AIG 2011 Annual Report Download - page 359

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AIG, its subsidiaries and certain affiliated companies offer various defined benefit plans to eligible employees
based on years of service.
AIG’s U.S. qualified retirement plan is a noncontributory defined benefit plan which is subject to the provisions
of ERISA. U.S. salaried employees who are employed by a participating company, have attained age 21 and
completed 12 months of continuous service are eligible to participate in the plan. Employees generally vest after
five years of service. Unreduced benefits are paid to retirees at normal retirement (age 65) and are based upon a
percentage of final average compensation multiplied by years of credited service, up to 44 years. Non-U.S. defined
benefit plans are generally either based on the employee’s years of credited service and compensation in the years
preceding retirement or on points accumulated based on the employee’s job grade and other factors during each
year of service.
AIG also sponsors several non-qualified unfunded defined benefit plans for certain employees, including key
executives, designed to supplement pension benefits provided by AIG’s other retirement plans. These include the
AIG Excess Retirement Income Plan (Excess), which provides a benefit equal to the reduction in benefits payable
to certain employees under the AIG U.S. qualified retirement plan as a result of federal tax limitations on
compensation and benefits payable and the Supplemental Executive Retirement Plan (Supplemental), which
provides additional retirement benefits to designated executives. Under the Supplemental plan, an annual benefit
accrues at a percentage of final average pay multiplied by each year of credited service, not greater than
60 percent of final average pay, reduced by any benefits from the current and any predecessor retirement plans
(including the Excess Plan and any comparable plans), Social Security, if any, and from any qualified pension plan
of prior employers. AIG has complied with the Special Master for TARP Executive Compensation’s mandate to
suspend future benefits in the non-qualified retirement plans for the Top 100 most highly compensated employees
of AIG. The impact to AIG’s financial statements was not significant.
Effective April 1, 2012, the AIG Retirement and AIG Excess Plans will be converted from final average pay to
cash balance formulas comprised of pay credits based on 6 percent of a plan participant’s annual compensation
(subject to IRS limitations for the qualified plan) and annual interest credits. However, employees satisfying
certain age and service requirements remain covered under the final average pay formula in the respective plans.
AIG and its subsidiaries also provide postretirement medical care and life insurance benefits in the U.S. and in
certain non-U.S. countries. Eligibility in the various plans is generally based upon completion of a specified period
of eligible service and attaining a specified age. Overseas, benefits vary by geographic location.
U.S. postretirement medical and life insurance benefits are based upon the employee electing immediate
retirement and having a minimum of ten years of service. Medical benefits are contributory, while the life
insurance benefits are generally non-contributory. Retiree medical contributions vary from requiring no cost for
pre-1989 retirees to requiring actual premium payments reduced by certain credits for post-1993 retirees. These
contributions are subject to adjustment annually. Other cost sharing features of the medical plan include
deductibles, coinsurance and, Medicare coordination. Effective April 1, 2012, the retiree medical employer subsidy
for the AIG Postretirement plan will be eliminated for certain employees.
AIG 2011 Form 10-K 345
20. EMPLOYEE BENEFITS
PENSION PLANS
POSTRETIREMENT PLANS