Freddie Mac 2010 Annual Report Download - page 250

Defined Contribution Plans
Our Thrift/401(k) Savings Plan, or Savings Plan, is a tax-qualified defined contribution pension plan offered to all
eligible employees. Employees are permitted to contribute from 1% to 25% of their eligible compensation to the Savings
Plan, subject to limits set by the Internal Revenue Code. We match employees’ contributions up to 6% of their eligible
compensation per year, with such matching contributions being made each pay period; the percentage matched depends upon
the employee’s length of service. Employee contributions and our matching contributions are immediately vested. We also
have discretionary authority to make additional contributions to our Savings Plan that are allocated to each eligible
employee, based on the employee’s eligible compensation. Employees become vested in our discretionary contributions
ratably over such employee’s first five years of service, after which time employees are fully vested in their discretionary
contribution accounts. In addition to our Savings Plan, we maintain a non-qualified defined contribution plan for our officers,
designed to make up for benefits lost due to limitations on eligible compensation imposed by the Internal Revenue Code, and
to make up for deferrals of eligible compensation under both our Executive Deferred Compensation Plan and our Mandatory
Executive Deferred Base Salary Plan. We incurred costs of $41 million, $40 million, and $33 million for the years ended
December 31, 2010, 2009, and 2008, respectively, related to these plans. These expenses were included in salaries and
employee benefits on our consolidated statements of operations.
Executive Deferred Compensation Plan and Mandatory Executive Deferred Base Salary Plan
Our Executive Deferred Compensation Plan is an unfunded, non-qualified plan that allows officers to elect to defer
substantially all or a portion of their corporate-wide annual cash bonus and up to 80% of their eligible annual salary for any
number of years specified by the employee. In December 2010, we advised participants in the Executive Deferred
Compensation Plan that the company is suspending deferrals of pay under this Plan during calendar year 2011 and that it
will review future deferral options during the fourth quarter of 2011.
In December 2009, we adopted, with the approval of FHFA and in consultation with Treasury, the Mandatory Executive
Deferred Base Salary Plan covering compensation of our officers at the level of senior vice president and above. This plan is
unfunded and is effective beginning in 2009 and is part of a compensation design for senior executives that we believe will
remain in place throughout the conservatorship. Part of this design requires that a portion of a senior executive’s base salary
be mandatorily deferred until the following year. The Mandatory Executive Deferred Base Salary Plan is a mechanism by
which these deferrals and the corresponding cash distributions are made. Our SERP has also been amended to generally
include compensation deferred under the Mandatory Executive Deferred Base Salary Plan.
Distributions under these two deferred compensation plans are paid from our general assets. We record a liability equal
to the accumulated deferred salary, cash bonus, and accrued interest, as applicable, net of any related distributions made to
plan participants.
NOTE 16: NONCONTROLLING INTERESTS
The equity and net earnings attributable to the noncontrolling interests in consolidated subsidiaries for prior periods
were reported on our consolidated balance sheets as noncontrolling interest and on our consolidated statements of operations
as net (income) loss attributable to noncontrolling interest. There was no material AOCI associated with the noncontrolling
interests recorded on our consolidated balance sheets. The majority of the balances in these accounts related to our two
majority-owned REITs. For a discussion of our significant accounting policies regarding our basis of accounting and our
determination of controlling and noncontrolling interests, see “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES.”
In February 1997, we formed two majority-owned REIT subsidiaries funded through the issuance of common stock
(99.9% of which was held by us) and a total of $4.0 billion of perpetual, step-down preferred stock originally issued to third
party investors. We repurchased most of the preferred stock held by third parties during 2007 and 2008 and as of
December 31, 2009 we held approximately 84% of the issued preferred shares.
On September 19, 2008, FHFA, as Conservator, advised us of FHFA’s determination that no further common or
preferred stock dividends should be paid by our REIT subsidiaries. FHFA specifically directed us, as the controlling
stockholder of both REIT subsidiaries and the boards of directors of both companies, not to declare or pay any dividends on
the preferred stock of the REITs until FHFA directs otherwise. However, at our request and with Treasury’s consent, FHFA
directed us and the boards of directors of our REIT subsidiaries to: (a) declare and pay dividends for one quarter on the
preferred shares of our REIT subsidiaries during each of the fourth quarter of 2009 and the first quarter of 2010; and (b) take
all steps necessary to effect the elimination of the REITs by merger in a timely and expeditious manner. The business
decision to eliminate the REITs was made to achieve increased flexibility in the management of the assets of our REIT
subsidiaries and to simplify our business operations.
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