SunTrust 2009 Annual Report Download - page 138

SUNTRUST BANKS, INC.
Notes to Consolidated Financial Statements (Continued)
benefits under the existing pension benefit formula after that date and all their accrued benefits were frozen. Beginning
January 1, 2008, Affected Participants who have fewer than 20 years of service and future participants will accrue future
pension benefits under a cash balance formula that provides compensation and interest credits to a Personal Pension Account.
Affected Participants with 20 or more years of service as of December 31, 2007 were given the opportunity to choose
between continuing a traditional pension benefit accrual under a reduced formula or participating in the new Personal
Pension Account. Effective January 1, 2008, the vesting schedule was changed from a 5-year cliff to a 3-year cliff for
participants employed by the Company on and after that date. SunTrust monitors the funded status of the plan closely and
due to the current funded status, SunTrust did not make a contribution for the 2009 plan year.
On October 1, 2004, SunTrust acquired NCF. Prior to the acquisition, NCF sponsored a funded qualified retirement plan, an
unfunded nonqualified retirement plan for some of its participants, and certain other postretirement health benefits for its
employees. Effective December 31, 2004, participants no longer earned future service in the NCF Retirement Plan (qualified
plan), and participants’ benefits were frozen with the exception of adjustments for pay increases after 2004. All former NCF
employees who met the service requirements began to earn benefits in the SunTrust Retirement Plan effective January 1, 2005.
On February 13, 2007, the NCF Retirement Plan was amended to completely freeze benefits for those Affected Participants who
do not elect, or are not eligible to elect, the traditional pension benefit formula in the SunTrust Retirement Plan. The effective
date for changes impacting the NCF Retirement Plan is January 1, 2008. Similar to the SunTrust Retirement Plan, due to the
current funded status of the NCF Retirement Plan, SunTrust did not make a contribution for the 2009 plan year.
SunTrust also maintains unfunded, noncontributory nonqualified supplemental defined benefit pension plans that cover key
executives of the Company. The plans provide defined benefits based on years of service and final average salary. SunTrust’s
obligations for these nonqualified supplemental defined benefit pension plans are included within the qualified Pension Plans
in the tables presented in this section under “Pension Benefits”.
On February 13, 2007, the SERP was amended to reduce the benefit formula for future service accruals. Current participants
in the SunTrust SERP will continue to earn future accruals under a reduced final average earnings formula. All future
participants and ERISA Excess Plan participants will accrue benefits under benefit formulas that mirror the revised benefit
formulas in the SunTrust Retirement Plan. The effective date for changes impacting the SERP was January 1, 2008. After
January 1, 2008, a new SERP cash balance formula was implemented for existing and new participants with no limit on pay
for SERP Tier 2 participants and a minimum preserved benefit for SERP participants at December 31, 2007. On
December 31, 2007, SunTrust Banks, Inc. also adopted an additional written amendment to the SunTrust Banks, Inc. ERISA
Excess Plan. This amendment implemented changes to mirror the cash balance changes in the qualified Pension Plan, but
with an earnings limit of two times the qualified plan’s eligible earnings.
Other Postretirement Benefits
Although not under contractual obligation, SunTrust provides certain health care and life insurance benefits to retired
employees (“Other Postretirement Benefits” in the tables). At the option of SunTrust, retirees may continue certain health
and life insurance benefits if they meet age and service requirements for Other Postretirement Benefits while working for the
Company. The health care plans are contributory with participant contributions adjusted annually, and the life insurance
plans are noncontributory. Employees who have retired or will retire after December 31, 2003 are not eligible for retiree life
insurance or subsidized post-65 medical benefits. Effective January 1, 2008, the pre-65 employer subsidy for medical
benefits was discontinued for participants who will not be age 55 with at least 10 years of service before January 1, 2010.
Certain retiree health benefits are funded in a Retiree Health Trust. In addition, certain retiree life insurance benefits are
funded in a VEBA. SunTrust reserves the right to amend or terminate any of the benefits at any time.
Assumptions
The SunTrust Benefits Plan Committee reviews and approves the assumptions for year-end measurement calculations. A
discount rate is used to determine the present value of future benefit obligations. The discount rate for each plan is
determined by matching the expected cash flows of each plan to a yield curve based on long-term, high quality fixed income
debt instruments available as of the measurement date. A string of benefit payments projected to be paid by the plan for the
next 100 years is developed based on the most recent census data, plan provisions and assumptions. The benefit payments at
each future maturity are discounted by the year-appropriate spot interest rates. The model then solves for the discount rate
that produces the same present value of the projected benefit payments as generated by discounting each year’s payments by
the spot rate. This assumption is reviewed by the SunTrust Benefits Plan Committee and updated every year for each plan. A
rate of compensation growth is used to determine future benefit obligations for those plans whose benefits vary by pay. Due
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