Bank of America 2015 Annual Report Download - page 215

Bank of America 2015 213
NOTE 17 Employee Benefit Plans
Pension and Postretirement Plans
The Corporation sponsors a qualified noncontributory trusteed
pension plan, a number of noncontributory nonqualified pension
plans, and postretirement health and life plans that cover eligible
employees. Non-U.S. pension plans sponsored by the Corporation
vary based on the country and local practices.
In 2013, the Corporation merged a defined benefit pension
plan, which covered eligible employees of certain legacy
companies, into the legacy Bank of America Pension Plan (the
Pension Plan). This merged plan is referred to as the Qualified
Pension Plan. The merger resulted in a remeasurement of the
qualified pension obligations and plan assets at fair value as of
the merger date which increased accumulated OCI by $2.0 billion,
net-of-tax. The benefit structures under the merged legacy plans
have not changed and remain intact in the Qualified Pension Plan.
Benefits earned under the Qualified Pension Plan have been
frozen. Thereafter, the cash balance accounts continue to earn
investment credits or interest credits in accordance with the terms
of the plan document.
It is the policy of the Corporation to fund no less than the
minimum funding amount required by the Employee Retirement
Income Security Act of 1974 (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.
The Corporation has an annuity contract that guarantees the
payment of benefits vested under a terminated U.S. pension plan
(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
2015 or 2014. Contributions may be required in the future under
this agreement.
The Corporation’s noncontributory, nonqualified pension plans
are unfunded and provide supplemental defined pension benefits
to certain eligible employees.
In addition to retirement pension benefits, certain benefits
eligible to 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. 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, 2015 and 2014. Amounts recognized at December
31, 2015 and 2014 are reflected in other assets, and in accrued
expenses and other liabilities on the Consolidated Balance Sheet.
The estimate of the Corporation’s PBO associated with these plans
considers various actuarial assumptions, including assumptions
for mortality rates and discount rates. As of December 31, 2014,
the Corporation adopted mortality assumptions published by the
Society of Actuaries in October 2014, adjusted to reflect observed
and anticipated future mortality experience of the participants in
the Corporation’s U.S. plans. The adoption of the new mortality
assumptions resulted in an increase of the PBO of approximately
$580 million at December 31, 2014. The discount rate
assumptions are derived from a cash flow matching technique that
utilizes rates that are based on Aa-rated corporate bonds with cash
flows that match estimated benefit payments of each of the plans.
The increase in the weighted-average discount rates in 2015
resulted in a decrease to the PBO of approximately $930 million
at December 31, 2015. The decrease in the weighted-average
discount rates in 2014 resulted in an increase to the PBO of
approximately $1.9 billion at December 31, 2014.