First Data 2007 Annual Report Download - page 208

Chase Paymentech
NOTES TO COMBINED FINANCIAL STATEMENTS – CONTINUED
For the years ended December 31, 2007 and 2006 and
the year ended December 31, 2005 (unaudited)
The Company provides a Registered Retirement Savings Plan (Registered Savings Plan) for its eligible Canadian employees. The Registered Savings Plan is a
defined contribution plan which provides savings and investment opportunities. Pretax contributions of up to 6% of an eligible employee's defined
compensation are matched 50% by the Company. Salaries and employee benefits included $337 thousand, $300 thousand, and $262 thousand of expense
relating to the Registered Savings Plan on the combined statements of income and comprehensive income for the years ended December 31, 2007, 2006, and
2005, respectively.
The Company provides a registered defined contributory pension plan for its eligible Canadian employees. The net periodic expense included in salaries and
employee benefits for this plan was $657 thousand, $536 thousand, and $457 thousand on the combined statements of income and comprehensive income for
the years ended December 31, 2007, 2006, and 2005, respectively.
Long-Term Incentive Plan
Certain employees of the Company are participants in a Long-Term Incentive Plan (LTIP), which provides for cash awards, subject to certain vesting periods
and adjustments based on the performance of JPMorgan Chase and FDC. The LTIP began in 2005, and awards vest over a three-year period with 50% of the
award vesting after two years of service and the remaining 50% vesting after the third year of service. The Company records expense using the accelerated
expense attribution method over the related vesting periods. For the years ended December 31, 2007, 2006, and 2005, $14.5 million, $12.0 million, and $4.1
million, respectively, of expense relating to LTIP grants were included in salaries and employee benefits on the combined statements of income and
comprehensive income. The related liability is included in other accrued liabilities on the combined balance sheets.
Deferred Compensation Plan
The Company has a deferred compensation plan, which provides highly compensated employees the opportunity to defer up to 90% of their annual base
salary, 90% of their bonus compensation, and 90% of their LTIP. Each plan participant is fully vested in all deferred compensation and earnings credited to
his or her account.
The liability under the deferred compensation plan was $10.9 million and $7.9 million at December 31, 2007 and 2006, respectively. The Company's expense
under the deferred compensation plan, net of the investment return on related trust assets, totaled $453 thousand, $261 thousand, and $266 thousand for the
years ended December 31, 2007, 2006, and 2005, respectively.
In connection with the deferred compensation plan, the Company has placed certain assets in a rabbi trust to enhance the security of the benefits payable
under the plan. The assets of the trust, which consist of COLI policies and money market funds, are not generally available to the Company or its creditors,
except to pay participants' benefits or in the event of the Company's insolvency. Trust assets of $11.0 million and $7.2 million at December 31, 2007 and
2006, respectively, were included in other assets on the combined balance sheets. The COLI policies had cash surrender values of $9.3 million and $7.2
million at December 31, 2007 and 2006, respectively.
Stop Loss Insurance
The Company provides medical insurance through a variety of third party Administrative Services Agreements. In order to manage its insurance risk, the
Company purchases individual and aggregate stop loss coverage policies. The policies provide for payment of eligible expenses in excess of the Company's
individual obligation of $150 thousand per covered individual, not to exceed $2 million over the lifetime of a covered individual. Aggregate stop loss
coverage provided for in the policies becomes effective at the Aggregate Benefit Attachment Point, which was $15.0 million, $11.6 million, and $7.4 million
for 2007, 2006, and 2005 respectively. A risk exists to the Company with respect to recoveries under the stop loss contracts in the event the stop loss company
is unable to meet its obligations.
The Company's estimated liability for claims incurred but not reported at December 31, 2007 and 2006 was $1.2 million and $1.8 million, respectively, which
is included in other accrued expenses on the combined balance sheets.
NOTE 15 – SHARE-BASED PAYMENT
Under a share-based payment plan (Stock Option Plan) established in 1999, the Company granted non-qualified stock options to certain employees. The
purpose of the Stock Option Plan is to provide an incentive to key employees to better align their interests with the interests of the Company. The Company
issued the last option grants under this plan in 2004 and does not intend to provide for any additional grants of options in the future.
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