Bank of America 2013 Annual Report Download - page 243

Bank of America 2013 241
NOTE 17 Employee Benefit Plans
Pension and Postretirement Plans
The Corporation sponsors noncontributory trusteed pension plans,
a number of noncontributory nonqualified pension plans, and
postretirement health and life plans that cover eligible employees.
As discussed below, certain of the pension plans were amended,
effective June 30, 2012, to freeze benefits earned. The pension
plans provide defined benefits based on an employee’s
compensation and years of service. The Bank of America Pension
Plan (the Pension Plan) provides participants with compensation
credits, generally based on years of service. In 2013, the
Corporation merged a defined benefit pension plan, which covered
eligible employees of certain legacy companies, into the Bank of
America Pension Plan. This plan is referred to as the Qualified
Pension Plan (Qualified Pension Plans prior to this merger). For
account balances based on compensation credits prior to January
1, 2008, the Pension Plan allows participants to select from
various earnings measures, which are based on the returns of
certain funds or common stock of the Corporation. The participant-
selected earnings measures determine the earnings rate on the
individual participant account balances in the Pension Plan.
Participants may elect to modify earnings measure allocations on
a periodic basis subject to the provisions of the Pension Plan. For
account balances based on compensation credits subsequent to
December 31, 2007, the account balance earnings rate is based
on a benchmark rate. For eligible employees in the Pension Plan
on or after January 1, 2008, the benefits become vested upon
completion of three years of service. It is the policy of the
Corporation to fund no less than the minimum funding amount
required by ERISA.
The Pension Plan has a balance guarantee feature for account
balances with participant-selected earnings, applied at the time a
benefit payment is made from the plan that effectively provides
principal protection for participant balances transferred and
certain compensation credits. The Corporation is responsible for
funding any shortfall on the guarantee feature.
As a result of acquisitions, the Corporation assumed the
obligations related to the pension plans of certain legacy
companies. The benefit structures under these acquired plans
have not changed and remain intact in the merged plan. Certain
benefit structures are substantially similar to the Pension Plan
discussed above; however, certain of these structures do not allow
participants to select various earnings measures; rather the
earnings rate is based on a benchmark rate. In addition, these
structures include participants with benefits determined under
formulas based on average or career compensation and years of
service rather than by reference to a pension account. Certain of
the other structures provide a participant’s retirement benefits
based on the number of years of benefit service and a percentage
of the participant’s average annual compensation during the five
highest paid consecutive years of the last 10 years of employment.
The 2013 merger of the defined benefit pension plan into the
Qualified Pension Plan required a remeasurement of the qualified
pension obligations and plan assets at fair value as of the merger
date in addition to the required December 31 remeasurement. The
2013 remeasurements resulted in an increase in accumulated
OCI of $2.0 billion, net-of-tax.
In 2012, in connection with a redesign of the Corporation’s
retirement plans, the Compensation and Benefits Committee of
the Board approved amendments to freeze benefits earned in the
Qualified Pension Plans effective June 30, 2012. As a result of
freezing the Qualified Pension Plans, a curtailment was triggered
and a remeasurement of the qualified pension obligations and
plan assets occurred. As of the remeasurement date, the plan
assets had increased in value from the prior measurement date
resulting in an increase in the funded status of the plan and the
curtailment impact reduced the projected benefit obligation. The
combined impact resulted in a $1.3 billion increase to the net
pension assets recognized in other assets and a corresponding
increase in accumulated OCI of $832 million, net-of-tax. The impact
of the immediate recognition of the prior service cost of $58 million
was recorded in personnel expense as a curtailment loss in 2012.
All economic assumptions were consistent with the prior year end
including the weighted-average discount rate of 4.95 percent used
for remeasurement of the Qualified Pension Plans.
As a result of freezing the Qualified Pension Plans, the
amortization period for actuarial gains and losses was changed
from the average working life to the estimated average lifetime of
benefits being paid. In addition, in 2014, the long-term expected
return on assets assumption for the Qualified Pension Plan was
reduced to 6.0 percent from 6.5 percent in 2013 and 8.0 percent
in 2012 to reflect current market conditions and long-term financial
goals.
The Corporation assumed the obligations related to the plans
of Merrill Lynch. These plans include a terminated U.S. pension
plan (the Other Pension Plan), non-U.S. pension plans, nonqualified
pension plans and postretirement plans. The non-U.S. pension
plans vary based on the country and local practices.
The Corporation has an annuity contract, previously purchased
by Merrill Lynch, that guarantees the payment of benefits vested
under the Other Pension Plan. The Corporation, under a
supplemental agreement, may be responsible for, or benefit from
actual experience and investment performance of the annuity
assets. The Corporation made no contribution under this
agreement in 2013 or 2012. Contributions may be required in the
future under this agreement.
The Corporation sponsors a number of noncontributory,
nonqualified pension plans (the Nonqualified Pension Plans). As
a result of acquisitions, the Corporation assumed the obligations
related to the noncontributory, nonqualified pension plans of
certain legacy companies including Merrill Lynch. These plans,
which are unfunded, provide defined pension benefits to certain
employees.
In addition to retirement pension benefits, full-time, salaried
employees and certain part-time employees may become eligible
to continue participation as retirees in health care and/or life
insurance plans sponsored by the Corporation. Based on the other
provisions of the individual plans, certain retirees may also have
the cost of these benefits partially paid by the Corporation. The
obligations assumed as a result of acquisitions are substantially
similar to the Corporation’s postretirement health and life plans,
except for Countrywide which did not have a postretirement health
and life plan. Collectively, these plans are referred to as the
Postretirement Health and Life Plans.
The Pension and Postretirement Plans table summarizes the
changes in the fair value of plan assets, changes in the projected
benefit obligation (PBO), the funded status of both the
accumulated benefit obligation (ABO) and the PBO, and the
weighted-average assumptions used to determine benefit
obligations for the pension plans and postretirement plans at
December 31, 2013 and 2012. Amounts recognized at December
31, 2013 and 2012 are reflected in other assets, and in accrued
expenses and other liabilities on the Consolidated Balance Sheet.