Bank of America 2014 Annual Report Download - page 234

232 Bank of America 2014
Plan Assets
The Qualified Pension Plan has been established as a retirement
vehicle for participants, and trusts have been established to
secure benefits promised under the Qualified Pension Plan. The
Corporation’s policy is to invest the trust assets in a prudent
manner for the exclusive purpose of providing benefits to
participants and defraying reasonable expenses of administration.
The Corporation’s investment strategy is designed to provide a
total return that, over the long term, increases the ratio of assets
to liabilities. The strategy attempts to maximize the investment
return on assets at a level of risk deemed appropriate by the
Corporation while complying with ERISA and any applicable
regulations and laws. The investment strategy utilizes asset
allocation as a principal determinant for establishing the risk/
return profile of the assets. Asset allocation ranges are
established, periodically reviewed and adjusted as funding levels
and liability characteristics change. Active and passive investment
managers are employed to help enhance the risk/return profile of
the assets. An additional aspect of the investment strategy used
to minimize risk (part of the asset allocation plan) includes
matching the equity exposure of participant-selected earnings
measures. For example, the common stock of the Corporation held
in the trust is maintained as an offset to the exposure related to
participants who elected to receive an earnings measure based
on the return performance of common stock of the Corporation.
No plan assets are expected to be returned to the Corporation
during 2015.
The assets of the Non-U.S. Pension Plans are primarily
attributable to a U.K. pension plan. This U.K. pension plan’s assets
are invested prudently so that the benefits promised to members
are provided with consideration given to the nature and the duration
of the plan’s liabilities. The current investment strategy was set
following an asset-liability study and advice from the trustee’s
investment advisors. The selected asset allocation strategy is
designed to achieve a higher return than the lowest risk strategy
while maintaining a prudent approach to meeting the plan’s
liabilities.
The expected return on asset assumption was developed
through analysis of historical market returns, historical asset class
volatility and correlations, current market conditions, anticipated
future asset allocations, the funds’ past experience, and
expectations on potential future market returns. The expected
return on assets assumption is determined using the calculated
market-related value for the Qualified Pension Plan and the Other
Pension Plan and the fair value for the Non-U.S. Pension Plans
and Postretirement Health and Life Plans. The expected return on
assets assumption represents a long-term average view of the
performance of the assets in the Qualified Pension Plan, the Non-
U.S. Pension Plans, the Other Pension Plan, and Postretirement
Health and Life Plans, a return that may or may not be achieved
during any one calendar year. The terminated Other U.S. Pension
Plan is invested solely in an annuity contract which is primarily
invested in fixed-income securities structured such that asset
maturities match the duration of the plan’s obligations.
The target allocations for 2015 by asset category for the
Qualified Pension Plan, Non-U.S. Pension Plans, Nonqualified and
Other Pension Plans, and Postretirement Health and Life Plans are
presented in the table below.
2015 Target Allocation
Percentage
Asset Category
Qualified
Pension Plan
Non-U.S.
Pension Plans
Nonqualified
and Other
Pension Plans
Postretirement
Health and Life
Plans
Equity securities 30 - 60 10 - 35 0 - 5 0 - 20
Debt securities 40 - 70 40 - 80 95 - 100 70 - 100
Real estate 0 - 10 0 - 15 0 - 5 0 - 5
Other 0 - 5 0 - 15 0 - 5 0 - 5
Equity securities for the Qualified Pension Plan include common stock of the Corporation in the amounts of $215 million (1.15
percent of total plan assets) and $200 million (1.10 percent of total plan assets) at December 31, 2014 and 2013.