Freddie Mac 2010 Annual Report Download - page 322

the Internal Revenue Code; and (b) did not exclude from compensation Deferred Base Salary and amounts deferred under
our EDCP. For example, in 2010 under the Internal Revenue Code, only the first $245,000 of an employee’s compensation is
considered when determining our percentage-based matching contribution and the basic contribution for any participant in
the Thrift/401(k) Savings Plan. 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 Thrift/401(k) SERP Benefit is an appropriate benefit because offering such a
benefit helps us remain competitive with companies in the Comparator Group.
The Thrift/401(k) SERP Benefit equals the amount of the employer matching contributions and basic contribution for
each Named Executive Officer that would have been made to the Thrift/401(k) Savings Plan during the year, based upon the
participant’s eligible compensation, without application of the above limits, less the amount of the matching contributions
and basic contribution actually made to the Thrift/401(k) Savings Plan during the year. Participants are credited with earnings
or losses in their Thrift/401(k) SERP Benefit accounts based upon each participant’s individual direction of the investment of
such notional amounts among the virtual investment funds available under the SERP. Such investment options are based upon
and mirror the performance of the investment options available under the Thrift/401(k) Savings Plan. As of December 31,
2010, there were 20 investment options in which participants’ notional amounts could be deemed invested.
To be eligible for the Thrift/401(k) SERP Benefit, the Named Executive Officer must be eligible for matching
contributions and basic contributions under the Thrift/401(k) Savings Plan for part of the year. In addition, to be eligible for
the portion of the Thrift/401(k) SERP Benefit attributable to employer matching contributions, the Named Executive Officer
must contribute the maximum amount permitted under the terms of the Thrift/401(k) Savings Plan on a pre-tax basis
throughout the entire portion of the year in which the Named Executive Officer is eligible to make such contributions. That
portion of the Thrift/401(k) SERP Benefit is vested when accrued, while the accrual relating to the basic contribution paid
prior to 2008 is subject to five-year cliff vesting, and the accrual relating to the basic contribution paid in 2008 and later
years is subject to five-year graded vesting of 20% per year. The Thrift/401(k) SERP Benefits that vest on or after January 1,
2005 are generally distributed in a lump sum payable 90 days after the end of the calendar year in which separation from
service occurs. 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. If the Named Executive Officer dies, the vested Thrift/
401(k) SERP Benefit is paid in the form of a lump sum within 90 days of death.
Thrift/401(k) SERP Benefits that vested prior to January 1, 2005 are generally distributed after separation from service
(other than retirement) in the form of three reasonably equal annual installments, starting in the first quarter of the calendar
year following the year in which the separation from service occurs. In the case of retirement, the vested pre-2005 Thrift/
401(k) SERP Benefit is combined with the vested pre-2005 Pension SERP Benefit and is payable in the form of a single life
annuity at age 65 (or in a series of reasonably equal installments over 15 years commencing with retirement if actuarial
estimates indicate that this payment form would yield a longer period of payment). In the case of death, the vested pre-2005
Thrift/401(k) SERP Benefit is paid in the form of a lump sum within 90 days of such event.
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