold that is based on our net operating income, or “NOI.” NOI is the Company’s net income, excluding: (i) realized capital gains and losses; (ii) impairment losses; (iii) related federal income taxes; (iv) losses from discontinued operations; (v) debt prepayment penalties; (vi) extraordinary gains or losses; (vii) the cumulative effect of accounting changes or the effect of material changes in tax laws; (viii) acquisitions or divestitures; (ix) unusual or nonrecurring items; (x) asset write downs; (xi) litigation, claims, judgments, or settlements not related to core operations; (xii) expenses for reorganization or restructuring initiatives; (xiii) currency fluctuations; and (xiv) reserve strengthening or financing activities. Use of NOI as the measure for the funding qualifier gives appropriate consideration to the interests of both our shareholders and the participants in our AIP.

The funding qualifier under our 2021 AIP was 75 percent of the Company’s forecasted NOI for 2021. For an AIP payout to occur, 2021 NOI had to exceed $193 million. Our 2021 NOI totaled $298 million, thereby satisfying this requirement.

Long Term Incentive Plan

The purpose of our LTIP is to enhance our growth and profitability, and that of the Exchange, by providing longer term rewards to executives who are capable of having a significant impact on performance. We accomplish this by providing our executives with incentives based on attainment of certain performance goals over three-year performance periods. Performance is measured and compared to an industry peer group selected by the compensation committee. The LTIP permits grants of performance shares, performance units and/or phantom stock. Performance shares represent the right to receive shares of common stock or cash. Performance units and phantom stock represent the right to receive a cash payment. Awards for the performance periods beginning in 2019, 2020 and 2021 were granted in phantom stock and will be paid in cash. The number of performance shares authorized for grant under the LTIP is 1.5 million shares. No performance shares have been issued under the LTIP. Accordingly, 1.5 million shares of Class A common stock are available for issuance under the LTIP. We purchase our Class A common stock in the open market to settle performance share awards; we do not issue new shares to settle stock awards.

 

 

2022 Information Statement    23

LTIP Peer Group

The compensation committee believes the peer group below is representative of the property and casualty industry, as it comprises a large share of the industry’s premiums.

2021-2023 LTIP Peer Group

 

Allstate Insurance Group     American Family Insurance Group     Amica Mutual Group     Auto Owners Insurance Group     The Cincinnati Insurance Companies     COUNTRY Financial		Farmers Insurance Group   Government Employees Insurance Group (GEICO)   Grange Mutual Casualty Pool   Liberty Mutual Insurance Companies		Nationwide Insurance   Progressive Insurance Group   State Farm Group   Travelers Group   USAA Group   Westfield Group

LTIP Targets

The table below shows LTIP targets expressed as a percentage of base salary.

 

Name		LTIP Target as a % of Base Salary
Timothy G. NeCastro			200%
Gregory J. Gutting			90%
Lorianne Feltz			90%
Robert C. Ingram, III			90%
Douglas E. Smith			90%

The target number of shares for each participant was calculated by dividing the target equity incentive plan award by $246.50, the average closing share price of our Class A common stock for the first 20 business days of the performance period. Opportunities under the LTIP range from 0 to 250 percent of target.

LTIP Performance Measures & Weightings

The performance measures for the LTIP are DWP (40 percent weight), statutory combined ratio (40 percent weight) and ROIA (20 percent weight). Given the nature of our business, underwriting profitability and return on investments are important to long-term financial strength. The Property and Casualty Group’s DWP growth is also important to our financial results as it is the primary driver of the management fee revenue we earn from the Exchange.

The 2019-2021 performance period is closed. The payout, pending approval from our compensation committee, will be made later in 2022 since computations require peer group data that is not yet available. To date, for this performance period, we have information on eleven of the twelve measurement quarters and expect the payout to be approximately 66 percent of target.

 

 

24    Erie Indemnity Company

Retirement Benefits and Perquisites

We believe retirement benefits are an important part of a competitive reward opportunity that enables us to attract and retain talented leaders. We also offer our executives a limited number of perquisites.

