AIG 2012 Annual Report Download - page 337

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22. EMPLOYEE BENEFITS
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Pension Plans
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We offer various defined benefit plans to eligible employees based on years of service.
The U.S. AIG Retirement Plan (the qualified plan) is a noncontributory defined benefit plan, which is subject to the
provisions of ERISA. U.S. salaried employees who are employed by a participating company and completed
12 months of continuous service are eligible to participate in the plan. Effective April 1, 2012, the qualified plan was
converted to a cash balance formula comprised of pay credits based on six percent of a plan participant’s annual
compensation (subject to IRS limitations) and annual interest credits. In addition, employees can take their vested
benefits when they leave AIG as a lump sum or an annuity option after completing at least three years of service.
However, employees satisfying certain age and service requirements (i.e. grandfathered employees) remain covered
under the old plan formula, which is based upon a percentage of final average compensation multiplied by years of
credited service, up to 44 years. Grandfathered employees will receive the higher of the benefits under the cash
balance or final average pay formula at retirement. Non-U.S. defined benefit plans are generally either based on the
employee’s years of credited service and compensation in the years preceding retirement or on points accumulated
based on the employee’s job grade and other factors during each year of service.
We also sponsor several non-qualified unfunded defined benefit plans for certain employees, including key
executives, designed to supplement pension benefits provided by the qualified plan. These include the AIG
Non-Qualified Retirement Income Plan (AIG NQRIP) formerly known as AIG Excess Retirement Income Plan, which
provides a benefit equal to the reduction in benefits payable to certain employees under the qualified plan as a result
of federal tax limitations on compensation and benefits payable, and the Supplemental Executive Retirement Plan
(Supplemental), which provides additional retirement benefits to designated executives. Under the Supplemental plan,
an annual benefit accrues at a percentage of final average pay multiplied by each year of credited service, not
greater than 60 percent of final average pay, reduced by any benefits from the current and any predecessor
retirement plans (including the AIG NQRIP Plan), Social Security, and any benefits accrued under a Company
sponsored foreign deferred compensation plan. As of December 2012, we are no longer subject to the Special
Master for TARP Executive Compensation; therefore, the suspension of future benefit accruals in the non-qualified
retirement plans for our Top 100 most highly compensated employees is lifted.
Postretirement Plans
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We also provide postretirement medical care and life insurance benefits in the U.S. and in certain non-U.S. countries.
Eligibility in the various plans is generally based upon completion of a specified period of eligible service and
attaining a specified age. Overseas, benefits vary by geographic location.
U.S. postretirement medical and life insurance benefits are based upon the employee attaining the age of 55 and
having a minimum of ten years of service. Eligible employees who have medical coverage can enroll in retiree
medical without having to elect immediate retirement pension benefits. Medical benefits are contributory, while the life
insurance benefits are generally non-contributory. Retiree medical contributions vary from requiring no cost for
pre-1989 retirees to requiring actual premium payments reduced by certain subsidies for post-1993 retirees. These
contributions are subject to adjustment annually. Other cost sharing features of the medical plan include deductibles,
coinsurance and Medicare coordination. Effective April 1, 2012, the retiree medical employer subsidy for the AIG
Postretirement plan was eliminated for employees who were not grandfathered. Additionally, new employees hired
after December 31, 2012 are not eligible for retiree life insurance.
The following table presents the funded status of the plans, reconciled to the amount reported in the
Consolidated Balance Sheet. The measurement date for most of the Non-U.S. defined benefit pension and
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AIG 2012 Form 10-K320
ITEM 8 / NOTE 22. EMPLOYEE BENEFITS