Fannie Mae 2004 Annual Report Download - page 326

Plan. We released 116,119 shares in 2003 as awards vested. Unvested shares totaled 1,522,859 and 806,274 as
of December 31, 2004 and 2003, respectively, at a weighted average fair value at grant date of $75.32 and
$70.98, respectively.
We recorded compensation expense for these grants of $32 million, $16 million and $8 million for the years
ended December 31, 2004, 2003 and 2002, respectively.
Stock Appreciation Rights
Under the 2003 Plan, we are permitted to grant to employees Stock Appreciation Rights (“SARs”), an award
of common stock or an amount of cash, or a combination of shares of common stock and cash, the aggregate
amount or value of which is determined by reference to a change in the fair value of the common stock. As of
December 31, 2004, no SARs had been granted.
Shares Available for Future Issuance
The 1985 Purchase Plan and the 2003 Plan allow us to issue up to 90 million shares of common stock to
eligible employees for all programs. As of December 31, 2004, 10,418,495 and 35,971,268 shares remained
available for grant under the 1985 Purchase Plan and the 2003 Plan, respectively.
14. Employee Retirement Benefits
We sponsor both defined benefit plans and defined contribution plans for our employees, as well as a
healthcare plan that provides certain health benefits for retired employees and their dependents.
Defined Benefit Pension Plans and Postretirement Health Care Plan
Our defined benefit pension plans include qualified and nonqualified noncontributory plans. Pension plan
benefits are based on years of credited service and a percentage of eligible compensation. All regular full-time
employees and regular part-time employees regularly scheduled to work at least 1,000 hours per year are
eligible to participate in the qualified defined benefit pension plan. We fund our qualified pension plan through
employer contributions to an irrevocable trust that is maintained for the sole benefit of plan participants.
Contributions to our qualified pension plan are subject to a minimum funding requirement and a maximum
funding limit under the Employee Retirement Income Security Act of 1974 (“ERISA”) and IRS regulations.
Although we were not required to make any contributions to the qualified plan in 2004, 2003 or 2002, we did
elect to make discretionary contributions in each of these years.
Our nonqualified pension plans include an Executive Pension Plan, Supplemental Pension Plan and the 2003
Supplemental Pension Plan, which is a bonus-based plan. These plans cover certain executive-level employees
and supplement the benefits payable under the qualified pension plan. The Compensation Committee of the
Board of Directors selects those who can participate in the Executive Pension Plan. The Board of Directors
approves the pension goals under the Executive Pension Plan for participants who are at the level of Executive
Vice President and above and payments are reduced by any amounts payable under the qualified plan.
Participants typically vest in their pension benefits after ten years of service as a participant, with partial
vesting usually beginning after five years. Benefits under the Executive Pension Plan are paid through a rabbi
trust.
The Supplemental Pension Plan provides retirement benefits to employees who do not receive a benefit from
the Executive Pension Plan and whose salary exceeds the statutory compensation cap applicable to the
qualified plan or whose benefit is limited by the statutory benefit cap. Similarly, the 2003 Supplemental
Pension Plan provides additional benefits to our officers based on the annual cash bonus received by an
officer, but the amount of bonus considered is limited to 50% of the officer’s salary. We pay benefits for our
unfunded Supplemental Pension Plans from our cash and cash equivalents.
We also sponsor a contributory postretirement Health Care Plan that covers substantially all regular full-time
employees who meet the applicable service requirements. We accrue and pay the benefits for our unfunded
postretirement Health Care Plan from our cash and cash equivalents.
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FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)