 

Pension Plan		•  Provided to all eligible employees since 1946
SERP(1)		•  Provided to executive officers, senior vice presidents and other select officers of the Company •  Encourages retention and long service careers
Deferred Compensation   Plan		•  Provided to executive officers, senior vice presidents and other select officers of the Company •  Unfunded, non-qualified deferred compensation
Incentive Compensation   Deferral Plan		•  Provided to executive officers, senior vice presidents and other select officers of the Company •  Unfunded, non-qualified incentive compensation deferral
Perquisites		•  In addition to broad-based benefits offered generally to all of our full-time employees, executives are offered: ○   Business club memberships ○   Airline club memberships as needed ○   Comprehensive financial counseling ○   Officer physicals ○   Accidental death benefits ○   Guest travel ○   Residential home security ○   Personal use of company aircraft ○   Tax gross-ups for residential home security, guest and personal use of company aircraft

 

(1)

We provide a SERP to our NEOs in response to those provisions of the Internal Revenue Code of 1986, or the “Code,” that limit the maximum annual pension award that can be paid to any eligible employee. As illustrated in the Pension Benefits table, an older NEO can produce a significantly higher present value compared to a younger, more highly paid NEO. This result occurs primarily because the nearer a NEO is to normal retirement age, the shorter the discount period used in calculating the present value of the benefits. In addition, amounts in the Pension Benefits table may increase or decrease from year to year. This is the result of discount rates used in the calculations. See Executive Compensation — Pension Plan.

Policy on Recoupment of Officer Bonuses

We have a “clawback” policy that applies to AIP and LTIP payouts. To the extent permitted by law, our policy requires the reimbursement of all or a portion of any performance-based annual or long-term bonus paid to any officer where (a) the payment was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement, and (b) a lower payment would have been made to the officer based upon the restated financial results. In each such instance the Company will, to the extent practicable, seek to recover the amount by which the officer’s bonus for the relevant period exceeded the lower payment that would have been made based on the restated financial results. We will not seek to recover bonuses paid more than two years prior to the date on which our board of directors was made aware of the need to restate our financial statements. We will continue to monitor regulatory requirements and adjust our policy as necessary.

To the extent permitted by law, officers are also required to reimburse us for any performance-based annual or long-term bonus we paid to such officer where the officer’s employment with the Company was terminated for cause either prior to the payment of the bonus or within six months thereafter.

Policy for Minimum Stock Ownership Levels

Our Policy for Minimum Stock Ownership Levels is designed to promote greater alignment with the interests of our shareholders through ownership of Company stock and achieve a stronger correlation to market-prevalent stock ownership practices of public companies. The policy requires our executive and senior officers to acquire and hold Erie Indemnity Company stock with a market value equal to a specific multiple of base salary. Owned shares, shares held in our 401(k) savings plan, shares issued under the LTIP and share credits issued under the Incentive Compensation Deferral Plan are counted toward satisfying the ownership requirement.

 

 

2022 Information Statement    25

Officers who are covered by the policy must achieve their minimum ownership level by the fifth anniversary of becoming a covered officer. If a covered officer is appointed to a position with a higher minimum ownership requirement, the difference between the two levels must be achieved by the fifth anniversary of the new appointment. The original timeframe shall continue to apply to the prior ownership requirement.

The policy further provides that, once a covered officer owns or is credited with enough shares to satisfy their minimum ownership requirement, they are not required to acquire additional shares in the event of a decline in stock price or increase in base salary. The dollar value of the minimum stock ownership requirement does not fluctuate unless the covered officer is promoted to a position that has a higher ownership requirement.

The following table shows the required stock ownership levels and the share ownership of our NEOs as of December 31, 2021:

 

Name

Target Ownership Level

# of Shares Owned at 12/31/2021

Met Target

Timothy G. NeCastro

4x base salary

27,246

Yes

Gregory J. Gutting

3x base salary

9,224

Yes

Lorianne Feltz

3x base salary

7,006

Yes

Robert C. Ingram, III

3x base salary

N/A

N/A

Douglas E. Smith

3x base salary

5,118

Yes

Anti-Hedging Policy

We have an “Anti-Hedging Policy” that prohibits members of the Company’s board of directors and those officers of the Company who are subject to the Policy for Minimum Stock Ownership Levels, as well as their spouses and any individuals residing in the same household, from engaging in hedging or monetization transactions with respect to Company securities including, but not limited to: (i) purchasing put or call options or other derivative instruments; (ii) using financial instruments, such as exchange funds, variable prepaid forwards, equity swaps, collars and forwards; and (iii) establishing short positions in Company stock (collectively, “Prohibited Transactions”). Our board of directors believes that it is in the best interests of Company shareholders, and promotes the Company’s commitment to sound corporate governance, to prohibit individuals subject to this policy from engaging in Prohibited Transactions, as such transactions can disrupt the alignment between those individuals and the Company’s other shareholders, compromise Company compensation programs and philosophies, and undermine polices regarding stock ownership.

Tax Implications of Executive Compensation

Our compensation committee will continue to monitor guidance from the IRS to balance the benefits of deductibility with the goals of our executive compensation program.

