Fifth Third Bank 2011 Annual Report Download - page 131

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fifth Third Bancorp 129
Lowering both the expected rate of return on the plan and the
discount rate by 0.25% would have increased the 2011 pension
expense by approximately $1 million.
Based on the actuarial assumptions, the Bancorp does not
expect to contribute to the plan in 2012. Estimated pension benefit
payments, which reflect expected future service, are $20 million in
2012, $17 million in 2013, $16 million in 2014, $16 million in 2015
and $15 million in 2016. The total estimated payments for the years
2017 through 2021 is $66 million.
Investment Policies and Strategies
The Bancorp’s policy for the investment of plan assets is to employ
investment strategies that achieve a range of weighted-average target
asset allocations relating to equity securities (including the Bancorp’s
common stock), fixed income securities (including federal agency
obligations, corporate bonds and notes) and cash.
The following table provides the Bancorp’s targeted and actual weighted-average asset allocations by asset category for the years ended December
31:
W
eighted-average asset allocation Targeted range 2011 2010
Equity securities 74 %72
Bancorp common stock 2 2
Total equity securities(a) 70-80% 76 74
Total fixed income securities 20-25 21 23
Cash 0-5 3 3
Total 100 % 100
(a) Includes mutual and exchange traded funds.
The risk tolerance for the plan is determined by management to be
“moderate to aggressive”, recognizing that higher returns involve
some volatility and that periodic declines in the portfolio’s value are
tolerated in an effort to achieve real capital growth. There were no
significant concentrations of risk associated with the investments of
the Bancorp’s benefit and retirement plan at December 31, 2011
and 2010.
Permitted asset classes of the plan include cash and cash
equivalents, fixed income (domestic and non-U.S. bonds), equities
(U.S., non-U.S., emerging markets and REITS), equipment leasing
precious metals, commodity transactions and mortgages. The plan
utilizes derivative instruments including puts, calls, straddles or
other option strategies, as approved by management.
Prohibited asset classes of the plan include venture capital,
short sales, limited partnerships and leveraged transactions. Per
ERISA, the Bancorp’s common stock cannot exceed ten percent of
the fair value of plan assets.
Fifth Third Bank, as Trustee, is expected to manage the plan
assets in a manner consistent with the plan agreement and other
regulatory, federal and state laws. The Fifth Third Bank Pension,
Profit Sharing and Medical Plan Committee (the “Committee”) is
the plan administrator. The Trustee is required to provide to the
Committee monthly and quarterly reports covering a list of plan
assets, portfolio performance, transactions and asset allocation. The
Trustee is also required to keep the Committee apprised of any
material changes in the Trustee’s outlook and recommended
investment policy.
Other Information on Retirement and Benefit Plans
The accumulated benefit obligation for all defined benefit plans was
$253 million and $227 million at December 31, 2011 and 2010,
respectively. Amounts relating to the Bancorp’s defined benefit
plans with assets exceeding benefit obligations were as follows at
December 31:
($ in millions) 2011 2010
Projected benefit obligation $- 193
A
ccumulated benefit obligation - 193
Fair value of plan assets - 197
Amounts relating to the Bancorp’s defined benefit plans with benefit obligations exceeding assets were as follows at December 31:
($ in millions) 2011 2010
Projected benefit obligation $253 34
A
ccumulated benefit obligation 253 34
Fair value of plan assets 181 -
As of December 31, 2011 and 2010, $159 million and $172 million,
respectively, of plan assets were managed through mutual funds by
Fifth Third Bank, a subsidiary of the Bancorp. Plan assets included
$5 million of Bancorp common stock as of December 31, 2011 and
2010. Plan assets are not expected to be returned to the Bancorp
during 2012.
The Bancorp’s profit sharing plan expense was $35 million for
2011, $31 million for 2010, and $17 million for 2009. Expenses
recognized for matching contributions to the Bancorp’s defined
contribution savings plans were $40 million for the year ended
December 31, 2011, and $36 million for the years ended December
31, 2010 and 2009, respectively.