AIG 2006 Annual Report Download - page 203

American International Group, Inc. and Subsidiaries
portion of the total projected benefit payable at normal retirement
14. Stock Compensation Plans
to each year of credited service.
Continued
The HSB Group Inc. (HSB) retirement plan was merged into the
The total unrecognized compensation cost (net of ex- AIG U.S. retirement plan effective April 1, 2001. Benefits for HSB
pected forfeitures) related to non-vested share-based participants were changed effective January 1, 2005 to be
compensation awards granted under the 2002 Plan, the substantially similar to the AIG U.S. retirement plan benefits
AIG DCPPP, the AIG Partners Plan and the SICO Plans at subject to a grandfathering agreement.
December 31, 2006 and the blended weighted-average 21st Century sponsors its own benefit plans for its eligible
period over which that cost is expected to be recognized employees. Assets, obligations and costs with respect to 21st
at December 31, 2006 are as follows: Century’s plans are included herein. The assumptions used in its
plans were not significantly different from those used by AIG in
Blended
Unrecognized
Weighted-
Compensation AIG’s U.S. plans.
Average
Cost The AIG Excess Retirement Income Plan provides a benefit
(in millions) Period equal to the reduction in benefits payable under the AIG U.S.
2002 Plan $322 1.79 years retirement plan as a result of federal tax limitations on compensa-
AIG DCPPP $208 4.49 years tion and benefits payable thereunder. AIG has adopted a Supple-
AIG Partners Plan $191 2.37 years mental Executive Retirement Plan (Supplemental Plan) to provide
Total 2002 Plan $721 2.72 years additional retirement benefits to designated executives. Under the
SICO Plans $301 5.95 years Supplemental Plan, an annual benefit accrues at a percentage of
final average pay multiplied by each year of credited service, not
The total cost for awards outstanding as of December 31, 2006 greater than 60 percent of final average pay, reduced by any
under the 2002 Plan, the AIG DCPPP, the AIG Partners Plan, and benefits from the current and any predecessor retirement plans
the SICO Plans is expected to be recognized over approximately 4 (including the AIG Excess Retirement Income Plan and any
years, 11 years, 6 years and 23 years, respectively. comparable plans), Social Security, if any, and from any qualified
pension plan of prior employers. Currently, each of these plans is
15. Employee Benefits unfunded. AGC and HSB have adopted similar supplemental type
(a) Pension Plans: Employees of AIG, its subsidiaries and plans. These plans are also unfunded.
certain affiliated companies, including employees in foreign Where non-U.S. retirement plans are defined benefit plans,
countries, are generally covered under various funded, unfunded they are generally either based on the employees’ years of
and insured pension plans. Eligibility for participation in the credited service and compensation in the years preceding retire-
various plans is based on either completion of a specified period ment, or on points accumulated based on the employee’s job
of continuous service or date of hire, subject to age limitations. grade and other factors during each year of service.
Some AIG subsidiaries provide retirement benefits through defined AIG is in the process of spinning off the assets and liabilities
benefit plans, others employ defined contribution plans and some in the AIG U.S. retirement plan attributable to employees of Starr
use both. and The Starr Foundation. The accumulated benefit obligation of
AIG’s U.S. retirement plan is a qualified, noncontributory the employees in these two entities was computed as of
defined benefit plan which is subject to the provisions of ERISA. December 31, 2005. At December 31, 2005, the AIG
All employees of AIG and most of its subsidiaries and affiliates U.S. retirement plan was funded at an amount slightly greater
who are regularly employed in the United States, including certain than the accumulated benefit obligation. In the first quarter of
U.S. citizens employed abroad on a U.S. dollar payroll, and who 2007, AIG will transfer assets of approximately $32 million, which
have attained age 21 and completed twelve months of continuous is the equivalent of the present value of the December 31, 2005
service are eligible to participate in this plan. An employee with 5 accumulated benefit (adjusted for interest and benefit payments
or more years of plan participation is entitled to pension benefits through the transfer date) attributable to the employees in those
beginning at normal retirement at age 65. Benefits are based entities. Consistent with this arrangement, the amounts shown in
upon a percentage of average final compensation multiplied by the financial statements and footnote exclude liabilities and
years of credited service limited to 44 years of credited service. assets for employees of Starr.
The average final compensation is subject to certain limitations. (b) Postretirement Plans: In addition to AIG’s defined benefit
Employees may elect certain options with respect to receipt of pension plans, AIG and its subsidiaries provide a postretirement
their pension benefits including a joint and survivor annuity. An benefit program for medical care and life insurance in the U.S.
employee with 10 or more years of plan participation may retire and in certain non-U.S. countries. Eligibility in the various plans is
early from age 55 to 64. An early retirement factor is applied generally based upon completion of a specified period of eligible
resulting in a reduced benefit. If an employee terminates with less service and attaining a specified age. Overseas, benefits vary by
than five years of continuous service, the employee for feits the geographic location.
right to receive any pension benefits accumulated to that time. AIG’s U.S. postretirement medical and life insurance benefits
Annual funding requirements are determined based on the are based upon the employee electing immediate retirement and
‘‘projected unit credit’’ cost method, which attributes a pro rata having a minimum of ten years of service. Retirees who reached
Form 10-K 2006 AIG 153