Agreements with Executive Officers

We have no employment agreements with any NEOs. For termination scenarios relating to our NEOs, and a discussion of the agreement entered into with Mr. Ingram prior to the end of his employment with us, see Executive Compensation — Potential Termination or Change in Control Payments.

Under the terms of our AIP and LTIP, participants forfeit their entire award if they terminate employment with us prior to the end of the applicable performance period unless such termination is by reason of death, permanent disability, or normal or early retirement as defined in the plans. If a participant’s employment terminates before the last day of the performance period by reason other than death, permanent disability or normal or early retirement, our compensation committee may, in its discretion, determine that the participant’s interest in all or a portion of the award for that performance period shall be vested.

Mr. Ingram retired on December 31, 2021. Because he did meet the definitions of “retirement” or “early retirement” under the LTIP, our compensation committee, with the approval of the board of directors, authorized the Company to enter into an agreement with Mr. Ingram allowing him to vest in a 66 2/3 percent interest in his earned award for the 2020-2022 LTIP performance period, and a 33 1/3 percent interest in his earned award for the 2021-2023 performance period.

 

 

26    Erie Indemnity Company

Executive Compensation

The following table sets forth the 2021, 2020, and 2019 compensation of our NEOs. Compensation disclosed herein is for services rendered in all capacities to us, EFL, the Exchange and their subsidiaries and affiliates. Compensation is allocated among us, the Exchange, EFL and their subsidiaries and affiliates according to an estimated proportion of the executives’ time dedicated to the affairs of each entity. Our share of total compensation expense for the NEOs was 55 percent in 2021, 54 percent in 2020, and 44 percent in 2019. Amounts indicated are pre-individual income taxes.

Summary Compensation Table

 

Name and Principal Position		Year				Salary ($)				Bonus ($)(1)				Stock Awards ($)(2)				Non-Equity Incentive Plan Compen- sation ($)(3)				Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)(4)				All Other Compensation ($)(5)				Total ($)
Timothy G. NeCastro President and Chief Executive Officer			2021 2020 2019				966,154 940,385 884,615				885 0 0				1,940,202 1,900,133 1,575,064				1,361,492 1,092,500 360,000				509,104 1,270,170 1,386,628				96,684 60,473 43,403				4,874,521 5,263,661 4,249,710
Gregory J. Gutting Executive Vice President and Chief Financial Officer			2021 2020 2019				558,077 540,385 496,154				824 0 0				504,093 495,077 450,078				438,816 379,500 120,000				199,216 710,671 752,827				39,780 42,160 43,494				1,740,806 2,167,793 1,862,553
Lorianne Feltz Executive Vice President Claims and Customer Service			2021 2020 2019				438,077 424,231 396,154				699 0 0				396,126 387,009 360,090				334,224 288,960 91,200				74,804 652,770 624,305				38,401 63,729 32,670				1,282,331 1,816,699 1,504,419
Robert C. Ingram, III Former Executive Vice President and Chief Information Officer			2021 2020 2019				550,577 538,654 517,212				711 0 0				497,437 488,396 470,353				432,939 374,325 141,075				209,493 316,095 311,928				42,363 62,198 28,954				1,733,520 1,779,668 1,469,522
Douglas E. Smith Executive Vice President Sales and Products			2021 2020				438,077 424,231				699 0				396,126 387,009				321,024 283,800				109,431 470,719				39,345 21,883				1,304,702 1,587,642

 

(1)	For 2021, this column includes a $500 gift card given to all employees and the associated tax gross up.

 

(2)

Grants made under our LTIP for the performance periods beginning in, 2019, 2020 and 2021 are shown in the “Stock Awards” column. Grants of phantom stock were made each year, and, upon vesting, participants will be paid in cash. Pursuant to a Retirement Agreement dated December 30, 2021, Mr. Ingram will vest in a 66 2/3 percent interest in his earned award for the 2020-2022 performance period and a 33 1/3 percent interest in his earned award for the 2021-2023 performance period.

 

(3)	The “Non-Equity Incentive Plan Compensation” column includes payouts made under the AIP during each year.

 

(4)

Amounts in the “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” column decreased in 2021. The decrease is the result of an increase in discount rates used for calculations. Pension plan rates for 2021, 2020 and 2019 were 3.16 percent, 2.96 percent and 3.59 percent, respectively. SERP rates for 2021, 2020 and 2019 were 3.11 percent, 2.86 percent, and 3.59 percent, respectively.

 

(5)	See Supplemental Table for All Other Compensation.

