Freddie Mac 2012 Annual Report Download - page 358

An early retirement benefit is available to a participant who terminates employment on or after age 55 with at least five
years of service. For service before January 1, 2011, this early retirement benefit is reduced by 3% for each year (prorated
monthly for partial years) by which the commencement of such benefits precedes the earlier of: (a) the participant’s
attainment of age 65; or (b) the participant’s attainment of age 62 or later with at least 15 years of service. For service after
December 31, 2010, the reduction is 5% for each year (prorated monthly for partial years) by which the commencement of
benefits precedes the participant’s attainment of age 65. For participants with service prior to January 1, 2011 and after
December 31, 2010, the reductions are separately calculated, and the early retirement benefit is the sum of the two
calculations. Death benefits are available provided the participant completed at least five years of service prior to death.
Supplemental Executive Retirement Plan — Pension SERP Benefit
To be eligible for the Pension SERP Benefit for any year, the NEO must be eligible to participate in the Pension Plan.
Each of the NEOs other than Mr. Layton and Mr. Haldeman is eligible to participate in the Pension Plan. Eligibility for the
Pension SERP Benefit and the Pension Plan has been eliminated for employees (including executive officers) hired or rehired
after January 1, 2012. See “Other Executive Compensation Considerations — Supplemental Executive Retirement Plan”
above.
The Pension SERP Benefit component of the SERP is an unfunded (benefits are paid from general assets), non-qualified
plan designed to provide participants with the full amount of benefits to which they would have been entitled under the
Pension Plan if that plan: (a) was not subject to certain dollar limits under the Internal Revenue Code; and (b) did not exclude
from “compensation” Deferred Base Salary amounts prior to 2012 and amounts deferred under our EDCP (discussed below).
For example, the Pension Plan is only permitted under the Internal Revenue Code to consider the first $250,000 of an
employee’s compensation during 2012 for the purpose of determining the participant’s compensation-based normal
retirement benefit. The SERP has been amended to provide that the maximum covered compensation for purposes of the
SERP, relative to an NEO, may not exceed two times the NEO’s Semi-Monthly Base Salary or Base Salary (as defined in the
pre-2012 executive compensation program and the Executive Compensation Program, respectively). We believe the Pension
SERP Benefit is an appropriate benefit because offering such a benefit helps us remain competitive with companies in the
Comparator Group.
The Pension SERP Benefit is calculated as the participant’s accrued annual benefit payable at age 65 (or current age, if
greater) under the Pension Plan without application of the limits described in the preceding paragraph, less the participant’s
actual accrued benefit under the Pension Plan. The Pension SERP Benefit is vested for each participant to the same extent
that the participant is vested in the corresponding benefit under the Pension Plan.
Pension SERP Benefits that vest on or after January 1, 2005 are generally distributed in a lump sum after separation
from service and are payable 90 days after the end of the calendar year in which separation occurs. Subject to plan limitations
and restrictions under Internal Revenue Code Section 409A, employees may elect that this portion of the Pension SERP
Benefit be paid upon separation in the form of a single life annuity at age 65 or in reasonably equal annual installments over
five, 10 or 15 years (including interest). Under IRS rules, distributions to so-called “key employees” (as defined by the IRS
in regulations concerning Internal Revenue Code Section 409A) on account of separation from service may not commence
earlier than six months from the key employee’s separation from service. Payments under the SERP will be delayed if
necessary to meet this requirement. In the case of death, the Pension SERP Benefit is distributed as a lump sum within
90 days of such event.
Pension SERP Benefits that vested prior to January 1, 2005 are generally distributed after separation from service (other
than retirement) in the form of a single life annuity commencing at age 65. In the case of retirement, the vested pre-2005
Pension SERP Benefit is combined with the vested pre-2005 Thrift/401(k) SERP Benefit and is paid out in the form of a
single life annuity payable at age 65 (or in a series of reasonably equal installments over 15 years commencing with
retirement if actuarial estimates indicate that payment form would yield a longer period of payment). In the case of death
while employed, the vested pre-2005 Pension SERP Benefit is paid in the form of a lump sum within 90 days of such event.
Non-qualified Deferred Compensation
Executive Deferred Compensation Plan
The EDCP is a non-qualified plan and is unfunded (benefits are paid from our general assets). The EDCP has, in the
past, allowed the NEOs to defer receipt of a portion of their annual base pay and cash bonus (and to defer settlement of RSUs
granted between 2002 and 2007). Deferrals of pay under the EDCP were suspended beginning with calendar year 2011 and
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