Fannie Mae 2008 Annual Report Download - page 369

Employee Stock Ownership Plan
We have an Employee Stock Ownership Plan (“ESOP”) for eligible employees who are regularly scheduled to
work at least 1,000 hours in a calendar year. Participation is not available to participants in the Executive
Pension Plan. In 2007, the Plan was amended to freeze participation as of December 31, 2007 and to provide
that no contributions subsequent to the 2008 contribution for 2007 will be made to this plan.
Prior to this change, we contributed annually to the ESOP an amount up to 4% of the aggregate eligible salary
for all participants at the discretion of the Board of Directors or based on achievement of defined corporate
goals as determined by the Board. We contributed either shares of Fannie Mae common stock or cash to
purchase Fannie Mae common stock. When contributions were made in stock, the per share price was
determined using the average high and low market prices on the day preceding the contribution.
Participants were 100% vested in their ESOP accounts either upon attainment of age 65 or five years of
service. Employees who were at least 55 years of age, and had at least 10 years of participation in the ESOP,
were qualified to diversify vested ESOP shares by rolling over all or a portion of the value of their ESOP
account into investment funds available under the Retirement Savings Plan without losing the tax-deferred
status of the value of the ESOP.
Participants were immediately vested in all dividends paid on the shares of Fannie Mae common stock
allocated to their account. Unless employees elected to receive the dividend in cash, ESOP dividends were
automatically reinvested in Fannie Mae common stock within the ESOP. If the employee elected to receive the
dividend in cash, the dividends were accrued upon declaration and were distributed in February for the four
previous quarters pursuant to the employee’s election. Shares held but not allocated to participants who
forfeited their shares prior to vesting were used to reduce our future contributions.
ESOP shares are a component of our basic weighted-average shares outstanding for purposes of our EPS
calculations, except unallocated shares, which are not treated as outstanding until they are committed to be
released for allocation to employee accounts. Cash contributions, if any, were held in a trust managed by the
plan trustee and were invested in Fannie Mae common stock.
The following table displays our ESOP activity for the years ended December 31, 2008, 2007 and 2006.
2008 2007 2006
For the Year Ended
December 31,
(Shares in thousands)
Common shares allocated to employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,702 1,840 1,761
Common shares committed to be released to employees . . . . . . . . . . . . . . . . . . . . . . — 349 200
Unallocated common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 11 1
Compensation cost is measured as the fair value of the shares or cash contributed to, or to be contributed to,
the ESOP. We recorded these contributions as “Salaries and employee benefits expense” in our consolidated
statements of operations. Expense recorded in connection with the ESOP was $12 million and $11 million for
the years ended December 31, 2007 and 2006, respectively, based on actual contributions of 2% of salary for
each of the reported years. We recorded no expense in 2008. The fair value of unearned ESOP shares, which
represented the fair value of common shares issued or treasury shares sold to the ESOP, was $1 million as of
December 31, 2007.
F-91
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)