Stock Awards: Long Term Incentive Plan

Our LTIP allows awards of phantom stock and the payment of outstanding awards to be made in either cash or stock. The LTIP plan document includes a list of performance measures that may be used to establish performance goals. Awards for the 2021-2023, 2020-2022 and 2019-2021 performance periods are payable in cash. The amounts shown in the Summary Compensation Table for 2021, 2020 and 2019 reflect the grant date fair value of these awards as further described below. Amounts for each performance period will not be earned until December 31 of the third year and may be more or less than the value shown based upon the level of achievement of the performance goals.

For 2021, 2020 and 2019, the grant value of each executive’s target LTIP award (calculated as a percentage of their base salary) was established by our compensation committee. The number of phantom shares awarded in 2021, 2020 and 2019 was calculated by dividing the target LTIP award by $246.50, $167.03 and $138.87, respectively, the average share price for the first 20 business days of each performance period.

 

 

2022 Information Statement    27

Non-Equity Incentive Plan Compensation

The “Non-Equity Incentive Plan Compensation” column includes the AIP payouts during each year.

Change in Pension Value and Non-Qualified Deferred Compensation Earnings

The Summary Compensation Table above includes the net change in the present value of accrued benefits from December 31, 2020 to December 31, 2021 under our pension plan, a tax-qualified defined benefit pension plan, and our SERP, a non-qualified defined benefit arrangement. The present value information presented utilizes assumptions consistent with those used for fiscal year 2021 disclosure under Financial Accounting Standards Board (FASB) Accounting Standards Codification 715, “Compensation — Retirement Plans.” Pension plan discount rates used for December 31, 2021, 2020 and 2019 were 3.16 percent, 2.96 percent and 3.59 percent, respectively.

SERP discount rates used for December 31, 2021, 2020 and 2019 were 3.11 percent, 2.86 percent and 3.59 percent, respectively (no post-retirement discount rate for 2021 or 2020, and 3.09 percent post-retirement discount rate for 2019).

There are no above-market or preferential non-qualified deferred compensation earnings to disclose in this column. See Non-Qualified Deferred Compensation for a description of the investment funds and earnings.

All Other Compensation

The following table provides details of the amounts presented in the “All Other Compensation” column of the Summary Compensation Table.

Supplemental Table for All Other Compensation

 

Name		Year				401(k) Contribution ($)(1)				Supple- mental 401(k) Match ($)(2)				Tax Gross- Ups ($)(3)				Member- ship Dues ($)(4)				Guest Travel ($)(5)				Other ($)(6)				Total ($)
Timothy G. NeCastro			2021 2020 2019				11,600 11,400 11,200				27,046 0 0				4,389 13,532 11,147				2,918 1,951 1,923				0 0 6,008				50,731 33,590 13,125				96,684 60,473 43,403
Gregory J. Gutting			2021 2020 2019				11,600 11,400 11,200				10,723 10,215 8,646				538 708 3,149				2,895 3,960 3,203				0 0 1,989				14,024 15,877 15,307				39,780 42,160 43,494
Lorianne Feltz			2021 2020 2019				11,600 11,400 11,200				5,923 5,569 0				2,715 14,856 0				2,537 1,696 2,168				0 0 0				15,626 30,208 19,302				38,401 63,729 32,670
Robert C. Ingram, III			2021 2020 2019				11,600 11,400 11,200				10,423 10,146 9,489				998 2,066 0				2,537 1,951 1,923				0 0 0				16,805 36,635 6,342				42,363 62,198 28,954
Douglas E. Smith			2021 2020				11,600 11,400				6,600 5,569				0 0				3,072 2,891				0 0				18,073 2,023				39,345 21,883

 

(1)

This column includes the company match for our tax-qualified 401(k) savings plan for our employees. For more information on the 401(k) savings plan, see also Part II, Item 8, “Financial Statements and Supplementary Data — Note 9, Postretirement Benefits, of Notes to Financial Statements” in our annual report on Form 10-K filed with the SEC on February 24, 2022.

 

(2)	Included in the “Supplemental 401(k) Match” column are our contributions that cannot be credited to the tax-qualified 401(k) savings plan because of compensation and contribution limits imposed by the Code. See Non-qualified Deferred Compensation for additional discussion.

 

(3)	We pay taxes on behalf of our executives for guest travel, residential home security, and personal use of company aircraft. For 2021, this column includes gross ups for residential home security monitoring services for Mr. NeCastro, Mr. Gutting and Ms. Feltz.

 

(4)	We provide professional association and business dining club membership dues for executives.

 

(5)	We pay registration fees and normal travel expenses for an executive’s guest when they accompany the executive to certain business functions.

