AIG 2014 Annual Report Download - page 323

ITEM 8 / NOTE 21. SHARE-BASED AND OTHER COMPENSATION PLANS
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TARP and Other RSUs
TARP RSUs awarded require the achievement of objective performance metrics as a condition to entitlement. An award would
have been settled in 25 percent installments in proportion to the repayment of our TARP obligations. As a result of the
repayment of our TARP obligations in December 2012, outstanding awards vest and settle in two 50 percent installments on
the second and third anniversary of the date of grant, along with other cash-settled RSUs granted and issued in March 2013
and 2012.
Long Term Incentive Plans
Certain employees were provided the opportunity to receive additional compensation in the form of cash and cash-settled
SARs under the 2011 LTIP or 100 percent cash for the 2012 LTIP if certain performance measures were met. The ultimate
value of these awards was contingent on AIG achieving performance measures over a two-year performance period and such
value could range from zero to twice the target amount. Subsequent to the performance period, the earned awards were
subject to an additional time-vesting period. This results in a graded vesting schedule for the cash portion of up to two years,
while the SARs portion cliff-vests two years after the end of performance period.
The cash portion of the awards expensed in 2014, 2013 and 2012 totaled approximately $57 million, $249 million, and $189
million, respectively.
The following table presents a roll forward of SARs and cash-settled RSUs (excluding stock salary) as well as the
related expenses:
Number of Units
Year Ended December 31, 2014 TARP RSUs(a) Other RSUs(b) SARs(d)
Unvested, beginning of year 857,579 1,563,687 8,966,246
Granted ---
Vested(c) (529,049) (382,468) (5,521,171)
Forfeited (89,417) (15,687) (160,166)
Unvested, end of year 239,113 1,165,532 3,284,909
Net compensation expense for the year (in millions) $ 12 $ 31 $ 36
(a) Total unrecognized compensation and the weighted-average period for which it will be recognized is $3 million and 0.55 year, respectively.
(b) Total unrecognized compensation and the weighted-average period for which it will be recognized is $13 million and 0.61 year, respectively.
(c) Also includes SARs for which vesting was accelerated for employees who became retirement eligible or were deceased.
(d) The ending balance represents awards granted under the 2011 LTIP that vested on January 1, 2015 and were automatically exercised. The value of a SAR
as of December 31, 2014 was determined based on the excess of the fair value (as defined) of one share of AIG Common Stock over the strike price of $37.40;
the fair value was $55.29 based on the average of the closing sale prices on each trading day during the month of December 2014 in accordance with the plan
provisions. No SARs are outstanding after January 1, 2015.
22. EMPLOYEE BENEFITS
Pension Plans
We offer various defined benefit plans to eligible employees.
The U.S. AIG Retirement Plan (the qualified plan) is a noncontributory defined benefit plan, that is subject to the provisions of
ERISA. U.S. salaried employees who are employed by a participating company and who have 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