Fannie Mae 2013 Annual Report Download - page 279

FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-55
the fourth quarter of 2013. By March 31, 2014, we will pay Treasury a senior preferred stock dividend for the first quarter of
2014 of $7.2 billion, which equals the excess of our net worth as of December 31, 2013 over the $2.4 billion capital reserve
amount applicable for dividend periods in 2014 under the terms of the senior preferred stock purchase agreement with
Treasury.
There was no impact to the numerator of our diluted EPS calculation from the dilutive convertible preferred stock for the year
ended December 31, 2013.
12. 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 and comprehensive income (loss). For
the years ended December 31, 2013, 2012 and 2011, we recognized net periodic benefit costs for our defined benefit and
healthcare plans and expenses for our defined contribution plans of $94 million, $133 million and $118 million, respectively.
Defined Benefit Pension Plans and Postretirement Health Care Plan
Our defined benefit pension plans include qualified and nonqualified noncontributory plans. Our qualified defined benefit
pension plan is the Fannie Mae Retirement Plan (referred to as our “qualified pension plan”). Our nonqualified defined
benefit pension plans include the Executive Pension Plan, Supplemental Pension Plan and the Supplemental Pension Plan of
2003. These plans cover certain employees and supplement the benefits payable under the qualified pension plan. Benefits
under the Executive Pension Plan are paid through a rabbi trust. 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 plans. Effective
December 31, 2009, our Executive Pension Plan was amended to cease benefit accruals for participating employees. In April
2013, the Board of Directors approved plan amendments effective June 30, 2013 to cease benefit accruals for our qualified
pension plan, our Supplemental Pension Plan and our Supplemental Pension Plan of 2003, which resulted in a curtailment
and a remeasurement of these plans.
In October 2013, pursuant to a directive from our conservator, our Board of Directors approved an amendment to terminate
our qualified pension plan and our nonqualified Supplemental Pension Plan, Supplemental Pension Plan of 2003 and
Executive Pension Plan, effective December 31, 2013. We plan to distribute all benefits remaining under the qualified
pension plan following receipt of regulatory approvals. We expect the distribution for the qualified and nonqualified pension
plans to be completed by December 31, 2015. Except for retirees receiving payments under the qualified pension plan (or “in
pay status”), participants in the qualified pension plan will have the choice of receiving either a single lump sum payment or
an annuity. Retirees in pay status will continue to receive payments of their pension plan benefits pursuant to their current
annuity elections. We plan to purchase annuity contracts from an insurance company for retirees and participants that choose
annuities as a payment option. All participants in the nonqualified pension plans will receive lump sum payments of their
remaining accrued benefits under the plans. The lump sum payments paid to participants in all of the terminated plans will
represent the actuarial equivalent value of the participants’ remaining accrued benefits under the plans as of the applicable
distribution dates, calculated in accordance with the terms of the plans using the plans’ benefit reduction factors for early
retirement applicable for annuity payments and based on the participants’ ages on the distribution dates.
Pension plan benefits are based on years of credited service and a percentage of eligible compensation. 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 maximum funding limit under the Employee Retirement Income Security Act of 1974 (“ERISA”) and IRS
regulations.
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. 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 also sponsor a postretirement Health Care Plan that covers substantially all regular full-time employees who meet the
applicable age and service requirements at the time they terminate employment with us. We subsidize premium costs for