Freddie Mac 2012 Annual Report Download - page 359

continue to be suspended. We will review future deferral options on an annual basis. None of the NEOs have a balance under
the EDCP.
Supplemental Executive Retirement Plan — Thrift/401(k) SERP Benefit
The Thrift/401(k) SERP Benefit component of the SERP is an unfunded (benefits are paid from general assets), non-
qualified defined contribution plan designed to provide participants with the full amount of benefits that they would have
been entitled to under the Thrift/401(k) Savings 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. For example, in 2012 under the Internal Revenue Code, only the first $250,000 of an employee’s
compensation is considered when determining our percentage-based matching contribution and the Discretionary
Contribution for any participant in the Thrift/401(k) Savings Plan. The SERP was 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 Thrift/401(k) SERP Benefit is an appropriate benefit because offering such a benefit
helps us remain competitive with companies in the Comparator Group.
The Thrift/401(k) SERP Benefit equals the amount of the employer matching contributions and Basic Contribution (or,
as of January 1, 2012, Discretionary Contribution) for each NEO that would have been made to the Thrift/401(k) Savings
Plan during the year, based upon the participant’s eligible compensation, without application of the above limits, less the
amount of the matching contributions and Basic Contribution (or, as of January 1, 2012, Discretionary Contribution) actually
made to the Thrift/401(k) Savings Plan during the year. Participants are credited with earnings or losses in their Thrift/401(k)
SERP Benefit accounts based upon each participant’s individual direction of the investment of such notional amounts among
the virtual investment funds available under the SERP. Such investment options are based upon and mirror the performance
of the investment options available under the Thrift/401(k) Savings Plan. As of December 31, 2012, there were 21
investment options in which participants’ notional amounts could be deemed invested.
To be eligible for the Thrift/401(k) SERP Benefit, the NEO must be eligible for matching contributions and Basic
Contributions (or, as of January 1, 2012, Discretionary Contribution) under the Thrift/401(k) Savings Plan for part of the
year. In addition, to be eligible for the portion of the Thrift/401(k) SERP Benefit attributable to employer matching
contributions, the NEO must contribute the maximum amount permitted under the terms of the Thrift/401(k) Savings Plan on
a pre-tax basis throughout the entire portion of the year in which the NEO is eligible to make such contributions. The portion
of the Thrift/401(k) SERP Benefit that is attributable to employer matching contributions is vested when accrued, while the
accrual relating to the Basic Contribution paid prior to 2008 is subject to five-year cliff vesting, the accrual relating to the
Basic Contribution attributable to calendar years 2008-2011 is subject to five-year graded vesting of 20% per year, and the
accrual relating to the new employer Discretionary Contribution (which replaced the Basic Contribution as of January
2012) will be subject to three-year cliff vesting.
The Thrift/401(k) SERP Benefits that vest on or after January 1, 2005 are generally distributed in a lump sum payable
90 days after the end of the calendar year in which separation from service occurs. A six-month delay in commencement of
distributions on account of separation from service applies to key employees, in accordance with Internal Revenue Code
Section 409A. If the NEO dies, the vested Thrift/401(k) SERP Benefit is paid in the form of a lump sum within 90 days of
death.
Thrift/401(k) SERP Benefits that vested prior to January 1, 2005 are generally distributed after separation from service
(other than retirement) in the form of three reasonably equal annual installments, starting in the first quarter of the calendar
year following the year in which the separation from service occurs. In the case of retirement, the vested pre-2005 Thrift/
401(k) SERP Benefit is combined with the vested pre-2005 Pension SERP Benefit and is payable in the form of a single life
annuity at age 65 (or in a series of reasonably equal installments over 15 years commencing with retirement if actuarial
estimates indicate that this payment form would yield a longer period of payment). In the case of death while employed, the
vested pre-2005 Thrift/401(k) SERP Benefit is paid in the form of a lump sum within 90 days of such event.
The following table shows the contributions, earnings, withdrawals and distributions, and accumulated balances under
the Thrift/401(k) SERP Benefit for each NEO. As of December 31, 2012, none of the NEOs was a participant in the EDCP.
354 Freddie Mac