Fannie Mae 2006 Annual Report Download - page 296

entitled to a subsidy under the Act, which reduces the accumulated postretirement benefit obligation attributed
to past service and the net periodic postretirement benefit cost for the current period. We adopted FASB Staff
Position No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug,
Improvement and Modernization Act of 2003” (“FSP 106-2”) prospectively as of July 1, 2004. The Act’s
impact on expected benefit payments is also displayed in the table below.
Qualified Nonqualified
Before Medicare
Part D Subsidy
Medicare
Part D Subsidy
Pension Benefits
Other Post Retirement Benefits
Expected Retirement Plan Benefit Payments
(Dollars in millions)
2007................................ $ 12 $ 5 $ 4 $—
2008................................ 14 5 5 —
2009................................ 16 6 6 1
2010................................ 20 6 7 1
2011................................ 23 7 8 1
2012—2016 .......................... 188 55 56 5
Defined Contribution Plans
Retirement Savings Plan
The Retirement Savings Plan is a defined contribution plan that includes a 401(k) before-tax feature, a regular
after-tax feature and as of 2006, a Roth after-tax feature. Under the plan, eligible employees may allocate
investment balances to a variety of investment options. We match employee contributions up to 3% of base
salary in cash (maximum of $6,600 for 2006, $6,300 for 2005 and $6,150 for 2004). For the years ended
December 31, 2006, 2005 and 2004, the maximum employee contribution as established by the IRS was
$15,000, $14,000 and $13,000, respectively, with additional “catch-up” contributions permitted for participants
aged 50 and older of $5,000, $4,000 and $3,000, respectively. As of December 31, 2006, participants vested in
our contributions beginning at two years of participation and became fully vested after five years of
participation. There was no option to invest directly in our common stock for the years ended December 31,
2006, 2005 and 2004. We recorded expense of $15 million, $14 million and $13 million for the years ended
December 31, 2006, 2005 and 2004, respectively, as “Salaries and employee benefits expense” in the
consolidated statements of income.
Employee Stock Ownership Plan
We have an Employee Stock Ownership Plan (“ESOP”) for eligible employees who are regularly scheduled to
work at least 1,000 hours in a calendar year. Participation is not available to participants in the Executive
Pension Plan. Under the plan, we may contribute annually to the ESOP an amount up to 4% of the aggregate
eligible salary for all participants at the discretion of the Board of Directors or based on achievement of
defined corporate goals as determined by the Board. We may contribute either shares of Fannie Mae common
stock or cash to purchase Fannie Mae common stock. When contributions are made in stock, the per share
price is determined using the average high and low market prices on the day preceding the contribution.
Compensation cost is measured as the fair value of the shares or cash contributed to, or to be contributed to,
the ESOP. We record these contributions as “Salaries and employee benefits” expense in the consolidated
statements of income. Expense recorded in connection with the ESOP was $11 million, $10 million and
$9 million for the years ended December 31, 2006, 2005 and 2004, respectively, based on actual contributions
of 2% of salary for each of the reported years. The fair value of unearned ESOP shares, which represents the
fair value of common shares issued or treasury shares sold to the ESOP, was $2 million and $1 million as of
December 31, 2006 and 2005, respectively.
F-65
FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)