Citibank 2010 Annual Report Download - page 200

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Contributions
Citigroup’s pension funding policy for U.S. plans and non-U.S. plans is
generally to fund to applicable minimum funding requirements rather
than to the amounts of accumulated benefit obligations. For the U.S. plans,
the Company may increase its contributions above the minimum required
contribution under ERISA, if appropriate to its tax and cash position and
the plans’ funded position. For the U.S. pension plans, at December 31,
2010, there were no minimum required cash contributions. During 2010, a
discretionary cash contribution of $995 million was made to the plan. For
the non-U.S. pension plans, discretionary cash contributions in 2011 are
anticipated to be approximately $196 million. In addition, the Company
expects to contribute $41 million of benefits to be paid directly by the
Company for its non-U.S. pension plans. For the U.S. postretirement benefit
plans, there are no expected or required contributions for 2011 other than
$60 million of benefit payments expected to be paid directly by the Company.
For the non-U.S. postretirement benefit plans, expected cash contributions
for 2011 are $74 million including $4 million of benefits to be paid directly
by the Company. These estimates are subject to change, since contribution
decisions are affected by various factors, such as market performance and
regulatory requirements. In addition, management has the ability to change
funding policy.
Estimated Future Benefit Payments
The Company expects to pay the following estimated benefit payments in
future years:
U.S. plans Non-U.S. plans
In millions of dollars
Pension
benefits
Pension
benefits
Postretirement
benefits
2011 $ 737 $ 338 $ 52
2012 757 328 55
2013 772 344 58
2014 786 360 61
2015 804 376 65
2016–2020 4,331 2,214 396
Prescription Drugs
In December 2003, the Medicare Prescription Drug Improvement and
Modernization Act of 2003 (the “Act of 2003”) was enacted. The Act of 2003
established a prescription drug benefit under Medicare known as “Medicare
Part D,” and a federal subsidy to sponsors of U.S. retiree health-care benefit
plans that provide a benefit that is at least actuarially equivalent to Medicare
Part D. The benefits provided to certain participants are at least actuarially
equivalent to Medicare Part D and, accordingly, the Company is entitled to
a subsidy.
The expected subsidy reduced the accumulated postretirement benefit
obligation (APBO) by approximately $139 million and $148 million as of
December 31, 2010 and 2009, respectively, and the postretirement expense by
approximately $9 million and $13 million for 2010 and 2009, respectively.
The following table shows the estimated future benefit payments
without the effect of the subsidy and the amounts of the expected subsidy in
future years:
Expected U.S.
postretirement benefit payments
In millions of dollars
Before Medicare
Part D subsidy
Medicare
Part D subsidy
2011 $116 $13
2012 115 13
2013 114 14
2014 112 14
2015 109 10
2016–2020 504 47
The Patient Protection and Affordable Care Act and the Health Care and
Education Reconciliation Act of 2010 (collectively, the “Act of 2010”) were
signed into law in the U.S. in March 2010. One provision that impacted
Citigroup was the elimination of the tax deductibility for benefits paid that
are related to the Medicare Part D subsidy, starting in 2013. Citigroup was
required to recognize the full accounting impact in 2010, the period in which
the Act of 2010 was signed. As a result, there was a $45 million reduction in
deferred tax assets with a corresponding charge to earnings from continuing
operations. The other provisions of the Act are not expected to have a
significant impact on Citigroup’s pension and post-retirement plans.
Citigroup 401(k)
Under the Citigroup 401(k) plan, a defined-contribution plan, eligible
U.S. employees received matching contributions of up to 4% of their
compensation for 2010, subject to statutory limits. Effective January 1, 2011,
the maximum amount of matching contributions paid on employee deferral
contributions made into this plan will be increased from the 4% to 6% of
eligible pay for all employees, subject to statutory limits. The matching
contribution is invested according to participants’ individual elections.
Additionally, for eligible employees whose compensation is $100,000 or less,
a fixed contribution of up to 2% of compensation is provided.
The pretax expense associated with this plan amounted to approximately
$301 million, $442 million and $580 million in 2010, 2009 and 2008,
respectively. The decrease in expense from 2008 to 2009 reflects the reduction
in participants due to the Morgan Stanley Smith Barney joint venture and
other reductions in workforce, and the decrease from 2009 to 2010 reflects
the 4% matching contribution rate in effect for 2010.