Bank of America 2012 Annual Report Download - page 251

Bank of America 2012 249
Defined Contribution Plans
The Corporation maintains qualified defined contribution
retirement plans and nonqualified defined contribution retirement
plans. As a result of the Merrill Lynch acquisition, the Corporation
also maintains the defined contribution plans of Merrill Lynch which
include the 401(k) Savings & Investment Plan (SIP), the Retirement
and Accumulation Plan and the Employee Stock Ownership Plan.
In 2012, these plans were merged with the SIP being the successor
plan and is closed to new participants with certain exceptions.
The Corporation contributed $886 million, $723 million and $670
million in 2012, 2011 and 2010, respectively, in cash to the
qualified defined contribution plans. In connection with the
redesign of the Corporation’s retirement plans, an additional
annual contribution will be made to certain of these plans. The
expense in 2012 related to the additional annual contribution was
$174 million. At December 31, 2012 and 2011, 235 million shares
and 232 million shares of the Corporation’s common stock were
held by these plans. Payments to the plans for dividends on
common stock were $10 million, $9 million and $8 million in 2012,
2011 and 2010, respectively.
Certain non-U.S. employees are covered under defined
contribution pension plans that are separately administered in
accordance with local laws.
NOTE 19 Stock-based Compensation Plans
The Corporation administers a number of equity compensation
plans, including the Key Employee Stock Plan, the Key Associate
Stock Plan and the Merrill Lynch Employee Stock Compensation
Plan. Descriptions of the significant features of the equity
compensation plans are below. Under these plans, the Corporation
grants stock-based awards, including stock options, restricted
stock and RSUs. Grants in 2012 include RSUs which generally
vest in three equal annual installments beginning one year from
the grant date, awards of restricted stock that were vested and
released from restrictions on the grant date and certain awards
which will vest subject to the attainment of specified performance
goals.
For most awards, expense is generally recognized ratably over
the vesting period net of estimated forfeitures, unless the
employee meets certain retirement eligibility criteria. For awards
to employees that meet retirement eligibility criteria, the
Corporation records the expense upon grant. For employees that
become retirement eligible during the vesting period, the
Corporation recognizes expense from the grant date to the date
on which the employee becomes retirement eligible, net of
estimated forfeitures. The compensation cost for the stock-based
plans was $2.3 billion, $2.6 billion and $2.0 billion in 2012, 2011
and 2010, respectively. The related income tax benefit was $839
million, $969 million and $727 million for 2012, 2011 and 2010,
respectively.
Key Employee Stock Plan
The Key Employee Stock Plan, as amended and restated, provided
for different types of awards including stock options, restricted
stock and RSUs. 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. At December 31, 2012,
there were no outstanding awards remaining under this plan and
no further awards may be granted.
Key Associate Stock Plan
The Key Associate Stock Plan became effective January 1, 2003.
It provides for different types of awards, including stock options,
restricted stock and RSUs. As of December 31, 2012, the
shareholders had authorized approximately 1.1 billion shares for
grant under this plan. Additionally, any shares covered by awards
under the Key Employee Stock Plan or certain legacy company
plans that cancel, terminate, expire, lapse or settle in cash after
a specified date may be re-granted under the Key Associate Stock
Plan.
During 2012, the Corporation issued 290 million RSUs to
certain employees under the Key Associate Stock Plan. Certain
awards are earned based on the achievement of specified
performance criteria. RSUs may be settled in cash or in shares of
common stock depending on the terms of the applicable award.
In 2012, 7 million of these RSUs were authorized to be settled in
shares of common stock with the remainder in cash only. Certain
awards contain clawback provisions which permit the Corporation
to cancel all or a portion of the award under specified
circumstances. The compensation cost for cash-settled awards
and awards subject to certain clawback provisions, which in the
aggregate represent substantially all of the awards in 2012, is
accrued over the vesting period and adjusted to fair value based
upon changes in the share price of the Corporation’s common
stock.
From time to time, the Corporation enters into equity total return
swaps to hedge a portion of RSUs granted to certain employees
as part of their compensation in prior periods to minimize the
change in the expense to the Corporation driven by fluctuations
in the fair value of the RSUs. Certain of these derivatives are
designated as cash flow hedges of unrecognized unvested awards
with the changes in fair value of the hedge recorded in accumulated
OCI and reclassified into earnings in the same period as the RSUs
affect earnings. The remaining derivatives are used to hedge the
price risk of cash-settled awards with changes in fair value recorded
in personnel expense.
At December 31, 2012, approximately 130 million options were
outstanding under this plan. There were no options granted under
this plan during 2012, 2011 or 2010.
Merrill Lynch Employee Stock Compensation Plan
The Corporation assumed the Merrill Lynch Employee Stock
Compensation Plan with the acquisition of Merrill Lynch.
Approximately 8 million RSUs were granted in 2011 which generally
vest in three equal annual installments beginning one year from
the grant date. There were no shares granted under this plan during
2012 or 2010. At December 31, 2012, there were approximately
5 million unvested shares outstanding.
Other Stock Plans
As a result of the Merrill Lynch acquisition, the Corporation
assumed the obligations of outstanding awards granted under the
Merrill Lynch Financial Advisor Capital Accumulation Award Plan
(FACAAP) and the Merrill Lynch Employee Stock Purchase Plan
(ESPP). The FACAAP is no longer an active plan and no awards
were granted in 2012, 2011 or 2010. Awards granted in 2003
and thereafter are generally payable eight years from the grant
date in a fixed number of the Corporation’s common shares. For
outstanding awards granted prior to 2003, payment is generally
made 10 years from the grant date in a fixed number of the
Corporation’s common shares unless the fair value of such shares