Bank of America 2008 Annual Report Download - page 173

Equity securities for the Qualified Pension Plans include common
stock of the Corporation in the amounts of $269 million (1.88 percent of
total plan assets) and $667 million (3.56 percent of total plan assets) at
December 31, 2008 and 2007.
The Bank of America, MBNA, U.S. Trust Corporation, and LaSalle
Postretirement Health and Life Plans had no investment in the common
stock of the Corporation at December 31, 2008 or 2007. The Fleet-
Boston Postretirement Health and Life Plans included common stock of
the Corporation in the amount of $0.05 million (0.12 percent of total plan
assets) and $0.3 million (0.20 percent of total plan assets) at
December 31, 2008 and 2007.
Defined Contribution Plans
The Corporation maintains qualified defined contribution retirement plans
and nonqualified defined contribution retirement plans.
The Corporation contributed approximately $454 million, $420 million
and $328 million for 2008, 2007 and 2006, in cash, respectively. At
December 31, 2008 and 2007, an aggregate of 104 million shares and
93 million shares of the Corporation’s common stock were held by the
401(k) plans. Payments to the 401(k) plans for dividends on common
stock were $214 million, $228 million and $216 million during 2008,
2007 and 2006, respectively.
In addition, certain non-U.S. employees within the Corporation are
covered under defined contribution pension plans that are separately
administered in accordance with local laws.
Projected Benefit Payments
Benefit payments projected to be made from the Qualified Pension Plans, the Nonqualified Pension Plans and the Postretirement Health and Life Plans
are as follows:
Qualified Pension
Plans
(1)
Nonqualified Pension
Plans
(2)
Postretirement Health and Life Plans
(Dollars in millions) Net Payments
(3)
Medicare Subsidy
2009 $ 968 $110 $150 $15
2010 975 109 149 15
2011 1,004 112 150 16
2012 1,022 112 149 16
2013 1,026 111 149 16
2014 - 2018 5,101 530 588 78
(1) Benefit payments expected to be made from the plans’ assets.
(2) Benefit payments expected to be made from the Corporation’s assets.
(3) Benefit payments (net of retiree contributions) expected to be made from a combination of the plans’ and the Corporation’s assets.
Note 17 – Stock-Based Compensation Plans
The compensation cost recognized in income for the plans described
below was $885 million, $1.2 billion and $1.0 billion in 2008, 2007 and
2006, respectively. The related income tax benefit recognized in income
was $328 million, $438 million and $382 million for 2008, 2007 and
2006, respectively.
The following table presents the assumptions used to estimate the
fair value of stock options granted on the date of grant using the lattice
option-pricing model. Lattice option-pricing models incorporate ranges of
assumptions for inputs and those ranges are disclosed in the following
table. The risk-free rate for periods within the contractual life of the stock
option is based on the U.S. Treasury yield curve in effect at the time of
grant. Expected volatilities are based on implied volatilities from traded
stock options on the Corporation’s common stock, historical volatility of
the Corporation’s common stock, and other factors. The Corporation uses
historical data to estimate stock option exercise and employee termi-
nation within the model. The expected term of stock options granted is
derived from the output of the model and represents the period of time
that stock options granted are expected to be outstanding. The estimates
of fair value from these models are theoretical values for stock options
and changes in the assumptions used in the models could result in mate-
rially different fair value estimates. The actual value of the stock options
will depend on the market value of the Corporation’s common stock when
the stock options are exercised.
2008 2007 2006
Risk-free interest rate 2.05 –3.85% 4.72 –5.16% 4.59 –4.70%
Dividend yield 5.30 4.40 4.50
Expected volatility 26.00 –36.00 16.00 –27.00 17.00 –27.00
Weighted average volatility 32.80 19.70 20.30
Expected lives (years)
6.6 6.5 6.5
The Corporation has equity compensation plans that were approved by
its shareholders. These plans are the Key Employee Stock Plan and the
Key Associate Stock Plan. Descriptions of the material features of these
plans follow.
Key Employee Stock Plan
The Key Employee Stock Plan, as amended and restated, provided for
different types of awards. These include stock options, restricted stock
shares and restricted stock units. Under the plan, 10-year options to
purchase approximately 260 million shares of common stock were
granted through December 31, 2002, to certain employees at the closing
market price on the respective grant dates. Options granted under the
plan generally vest in three or four equal annual installments. At
December 31, 2008, approximately 53 million options were outstanding
under this plan. No further awards may be granted.
Key Associate Stock Plan
On April 24, 2002, the shareholders approved the Key Associate Stock
Plan to be effective January 1, 2003. This approval authorized and
reserved 200 million shares for grant in addition to the remaining amount
under the Key Employee Stock Plan as of December 31, 2002, which was
approximately 34 million shares plus any shares covered by awards under
the Key Employee Stock Plan that terminate, expire, lapse or are can-
celled after December 31, 2002. Upon the FleetBoston merger, the
shareholders authorized an additional 102 million shares and on April 26,
2006, the shareholders authorized an additional 180 million shares for
grant under the Key Associate Stock Plan. In January 2009, in con-
junction with the Merrill Lynch merger, the shareholders authorized an
additional 105 million shares for grant under the Key Associate Stock
Plan. At December 31, 2008, approximately 159 million options were
Bank of America 2008 171