Wells Fargo 2009 Annual Report Download - page 169


Note 19: Employee Benefits and Other Expenses
Employee Benefits
We sponsor a noncontributory qualified defined benefit
retirement plan, the Wells Fargo & Company Cash Balance
Plan (Cash Balance Plan), which covers eligible employees
of Wells Fargo; the benefits earned under the Cash Balance
Plan were frozen effective July 1, 2009.
On April 28, 2009, the Board of Directors approved amend-
ments to freeze the benefits earned under the Wells Fargo
qualified and supplemental Cash Balance Plans and the
Wachovia Corporation Pension Plan, a cash balance plan
that covered eligible employees of the legacy Wachovia
Corporation, and to merge the Wachovia Pension Plan into
the qualified Cash Balance Plan. These actions became
effective on July 1, 2009.
Prior to July 1, 2009, eligible employees’ cash balance
plan accounts were allocated a compensation credit based
on a percentage of their qualifying compensation. The
compensation credit percentage was based on age and years
of credited service. The freeze discontinues the allocation
of compensation credit for services after June 30, 2009.
Investment credits continue to be allocated to participants
based on their accumulated balances. Employees become
vested in their Cash Balance Plan accounts after completing
three years of vesting service.
Freezing and merging the above plans effective July 1,
2009, resulted in a re-measurement of the pension obligations
and plan assets as of April 30, 2009. Freezing and re-measuring
decreased the pension obligations by approximately
$945 million and decreased cumulative OCI by approximately
$725 million pre tax ($456 million after tax) in second quarter
2009. The re-measurement resulted in a decrease in the fair
value of plan assets of approximately $150 million. We used a
discount rate of 7.75% for the April 30, 2009, re-measurement
based on our consistent methodology of determining our
discount rate based on an established yield curve developed
by our outside actuarial firm. This methodology incorporates
a broad group of top quartile Aa or higher rated bonds.
As a result of freezing our pension plans, we revised our
amortization life for actuarial gains and losses from 5 years
to 13 years to reflect the estimated average remaining
participation period.
These actions lowered pension cost by approximately
$500 million for 2009, including $67 million of one-time cur-
tailment gains.
We did not make a contribution to our Cash Balance Plan
in 2009. We do not expect that we will be required to make a
contribution to the Cash Balance Plan in 2010; however, this
is dependent on the finalization of the actuarial valuation.
Our decision of whether to make a contribution in 2010 will
be based on various factors including the actual investment
performance of plan assets during 2010. Given these uncer-
tainties, we cannot estimate at this time the amount, if any,
that we will contribute in 2010 to the Cash Balance Plan. The
total amount contributed for our other pension plans in 2009
was $83 million. For the unfunded nonqualified pension
plans and postretirement benefit plans, we will contribute the
minimum required amount in 2010, which equals the benefits
paid under the plans. In 2009, we paid $167 million in benefits
for the postretirement plans, which included $79 million in
retiree contributions.
We sponsor defined contribution retirement plans includ-
ing the Wells Fargo & Company 401(k) Plan (401(k) Plan)
and the Wachovia Savings Plan (Savings Plan). We also have
a frozen defined contribution plan resulting from a company
acquired by Wachovia. No contributions are permitted to
that plan. Under the 401(k) Plan, after one month of service,
eligible employees may contribute up to 25% of their pre-tax
qualifying compensation, although there may be a lower limit
for certain highly compensated employees in order to main-
tain the qualified status of the 401(k) Plan. Eligible employees
who complete one year of service are eligible for matching
company contributions, which are generally a 100% match
up to 6% of an employee’s qualifying compensation. Prior
to January 1, 2010, matching contributions generally vested
over the first four years of an eligible employee’s service
period. Effective January 1, 2010, prior and future matching
contributions will be 100% vested.
Under the Savings Plan, after one month of service, eligi-
ble employees may contribute up to 30% of their qualifying
compensation on a pre tax, Roth, or after-tax basis, although
there may be a lower limit for certain highly compensated
employees in order to maintain the qualified status of this
Savings Plan. Eligible employees who complete one year
of service are eligible for matching company contributions,
which are generally a 100% match up to 6% of an employee’s
qualifying compensation. The matching contributions vest
immediately. Effective December 31, 2009, the Savings Plan
was merged with the 401(k) Plan.
In 2009, the 401(k) Plan and the Savings Plan were
amended to permit us to make discretionary profit sharing
contributions. Based on 2009 earnings, we committed to
make a contribution in shares of common stock to the plan
accounts of eligible employees equaling 1% of qualifying
compensation, which resulted in recognizing $150 million
of defined contribution retirement plan expense recorded
in 2009.
Expenses for defined contribution retirement plans were
$862 million, $411 million and $426 million in 2009, 2008 and
2007, respectively.
We provide health care and life insurance benefits for
certain retired employees and reserve the right to terminate
or amend any of the benefits at any time.
The information set forth in the following tables is
based on current actuarial reports using the measurement
date of December 31 for our pension and postretirement
benefit plans.