Gilliam

We are asked to decide whether severance pay should be included as “earnings” for purposes of calculating an employee’s retirement benefits.

I

In 1974 Cynthia K. Gilliam (“Gilliam”) began working for Nevada Power Company, an investor-owned public utility that provides electric service to southern Nevada. She ultimately was promoted to Vice President of Retail Customer Operations in 1993, where she remained until 1999.

In 1986, Nevada Power Company established the Nevada Power Company Supplemental Executive Retirement Plan (“NPC Plan”), a non-qualified pension plan intended to provide retirement benefits to certain highly-compensated executives selected by the Board of Directors. In 1989, the Board made Gilliam a participant in the NPC Plan.

In anticipation of a possible merger, Gilliam and Nevada Power Company executed a three-year employment agreement in 1998. The agreement provided that Gilliam would receive severance pay and certain other benefits if her employment was terminated as a result of a “change in control” of the company. Subsequently, Nevada Power Company agreed to merge with Sierra Pacific Resources, an event that qualified as a change in control, as defined in…