SunTrust 2013 Annual Report Download - page 173

Notes to Consolidated Financial Statements, continued
157
(Dollars in millions)
Fair Value
Measurements at
December 31, 2012 1
Assets Measured
at Fair Value at
December 31, 2012
Quoted Prices In
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Mutual funds:
Equity index fund $49 $49 $— $—
Tax exempt municipal bond funds 86 86 — —
Taxable fixed income index funds 14 14 — —
Money market funds 15 15 — —
Total plan assets $164 $164 $— $—
1 Schedule does not include accrued income.
The SunTrust Benefits Finance Committee establishes investment policies and strategies and formally monitors the
performance of the investments throughout the year. The Company’s investment strategy with respect to pension assets is to
invest the assets in accordance with ERISA and related fiduciary standards. The long-term primary investment objectives for
the Pension Plans are to provide for a reasonable amount of long term growth of capital (both principal and income) without
undue exposure to risk in any single asset class or investment category and to enable the Pension Plan to provide benefits to
participants thereof. The objectives are accomplished through investments in equities, fixed income, and cash equivalents in
a mix that is conducive to participation in a rising market while allowing for protection in a declining market. The portfolio
is viewed as long-term in its entirety, avoiding decisions regarding short-term concerns and any single investment. Asset
allocation, as a percent of the total market value of the total portfolio, is set with the target percentages and ranges presented
in the investment policy statement. Rebalancing occurs on a periodic basis to maintain the target allocation, but normal market
activity may result in deviations. During 2013 and 2012, there was no SunTrust common stock held in the Pension Plans.
The basis for determining the overall expected long-term rate of return on plan assets considers past experience, current market
conditions, and expectations on future trends. A building block approach is used that considers long-term inflation, real returns,
equity risk premiums, target asset allocations, market corrections (for example, narrowing of fixed income spreads between
corporate bonds and U.S. Treasuries), and expenses. Capital market simulations from internal and external sources, survey
data, economic forecasts, and actuarial judgment are all used in this process.
The expected long-term rate of return on plan assets for the SunTrust Retirement Plan and the NCF Retirement Plan was
7.00% for 2013 and 2012. The expected long-term rate of return is 7.00% for the SunTrust Retirement Plan and 6.5% for the
NCF Retirement Plan for 2014. The asset allocation for the Pension Plans combined and the target allocation for each, by
asset category, are as follows:
Target
Allocation
Percentage of Plan Assets
at December 31
Asset Category 2014 2013 2012
Equity securities 0-60 % 48% 59%
Debt securities 40-100 49 39
Cash equivalents 0-10 3 2
Total 100% 100%
The investment strategy for the Other Postretirement Benefit Plans is maintained separately from the strategy for the Pension
Plans. The Company’s investment strategy is to create a series of investment returns sufficient to provide for a reasonable
amount of long term growth of capital (both principal and income) to enable the Plans to provide benefits to participants
thereof. During 2012, the assets were diversified among equity funds and fixed income investments according to the asset
mix approved by the SunTrust Benefits Finance Committee, which is presented in the target allocation table below. With the
Other Post Retirement Benefits having a shorter time horizon, a lower equity profile is appropriate. The pre-tax expected long-
term rate of return on retiree life plan assets was 5% for 2013 and 6.25% for 2012. The 2014 pre-tax expected long-term rate
of return on retiree life plan assets is 5.25%. The after-tax expected long-term rate of return on retiree health plan assets was
3.25% for 2013 and 4.06% for 2012. The 2014 after-tax expected long-term rate of return on retiree health plan assets is
3.41%. During 2013 and 2012, there was no SunTrust common stock held in the Other Postretirement Benefit Plans.