First Data 2009 Annual Report Download - page 253

Chase Paymentech
NOTES TO COMBINED FINANCIAL STATEMENTS
For the years ended December 31, 2007 and 2006 and
the year ended December 31, 2005 (unaudited) (Continued)
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
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