American Express 2011 Annual Report Download - page 98

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 United States. The RSP held 11 million and
12 million shares of American Express Common Stock as of
December 31, 2011 and 2010, respectively, beneficially for
employees. The Company matches employee contributions to
the plan up to a maximum of 5 percent of total pay, subject to
the limitations under the Internal Revenue Code (IRC).
Additional annual conversion contributions of up to 8 percent of
total pay are provided into the RSP for eligible employees. The
Company also sponsors an RSP RRP, which is an unfunded
non-qualified plan for employees whose RSP benefits are limited
by the IRC and its terms generally parallel those of the RSP,
except that the definitions of compensation and payment options
differ. In addition, the RSP RRP was amended effective
January 1, 2011 such that the Company matches employee
contributions up to a maximum of 5 percent of total pay in
excess of IRC compensation limits only to the extent the
employee contributes to the plan.
The total expense for all defined contribution retirement plans
globally was $252 million, $217 million and $118 million in
2011, 2010 and 2009, respectively. The increase in expense in
2010 primarily reflects the Company’s reinstatement in January
of the employer match and conversion contributions.
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) 2011 2010
Net actuarial loss $35$50
Total, pretax effect 35 50
Tax impact (13) (19)
Total, net of taxes $22$31
The estimated portion of the net actuarial loss above that is
expected to be recognized as a component of net periodic benefit
cost in 2012 is nil.
The following table lists the amounts recognized in other
comprehensive loss in 2011:
(Millions) 2011
Net actuarial gain:
Reclassified to earnings from equity(a) $ (3)
Gains in current year(b) (5)
Curtailment gain (5)
Early Retiree Reinsurance Program subsidy (2)
Net actuarial gain, pretax $ (15)
(a) Amortization of actuarial losses.
(b) Deferral of actuarial gains.
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:
(Millions) 2011 2010
Projected benefit obligation, beginning of year $ 319 $ 324
Service cost 56
Interest cost 16 17
Benefits paid (18) (20)
Actuarial gain (5) (8)
Curtailment gain (6) –
Net change (8) (5)
Projected benefit obligation, end of year $ 311 $ 319
The plans are unfunded and the obligations as of December 31,
2011 and 2010 are recognized in the Consolidated Balance Sheets
in other liabilities.
Net Periodic Benefit Cost
GAAP provides for the delayed recognition of the net actuarial
loss and the net prior service credit remaining in accumulated
other comprehensive (loss) income.
The components of the net periodic benefit cost for all other
postretirement benefit plans for the years ended December 31
were as follows:
(Millions) 2011 2010 2009
Service cost $5$6$5
Interest cost 16 17 18
Amortization of prior service cost ––(2)
Recognized net actuarial loss 322
Curtailment (gain) loss (1) –6
Net periodic benefit cost $23$25$29
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