US Bank 2005 Annual Report Download - page 88

For the years ended December 31, 2005, 2004 and 2003, outstanding convertible notes that could potentially be
options to purchase 16 million, 36 million and 79 million converted into shares of the Company’s common stock
shares, respectively, were outstanding but not included in pursuant to a specified formula, were not included in the
the computation of diluted earnings per share because they computation of diluted earnings per share because they
were antidilutive. For the year ended December 31, 2005, were antidilutive.
EMPLOYEE BENEFITS
Employee Investment Plan The Company has a defined In general, the Company’s pension plan objectives
contribution retirement savings plan which allows qualified include maintaining a funded status sufficient to meet
employees to make contributions up to 50 percent of their participant benefit obligations over time while reducing
annual compensation, subject to Internal Revenue Service long-term funding requirements and pension costs. The
limits, through salary deductions under Section 401(k) of Company has an established process for evaluating all the
the Internal Revenue Code. Employee contributions are plans, their performance and significant plan assumptions,
invested, at the employees’ direction, among a variety of including the assumed discount rate and the long-term rate
investment alternatives. Employee contributions are of return (LTROR). At least annually, an independent
100 percent matched by the Company, up to four percent consultant is engaged to assist U.S. Bancorp’s Compensation
of an employee’s eligible annual compensation. The Committee (‘‘the Committee’’) in evaluating plan objectives,
Company’s matching contribution vests immediately; funding policies and plan investment policies considering its
however, a participant must be employed in an eligible long-term investment time horizon and asset allocation
position on the last business day of the year to receive that strategies. The process also evaluates significant plan
year’s matching contribution. Although the matching assumptions. Although plan assumptions are established
contribution is initially invested in the Company’s common annually, the Company may update its analysis on an
stock, an employee can reinvest the matching contributions interim basis in order to be responsive to significant events
among various investment alternatives. Total expense was that occur during the year, such as plan mergers and
$53 million, $49 million and $49 million in 2005, 2004 amendments.
and 2003, respectively. In addition to the funded qualified retirement plan, the
Company maintains a non-qualified plan that is unfunded
Pension Plans Pension benefits are provided to substantially and the aggregate accumulated benefit obligation exceeds
all employees based on years of service and employees’ the assets. The assumptions used in computing the present
compensation while employed with the Company. value of the accumulated benefit obligation, the projected
Employees are fully vested after five years of service. Prior benefit obligation and net pension expense are substantially
to their acquisition dates, employees of certain acquired consistent with those assumptions used for the funded
companies were covered by separate, noncontributory qualified plan. The Company recognized a settlement loss of
pension plans that provided benefits based on years of $4 million on this plan in 2003, related to the level of
service and compensation. Generally, the Company merges payouts made from the plan.
plans of acquired companies into its existing pension plans
when it becomes practicable. Funding Practices The Company’s funding policy is to
Under the current plan’s benefit structure, a contribute amounts to its plans sufficient to meet the
participant’s future retirement benefits are based on a minimum funding requirements of the Employee Retirement
participant’s highest five-year average annual compensation Income Security Act of 1974, plus such additional amounts
during his or her last 10 years before retirement or as the Company determines to be appropriate. No
termination from the Company. Prior to the merger with contributions were made in 2004 or 2005. In 2006, the
Firstar Corporation, two of the previous companies had Company anticipates no minimum funding requirement and
cash balance pension benefit structures under which the therefore does not expect to make any contributions to the
participants earned retirement benefits based on their plan. Contributions made to the plan were invested in
average compensation over their entire career, while the accordance with established investment policies and asset
former Firstar Corporation retirement benefit structure was allocation strategies.
based on final average pay and years of service, similar to Investment Policies and Asset Allocation In establishing its
the current plan. Plan assets primarily consist of various investment policies and asset allocation strategies, the
equities, equity mutual funds and other miscellaneous Company considers expected returns and the volatility
assets. associated with different strategies. An independent
consultant performs modeling that projects numerous
86 U.S. BANCORP
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