Freddie Mac 2014 Annual Report Download - page 266

261 Freddie Mac
in or after August 2011, the form of agreement has been revised to provide that indemnification rights under the agreement
would terminate if and when the executive officer remained with Freddie Mac after ceasing to report directly to the CEO with
respect to any claims arising from matters occurring after the officer was no longer a direct CEO report. Similar
indemnification rights would continue to be available to such executive officers under the Bylaws going forward. The
indemnification agreements provide that we will indemnify the indemnitee to the fullest extent permitted by our Bylaws and
Virginia law. This obligation includes, subject to certain terms and conditions, indemnification against all liabilities and
expenses (including attorneys’ fees) actually and reasonably incurred by the indemnitee in connection with any threatened or
pending action, suit or proceeding, except such liabilities and expenses as are incurred because of the indemnitee’s willful
misconduct or knowing violation of criminal law. The indemnification agreements provide that if requested by the indemnitee,
we will advance expenses, subject to repayment by the indemnitee of any funds advanced if it is ultimately determined that the
indemnitee is not entitled to indemnification. The rights to indemnification under the indemnification agreements are not
exclusive of any other right the indemnitee may have under any statute, agreement or otherwise. Our obligations under the
indemnification agreements will continue after the indemnitee is no longer a director or officer of the company with respect to
any possible claims based on the fact that the indemnitee was a director or officer, and the indemnification agreements will
remain in effect in the event the conservatorship is terminated. The indemnification agreements also provide that
indemnification for actions instituted by FHFA will be governed by the standards set forth in FHFA's Notice of Proposed
Rulemaking, published in the Federal Register on November 14, 2008, implementing 12 U.S.C. 4518. That proposed
rulemaking has not yet been finalized. In the preamble to FHFA's final rule on Golden Parachute Payments, published in the
Federal Register on January 28, 2014, FHFA indicated that a final rule on indemnification payment provisions remains under
review.
Other Executive Compensation Considerations
Effect of Termination of Employment
Under the 2014 EMCP, Base Salary ceases upon an NEO’s termination of employment, regardless of the reason for such
termination. The timing and payment of any unpaid portion of Deferred Salary and related interest is based upon the reason for
termination, as discussed in “Potential Payments Upon Termination of Employment or Change-in-Control — Potential
Payments Under the 2014 EMCP.”
Perquisites
We believe that perquisites should be a minimal part of the compensation package for our NEOs. Total annual
perquisites for any NEO cannot exceed $25,000 without FHFA approval, and we do not provide a gross-up to cover any taxes
due on the perquisite itself. The only perquisite provided to our NEOs during 2014 was reimbursement for assistance with
personal financial planning, tax planning, and/or estate planning, up to an annual maximum benefit.
Supplemental Executive Retirement Plan and Supplemental Executive Retirement Plan II
Our NEOs are eligible to participate in our SERP. The SERP is designed to provide participants with the full amount of
benefits to which they would have been entitled under our Thrift/401(k) Plan if that plan was not subject to certain dollar limits
under the Internal Revenue Code. This portion of the SERP is referred to as the “401(k) SERP Benefit.” For participants
covered under the 2014 EMCP (or similar predecessor program), benefits under the 401(k) SERP Benefit are limited to two
times a participant’s Base Salary in any calendar year.
Prior to January 1, 2014, NEOs whose employment with the company commenced on or before December 31, 2011 were
also eligible under the SERP to accrue additional benefits, referred to as the “Pension SERP Benefit,” which was designed to
provide participants with the full amount of benefits to which they would have been entitled under our Pension Plan if that plan
was not subject to certain dollar limits under the Internal Revenue Code. Benefits were also limited as noted in the previous
paragraph. In October 2013, FHFA directed us to terminate the Pension Plan as well as the Pension SERP Benefit and the
pre-2005 Thrift/401(k) SERP component (together, the “Terminating SERP”). No Pension Plan accruals or Pension SERP
Benefit accruals occurred after December 31, 2013. The accruals associated with the Terminating SERP were fully distributed
by October 31, 2014.
On February 18, 2015, FHFA approved, effective January 1, 2014, a new nonqualified retirement plan, referred to as
SERP II. The SERP II is intended to provide participants with the full amount of benefits to which they would have been
entitled under our tax-qualified defined contribution Transitional Plan established in January 2014 (described above in “Item
9B. Other Information” and below in the footnotes to the "Summary Compensation Table") if that plan was not subject to
certain dollar limits under the Internal Revenue Code. Benefits are also limited for participants covered under the 2014 EMCP
(or similar predecessor program) as noted earlier in this section.
For additional information regarding these benefits, see “Compensation Tables” below and the discussion of
“Nonqualified Deferred Compensation” following the "Pension Benefits" table.
Stock Ownership, Hedging and Pledging Policies
FHFA approved the suspension of our previous stock ownership guidelines because we ceased paying our executives
stock-based compensation. The Purchase Agreement prohibits us from issuing any shares of our equity securities without the
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