Ameriprise 2006 Annual Report Download - page 93

20. Retirement Plans and Profit Sharing
Arrangements
The Company’s EBA with American Express allocated certain
liabilities and responsibilities relating to employee compensation
and benefit plans and programs and other related matters in
connection with the Distribution, including the general treatment
of outstanding American Express equity awards, certain
outstanding annual and long-term incentive awards, existing
deferred compensation obligations and certain retirement and
welfare benefit obligations. As of the date of the Distribution,
Ameriprise Financial generally assumed, retained and became
liable for all wages, salaries, welfare, incentive compensation
and employee-related obligations and liabilities for all of its
current and former employees. The EBA also provided for the
transfer of qualified plan assets and transfer of liabilities relating
to the pre-distribution participation of Ameriprise Financial’s
employees in American Express’ various retirement, welfare
and employee benefit plans from such plans to the applicable
plans Ameriprise Financial adopted for the benefit of its
employees.
Defined Benefit Plans
Effective for the year ended December 31, 2006, the Company
adopted the required provisions of SFAS 158, which resulted in
the recognition of the overfunded and underfunded statuses of
the Company’s defined benefit plans as assets or liabilities, as
appropriate. In addition, other comprehensive income includes
gains or losses and prior service costs or credits that arose
during the year but were not recognized as components of net
periodic benefit cost. The effect of the adoption of these
provisions on the Company’s assets, liabilities and shareholders’
equity as of December 31, 2006 was as follows:
Before After
Adoption of Adoption of
SFAS 158 Adjustments SFAS 158
(in millions)
Other assets(1) $ 3,367 $ (8) $ 3,359
Total assets 104,180 (8) 104,172
Other liabilities(2) 1,637 (5) 1,632
Total liabilities 96,252 (5) 96,247
Accumulated other
comprehensive loss,
net of tax (206) (3) (209)
Total shareholders’ equity 7,928 (3) 7,925
(1) The benefit asset and net deferred tax assets are included in other
assets.
(2) The benefit liability is included in other liabilities.
Beginning in 2007, the Company will recognize changes in the
funded statuses in the year in which the changes occur through
other comprehensive income. Effective December 31, 2008,
the Company will measure plan assets and benefit obligations
as of the date of the balance sheet.
Pension Plans
The Company’s employees in the United States are eligible to
participate in the Ameriprise Financial Retirement Plan (the
“Plan”), a noncontributory defined benefit plan which is a
qualified plan under the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”), under which the cost of
retirement benefits for eligible employees in the United States
is measured by length of service, compensation and other
factors and is currently being funded through a trust. Funding
of retirement costs for the Plan complies with the applicable
minimum funding requirements specified by ERISA. The Plan is
a cash balance plan by which the employees’ accrued benefits
are based on notional account balances, which are maintained
for each individual. Each pay period these balances are
credited with an amount equal to a percentage (determined by
an employee’s age plus service) of compensation as defined
by the Plan (which includes, but is not limited to, base pay,
certain incentive pay and commissions, shift differential,
overtime and transition pay). Employees’ balances are also
credited daily with a fixed rate of interest that is updated each
January 1 and is based on the average of the daily five-year
U.S. Treasury Note yields for the previous October 1 through
November 30, with a minimum crediting rate of 5%. Employees
have the option to receive annuity payments or a lump sum
payout at vested termination or retirement.
In addition, the Company sponsors an unfunded non-qualified
Supplemental Retirement Plan (the “SRP”) for certain highly
compensated employees to replace the benefit that cannot be
provided by the Plan due to Internal Revenue Service limits.
The SRP generally parallels the Plan but offers different
payment options.
Most employees outside the United States are covered by
local retirement plans, some of which are funded, while other
employees receive payments at the time of retirement or
termination under applicable labor laws or agreements.
Pursuant to the EBA described previously, the liabilities and
plan assets associated with the American Express Retirement
Plan, Supplemental Retirement Plan and a retirement plan
including employees from Threadneedle were split. The split
resulted in an allocation of unrecognized net losses to the
surviving plans administered separately by the Company and
American Express in proportion to the projected benefit
obligations of the surviving plans. As a result of this allocation,
the Company recorded additional pension liability in
2006 and 2005 of $5 million and $32 million, respectively.
91
Ameriprise Financial, Inc. 2006 Annual Report