Fannie Mae 2010 Annual Report Download - page 230

Pension Benefits
Defined Benefit Pension Plans
Executive Pension Plan. The Executive Pension Plan was designed to supplement the benefits payable under
our tax-qualified defined benefit retirement plan (the Federal National Mortgage Association Retirement Plan
for Employees Not Covered Under Civil Service Retirement Law or “Retirement Plan”). Mr. Williams is the
only named executive with a benefit under the Executive Pension Plan, and his benefit under the plan was
frozen as of December 31, 2009. Because the Executive Pension Plan is frozen, Mr. Williams’ compensation,
years of service and Retirement Plan benefits earned for years after 2009 are not taken into account in
determining his benefit under the Executive Pension Plan.
Executive Pension Plan benefits vested after ten years of participation in the plan, and Mr. Williams was 90%
vested at the time the plan was frozen. Mr. Williams’ maximum annual pension benefit under the Executive
Pension Plan, based on his status as 90% vested and a pension goal formula of 40%, is 36% of his average
annual covered compensation earned for the years 2007, 2008 and 2009. Covered compensation is
Mr. Williams’ average annual base salary, including deferred compensation, plus eligible incentive
compensation. For this purpose, eligible incentive compensation is limited in the aggregate to 50% of
Mr. Williams’ base salary, and consists of his Annual Incentive Plan cash bonus for 2007 and his 2008
Retention Program awards earned for 2008 and 2009. His payments under the Executive Pension Plan are
reduced by his Retirement Plan benefit determined as of December 31, 2009.
Early retirement is available under the plan at age 55, with a reduction in the plan benefit of 2% for each year
between the year in which benefit payments begin and the year in which the participant turns 60. The benefit
payment for Mr. Williams is a monthly amount equal to 1/12th of his annual retirement benefit payable during
the lives of Mr. Williams and his surviving spouse. If he dies before receiving benefits under the Executive
Pension Plan, his surviving spouse will be entitled to a death benefit that begins when Mr. Williams would
have reached age 55, based on his pension benefit at the date of death.
Supplemental Pension Plan and 2003 Supplemental Pension Plan. The purpose of the Supplemental Pension
Plan is to provide supplemental retirement benefits to employees whose salary exceeds the statutory
compensation cap applicable to the Retirement Plan or whose benefit under the Retirement Plan is limited by
the statutory benefit cap applicable to the Retirement Plan. The purpose of the Supplemental Pension Plan of
2003 (the “2003 Supplemental Pension Plan”) is to provide additional benefits based on eligible incentive
compensation not taken into account under the Retirement Plan or the Supplemental Pension Plan. For
executive officers, eligible incentive compensation includes Annual Incentive Plan bonuses, and awards under
the 2008 Retention Program for 2008 and 2009. Beginning with awards for 2009 performance, eligible
incentive compensation for executive officers also includes deferred pay awards. For purposes of determining
benefits under the 2003 Supplemental Pension Plan, the amount of an officer’s eligible incentive compensation
taken into account is limited in the aggregate to 50% of the officer’s base salary. Benefits under these plans
vest at the same time as benefits under the Retirement Plan, and benefits under these plans typically
commence at the later of age 55 or separation from service.
Messrs. Williams, Hisey and Benson are the only named executives who participate in the Supplemental
Pension Plan and the 2003 Supplemental Pension Plan. In general, officers who are eligible to participate in
the Executive Pension Plan receive the greater of their Executive Pension Plan benefits or combined
Supplemental Pension Plan and 2003 Supplemental Pension Plan benefits. However, for 2010 and 2011,
Mr. Williams will accrue benefits under the Supplemental Pension Plan and the 2003 Supplemental Pension
Plan that will not be offset by his Executive Pension Plan benefit. In light of its decision to freeze
Mr. Williams’ benefit under the Executive Pension Plan, the Board adopted this change, with the approval of
FHFA, to provide Mr. Williams a pension benefit for 2010 and 2011.
Retirement Plan. Participation in the Retirement Plan has been frozen, and employees hired after
December 31, 2007 and employees who did not satisfy the age and service requirements to be grandfathered
participants under the Retirement Plan do not earn benefits under the Retirement Plan. Prior to 2007,
participation in the Retirement Plan was generally available to employees. Participants are fully vested in the
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