BB&T 2014 Annual Report Download - page 125

Table of Contents
In February 2010, BB&T received an IRS statutory notice of deficiency for tax years 2002-2007 asserting a liability for taxes, penalties and interest of
approximately $892 million related to the disallowance of foreign tax credits and other deductions claimed by a subsidiary in connection with a financing
transaction. BB&T paid the disputed tax, penalties and interest in March 2010 and filed a lawsuit seeking a refund in the U.S. Court of Federal Claims. On
September 20, 2013, the court denied the refund claim. BB&T appealed the decision to the U.S. Court of Appeals for the Federal Circuit. Oral arguments were
heard in the appeal on January 7, 2015; however, no decision has been rendered. As of December 31, 2014, the exposure for this financing transaction is fully
reserved.
It is reasonably possible that the litigation associated with the financing transaction may conclude within the next twelve months; however, further
proceedings could delay a final resolution. Changes in the amount of unrecognized tax benefits, penalties and interest could result in a benefit of up to
approximately $700 million. The ultimate resolution of these matters may take longer.
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Defined Benefit Retirement Plans
BB&T provides a defined benefit retirement plan qualified under the IRC that covers most employees. Benefits are based on years of service, age at
retirement and the employee's compensation during the five highest consecutive years of earnings within the last ten years of employment.
In addition, supplemental retirement benefits are provided to certain key officers under supplemental defined benefit executive retirement plans, which are
not qualified under the IRC. Although technically unfunded plans, a Rabbi Trust and insurance policies on the lives of certain of the covered employees are
available to finance future benefits.
The following actuarial assumptions were used to determine net periodic pension costs for the qualified pension plan:
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Weighted average assumed discount rate 5.10 % 4.25 % 4.82 %
Weighted average expected long-term rate of return on plan assets 7.75 8.00 8.00
Assumed long-term rate of annual compensation increases 5.00 4.50 4.50
The weighted average expected long-term rate of return on plan assets represents the average rate of return expected to be earned on plan assets over the
period the benefits included in the benefit obligation are to be paid. In developing the expected rate of return, BB&T considers long-term compound
annualized returns of historical market data for each asset category, as well as historical actual returns on the plan assets. Using this reference information, the
Company develops forward-looking return expectations for each asset category and a weighted average expected long-term rate of return for the plan based
on target asset allocations contained in BB&T's Investment Policy Statement. The expected rate of return has been reduced to 7.5% for fiscal 2015.
During October 2014, the Society of Actuaries released new mortality tables that reflected longer life expectancies. BB&T adopted these tables, which
resulted in increases to the projected benefit obligations.
Financial data relative to the defined benefit pension plans is summarized in the following tables for the years indicated. The qualified pension plan prepaid
asset is recorded on the Consolidated Balance Sheets as a component of other assets and the nonqualified pension plans accrued liability is recorded on the
Consolidated Balance Sheets as a component of other liabilities. The data is calculated using an actuarial measurement date of December 31.
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Source: BB&T CORP, 10-K, February 25, 2015 Powered by Morningstar® Document Research℠
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