 

(6)

The “Other” column includes executive physicals, the company-paid portion of a comprehensive financial counseling program, the company-paid cost of residential home security, the taxable value of group term life insurance, payments for vacation conversion, and taxable fringe benefits. For Mr. NeCastro, Mr. Gutting and Ms. Feltz, this column for 2021 includes $3,168, $988, and $4,576, respectively, for the company cost of residential home security. For Messrs. NeCastro and Smith, amounts paid in 2021 include $37,308 and $16,923, respectively, for vacation conversion. For Mr. Ingram, the amount shown for 2021 includes $8,541 for personal use of the company aircraft. We believe allowing the CEO and NEOs access to a company aircraft for business and personal travel mitigates health and safety risks to Mr. NeCastro and the NEOs and allows them to be immediately available to respond to business priorities.

 

 

28    Erie Indemnity Company

Grants of Plan-Based Awards

The following table summarizes awards that were granted during 2021 under our AIP and LTIP.

Grants of Plan-Based Awards Table for 2021

 

Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1)

Estimated Future Payouts Under Equity Incentive Plan Awards(2)

Grant Date Fair Value of Stock and Option Awards ($)(3)

Name

Plan

Grant Date

Performance Period

Thresh- old ($)

Target ($)

Maxi- mum ($)

Thresh- old (#)

Target (#)

Maxi- mum (#)

Timothy G. NeCastro

AIP LTIP

2/17/21 2/17/21

2021 2021-2023

0 N/A

1,067,000 N/A

2,134,000 N/A

N/A 0

N/A 7,871

N/A 19,678

N/A 1,940,202

Gregory J. Gutting

AIP LTIP

2/17/21 2/17/21

2021 2021-2023

0 N/A

336,000 N/A

672,000 N/A

N/A 0

N/A 2,045

N/A 5,113

N/A 504,093

Lorianne Feltz

AIP LTIP

2/17/21 2/17/21

2021 2021-2023

0 N/A

264,000 N/A

528,000 N/A

N/A 0

N/A 1,607

N/A 4,018

N/A 396,126

Robert C. Ingram, III(4)

AIP LTIP

2/17/21 2/17/21

2021 2021-2023

0 N/A

331,500 N/A

663,000 N/A

N/A 0

N/A 2,018

N/A 5,045

N/A 497,437

Douglas E. Smith

AIP LTIP

2/17/21 2/17/21

2021 2021-2023

0 N/A

264,000 N/A

528,000 N/A

N/A 0

N/A 1,607

N/A 4,018

N/A 396,126

 

(1)

The maximum AIP payout is 200 percent of the target award. See Compensation Discussion and Analysis — Annual Incentive Plan and Part II, Item 8, “Financial Statements and Supplementary Data — Note 10, Incentive and Deferred Compensation Plans, of Notes to Financial Statements” in our annual report on Form 10-K filed with the SEC on February 24, 2022. The minimum funding qualifier for payment of the 2021 AIP awards was satisfied. AIP results were certified and approved by our compensation committee on February 16, 2022, and the awards were paid on March 15, 2022. All payments made under the AIP are reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.

 

(2)

Under the LTIP, our compensation committee grants performance shares, performance units and/or phantom stock to participants. Performance shares represent the right to receive shares of common stock or cash. Performance units and phantom stock represents the right to receive a cash payment. For the 2021-2023 performance period, grants were made in shares of phantom stock and awards will be paid in cash when vested. The maximum payout under this plan is 250 percent of the target award. Awards, if any, for the 2021-2023 performance period will vest at December 31, 2023.

 

(3)	The grant date fair value of the award was calculated by multiplying the target number of phantom shares by $246.50, the average share price for the first 20 business days of the performance period.

 

(4)	Pursuant to a Retirement Agreement dated December 30, 2021, Mr. Ingram will vest in a 33 1/3 percent interest in his earned award for the 2021-2023 performance period.

An executive’s target award is established by our compensation committee. The target number of performance shares, performance units and/or phantom stock for each executive is based on a competitive total direct compensation target opportunity and an agreed-upon target pay mix. When our compensation committee approves target awards, it also approves the performance measures, performance goals and the calibration of shares and/or cash awarded at performance levels above and below target. Our compensation committee has the discretion to reduce awards to any individual participant in the incentive plans, and we have a policy for recoupment of officer bonuses. See Compensation Discussion and Analysis.

Under our LTIP, the actual shares or cash paid to an executive at the end of a performance period may be more or less than the executive’s target, but not more than the maximum for that performance period. See also Part II, Item 8, “Financial Statements and Supplementary Data — Note 10, Incentive and Deferred Compensation Plans, of Notes to Financial Statements” in our annual report on Form 10-K filed with the SEC on February 24, 2022.

 

 

2022 Information Statement    29