American Express 2009 Annual Report Download - page 119

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN EXPRESS COMPANY
Benefit Payments
The Company’s defined benefit pension plans expect to make
benefit payments to retirees as follows:
(Millions) 2010 2011 2012 2013 2014
2015
–2019
Expected payments $132 $147 $152 $152 $171 $903
In addition, the Company expects to contribute $64 million
to its defined benefit pension plans in 2010.
DEFINED CONTRIBUTION RETIREMENT PLANS
The Company sponsors defined contribution retirement
plans, the principal plan being the Retirement Savings Plan
(RSP), a 401(k) savings plan with a profit sharing component.
The RSP is a tax-qualified retirement plan subject to ERISA
and covers most employees in the U. S. Under the terms of
the RSP, employees have the option of investing up to 10
percent of their contributions in the American Express
Company Stock Fund, which invests primarily in the
Company’s common stock, through accumulated payroll
deductions. Employees are restricted from transferring
balances into this fund if the balance has reached 10 percent
of the employee’s total account balance. The RSP held
13 million shares of American Express Common Stock at both
December 31, 2009 and 2008, beneficially for employees.
Effective July 1, 2007, the Company matches employee
contributions to the plan up to a maximum of 5 percent of
total pay. Additional annual conversion contributions of up
to 8 percent of total pay are provided into the RSP for eligible
employees who were hired before April 1, 2007. The
Company also sponsors an RSP SRP, which is an unfunded
non-qualified plan for employees whose RSP benefits are
limited by the Internal Revenue Code and its terms generally
parallel those of the RSP, except that the definition of
compensation and payment options differ.
The total expense for all defined contribution retirement
plans globally was $118 million, $211 million and $173
million in 2009, 2008 and 2007, respectively. The decrease in
defined contribution expense in 2009 primarily reflects the
Company’s temporary suspension of the employer match
conversion contributions (reinstated prospectively in January
2010).
OTHER POSTRETIREMENT BENEFIT PLANS
The Company sponsors unfunded other postretirement
benefit plans that provide health care and life insurance to
certain retired U.S. employees.
Accumulated Other Comprehensive Loss
The following table provides the amounts comprising
accumulated other comprehensive loss which are not yet
recognized as components of net periodic benefit cost as of
December 31:
(Millions) 2009 2008
Net actuarial loss $60 $47
Net prior service cost —(2)
Total, pretax effect 60 45
Tax impact (24) (18)
Total, net of taxes $36 $27
The estimated portion of the net actuarial loss above that is
expected to be recognized as a component of net periodic
benefit cost in 2010 is $2 million.
The following table lists the amounts recognized in other
comprehensive loss in 2009:
(Millions) 2009
Net actuarial loss:
Reclassified to earnings from equity $ (2)
Losses in current year 15
Net actuarial loss 13
Net prior service cost:
Reclassified to earnings from equity 2
Net prior service cost 2
Total, pretax $15
Benefit Obligations
The projected benefit obligation represents a liability based
upon estimated future medical and other benefits to be
provided to retirees.
The following table provides a reconciliation of the changes in
the projected benefit obligation:
Reconciliation of Change in Projected Benefit Obligation
(Millions) 2009 2008
Projected benefit obligation, beginning of year $295 $312
Effect of transition to December 31st measurement
date —1
Service cost 56
Interest cost 18 19
Benefits paid (16) (27)
Actuarial loss (gain) 16 (16)
Curtailment loss 6—
Net change 29 (17)
Projected benefit obligation, end of year $324 $295
The plans are unfunded and the obligations as of
December 31, 2009 and 2008 are recognized in the
Consolidated Balance Sheets in other liabilities.
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