Freddie Mac 2010 Annual Report Download - page 321

Supplemental Executive Retirement Plan — Pension SERP Benefit
The Pension SERP Benefit component of the SERP is designed to provide participants with the full amount of benefits
to which they would have been entitled under the Pension Plan if that plan: (a) was not subject to certain limits on
compensation that can be taken into account under the Internal Revenue Code; and (b) did not exclude from “compensation”
Deferred Base Salary and amounts deferred under our Executive Deferred Compensation Plan. For example, the Pension Plan
is only permitted under the Internal Revenue Code to consider the first $245,000 of an employee’s compensation during 2010
for the purpose of determining the participant’s compensation-based normal retirement benefit. Effective January 1, 2010, the
SERP was amended to provide that the maximum covered compensation for purposes of the SERP, relative to a Covered
Officer, may not exceed two times the Covered Officer’s Semi-Monthly Base Salary. We believe the Pension SERP Benefit is
an appropriate benefit because offering such a benefit helps us remain competitive with companies in the Comparator Group.
The Pension SERP Benefit is calculated as the participant’s accrued annual benefit payable at age 65 (or current age, if
greater) under the Pension Plan without application of the limits described in the preceding paragraph, less the participant’s
actual accrued benefit under the Pension Plan. The Pension SERP Benefit is vested for each participant to the same extent
that the participant is vested in the corresponding benefit under the Pension Plan.
To be eligible for the Pension SERP Benefit for any year, the Named Executive Officer must be eligible to participate in
the Pension Plan.
Pension SERP Benefits that vest on or after January 1, 2005 are generally distributed in a lump sum after separation
from service and are payable 90 days after the end of the calendar year in which separation occurs. Subject to plan
limitations and restrictions under Internal Revenue Code Section 409A, employees may elect that this portion of the Pension
SERP Benefit be paid upon separation in the form of a single life annuity at age 65 or in reasonably equal annual
installments over five, 10 or 15 years (including interest). Under IRS rules, distributions to so-called “key employees” (as
defined by the IRS in regulations concerning Internal Revenue Code Section 409A) on account of separation from service
may not commence earlier than six months from the key employee’s separation from service. Payments under the SERP will
be delayed if necessary to meet this requirement. In the case of death, the Pension SERP Benefit is distributed as a lump
sum within 90 days of such event.
Pension SERP Benefits that vested prior to January 1, 2005 are generally distributed after separation from service (other
than retirement) in the form of a single life annuity commencing at age 65. In the case of retirement, the vested pre-2005
Pension SERP Benefit is combined with the vested pre-2005 Thrift/401(k) SERP Benefit and is paid out in the form of a
single life annuity payable at age 65 (or in a series of reasonably equal installments over 15 years commencing with
retirement if actuarial estimates indicate that payment form would yield a longer period of payment). In the case of death,
the vested pre-2005 Pension SERP Benefit is paid in the form of a lump sum within 90 days of such event.
Non-qualified Deferred Compensation
Executive Deferred Compensation Plan
The EDCP allows the Named Executive Officers to defer receipt of a portion of their annual salary and cash bonus (and
to defer settlement of RSUs granted between 2002 and 2007). The EDCP is a non-qualified plan and is unfunded (benefits
are paid from our general assets). Pursuant to the plan, deferrals may be made for a period of whole years as elected by the
employee, but in no event past termination of employment. Deferred amounts are credited with interest, which is currently
the prime rate as reported by the Wall Street Journal as of the first business day of the applicable calendar year, plus 1%.
When employees make deferral elections for a particular year, they also specify the form in which the deferral will be
distributed after the expiration of the election. The available selections are lump sum or reasonably equal installments over
five, 10, or 15 years. A six-month delay in commencement of distributions on account of separation from service applies to
key employees, in accordance with Internal Revenue Code Section 409A. Hardship withdrawals are permitted in certain
limited circumstances.
On October 8, 2008, we amended the EDCP to permit participants to make a one-time election by October 31, 2008 to
change the timing and form of the distribution of their existing non-equity balances in the EDCP. Messrs. Federico and
Bisenius elected new in-service distributions scheduled to be paid in three installments in March 2009, December 2009, and
May 2010. None of the other Named Executive Officers have made deferrals under the EDCP. In December 2010, we
advised participants in the EDCP that we are suspending deferrals of pay under the EDCP during calendar year 2011, and
that we will review future deferral options during the fourth quarter of 2011.
Supplemental Executive Retirement Plan — Thrift/401(k) SERP Benefit
The Thrift/401(k) SERP Benefit component of the SERP is an unfunded, nonqualified defined contribution plan
designed to provide participants with the full amount of benefits that they would have been entitled to under the Thrift/
401(k) Savings Plan if that plan: (a) was not subject to certain limits on compensation that can be taken into account under
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