Fannie Mae 2010 Annual Report Download - page 347

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. Net periodic
benefit costs for defined benefit and healthcare plans, which are determined on an actuarial basis, and
expenses for our defined contribution plans, are included in “Salaries and employee benefits expense” in our
consolidated statements of operations. For the years ended December 31, 2010, 2009 and 2008, we recognized
net periodic benefit costs for our defined benefit and healthcare plans and expenses for our defined
contributions plans of $112 million, $131 million, and $95 million, respectively.
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. In 2007, the defined
benefit pension plans were amended to cease benefits accruals for employees that did not meet certain criteria
to be grandfathered under the plan and to vest those employees in their frozen accruals.
We fund our qualified pension plan through employer contributions to a qualified irrevocable trust that is
maintained for the sole benefit of plan participants and their beneficiaries. 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.
Our nonqualified defined benefit pension plans consist of an Executive Pension Plan, Supplemental Pension
Plan and the Supplemental Pension Plan of 2003, which is a bonus-based plan. These plans cover certain
employees and supplement the benefits payable under the qualified pension plan. The Executive Pension Plan
was frozen in 2009. Benefits under the Executive Pension Plan are paid through a rabbi trust.
The Supplemental Pension Plan provides retirement benefits to employees who participate in our qualified
pension plan and 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 Supplemental Pension Plan of 2003 provides additional benefits to our officers based on
eligible incentive compensation, if any, received by an officer, but the amount of incentive compensation
considered is limited to 50% of the officer’s base salary. We pay benefits for our unfunded defined benefit
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 age and service requirements. We subsidize premium costs for medical
coverage for some employees who meet the age and service requirements. Employees hired after 2007 receive
access to our retiree medical plan, when eligible, but they do not qualify for the subsidy. We accrue and pay
the benefits for our unfunded postretirement Health Care Plan from our cash and cash equivalents.
F-89
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)