Freddie Mac 2009 Annual Report Download - page 292

Cash Flows Related to Defined Benefit Plans
Our general practice is to contribute to our Pension Plan an amount equal to at least the minimum required contribution,
if any, but no more than the maximum amount deductible for federal income tax purposes each year. We made a
contribution to our Pension Plan of $74 million during 2009 in an effort to fully fund the Pension Plan’s projected benefit
obligation. In 2008, we made a contribution to our Pension Plan of approximately $16.5 million. We have not yet
determined whether a contribution to our Pension Plan is required for 2010.
In addition to the Pension Plan contributions noted above, we paid $6 million during 2009 and $2 million during 2008
in benefits under our SERP. Allocations under our SERP, as well as our Retiree Health Plan, are in the form of benefit
payments, as these plans are unfunded.
Table 16.9 sets forth estimated future benefit payments expected to be paid for our defined benefit plans. The expected
benefits are based on the same assumptions used to measure our benefit obligation at December 31, 2009.
Table 16.9 — Estimated Future Benefit Payments
Pension Benefits
Postretirement
Health Benefits
(in millions)
2010 . . ........................................................................ $ 13 $ 3
2011 . . ........................................................................ 15 4
2012 . . ........................................................................ 17 4
2013 . . ........................................................................ 20 5
2014 . . ........................................................................ 22 5
Years 2015-2019 .................................................................. 160 36
Defined Contribution Plans
Our Thrift/401(k) Savings Plan, or Savings Plan, is a tax-qualified defined contribution pension plan offered to all
eligible employees. Employees are permitted to contribute from 1% to 25% of their eligible compensation to the Savings
Plan, subject to limits set by the Internal Revenue Code. We match employees’ contributions up to 6% of their eligible
compensation per year, with such matching contributions being made each pay period; the percentage matched depends upon
the employee’s length of service. Employee contributions and our matching contributions are immediately vested. We also
have discretionary authority to make additional contributions to our Savings Plan that are allocated to each eligible
employee, based on the employee’s eligible compensation. Employees become vested in our discretionary contributions
ratably over such employee’s first five years of service, after which time employees are fully vested in their discretionary
contribution accounts. In addition to our Savings Plan, we maintain a non-qualified defined contribution plan for our officers,
designed to make up for benefits lost due to limitations on eligible compensation imposed by the Internal Revenue Code,
and to make up for deferrals of eligible compensation under both our Executive Deferred Compensation Plan and our
Mandatory Executive Deferred Base Salary Plan. We incurred costs of $40 million, $33 million and $36 million for the years
ended December 31, 2009, 2008 and 2007, respectively, related to these plans. These expenses were included in salaries and
employee benefits on our consolidated statements of operations.
Executive Deferred Compensation Plan and Mandatory Executive Deferred Base Salary Plan
Our Executive Deferred Compensation Plan is an unfunded, non-qualified plan that allows officers to elect to defer
substantially all or a portion of their corporate-wide annual cash bonus and up to 80% of their eligible annual salary for any
number of years specified by the employee.
In December 2009, we adopted, with the approval of FHFA and in consultation with Treasury, the Mandatory Executive
Deferred Base Salary Plan covering compensation of our officers at the level of senior vice president and above. This plan is
unfunded and is effective beginning in 2009 and is part of a compensation design for senior executives that we believe will
remain in place throughout the conservatorship. Part of this design requires that a portion of a senior executive’s base salary
be mandatorily deferred until the following year. The Mandatory Executive Deferred Base Salary Plan is a mechanism by
which these deferrals and the corresponding cash distributions are made. Our SERP has also been amended to generally
include compensation deferred under the Mandatory Executive Deferred Base Salary Plan.
Distributions under these two deferred compensation plans are paid from our general assets. We record a liability equal
to the accumulated deferred salary, cash bonus and accrued interest, as applicable, net of any related distributions made to
plan participants.
NOTE 17: SEGMENT REPORTING
Effective December 1, 2007, management determined that our operations consist of three reportable segments. As
discussed below, we use Segment Earnings to measure and assess the financial performance of our segments. Segment
Earnings is calculated for the segments by adjusting GAAP net income (loss) attributable to Freddie Mac for certain
investment-related activities and credit guarantee-related activities. The Segment Earnings measure is provided to the chief
289 Freddie Mac