JP Morgan Chase 2008 Annual Report Download - page 164

Notes to consolidated financial statements
162 JPMorgan Chase & Co./ 2008 Annual Report
Defined benefit pension plans
The Firm has a qualified noncontributory U.S. defined benefit pension
plan that provides benefits to substantially all U.S. employees. The
U.S. plan employs a cash balance formula in the form of pay and
interest credits to determine the benefits to be provided at retire-
ment, based upon eligible compensation and years of service.
Employees begin to accrue plan benefits after completing one year of
service, and beginning January 1, 2008, benefits generally vest after
three years of service. The Firm also offers benefits through defined
benefit pension plans to qualifying employees in certain non-U.S.
locations based upon factors such as eligible compensation, age
and/or years of service.
It is the Firm’s policy to fund the pension plans in amounts sufficient
to meet the requirements under applicable employee benefit and
local tax laws. On January 15, 2009, the Firm made a discretionary
cash contribution to its U.S. defined benefit pension plan of $1.3 bil-
lion, funding the plan to the maximum allowable amount under
applicable tax law. The expected amount of 2009 contributions to its
non-U.S. defined benefit pension plans is $44 million, of which $20
million is contractually required. The amount of potential 2009 con-
tributions to the United Kingdom (“U.K.”) defined benefit plans is
not reasonably estimable at this time.
JPMorgan Chase also has a number of defined benefit pension plans
not subject to Title IV of the Employee Retirement Income Security
Act. The most significant of these plans is the Excess Retirement
Plan, pursuant to which certain employees earn pay and interest
credits on compensation amounts above the maximum stipulated by
law under a qualified plan. The Excess Retirement Plan had an
unfunded projected benefit obligation in the amount of $273 million
and $262 million, at December 31, 2008 and 2007, respectively.
Defined contribution plans
JPMorgan Chase offers several defined contribution plans in the U.S.
and in certain non-U.S. locations, all of which are administered in
accordance with applicable local laws and regulations. The most sig-
nificant of these plans is The JPMorgan Chase 401(k) Savings Plan
(the “401(k) Savings Plan”), which covers substantially all U.S.
employees. The 401(k) Savings Plan allows employees to make pre-
tax and Roth 401(k) contributions to tax-deferred investment portfo-
lios. The JPMorgan Chase Common Stock Fund, which is an invest-
ment option under the 401(k) Savings Plan, is a nonleveraged
employee stock ownership plan. The Firm matches eligible employee
contributions up to a certain percentage of benefits-eligible compen-
sation per pay period, subject to plan and legal limits. Employees
begin to receive matching contributions after completing a one-year-
of-service requirement and are immediately vested in the Firm’s con-
tributions when made. Employees with total annual cash compensa-
tion of $250,000 or more are not eligible for matching contributions.
The 401(k) Savings Plan also permits discretionary profit-sharing con-
tributions by participating companies for certain employees, subject
to a specified vesting schedule.
OPEB plans
JPMorgan Chase offers postretirement medical and life insurance
benefits to certain retirees and postretirement medical benefits to
qualifying U.S. employees. These benefits vary with length of service
and date of hire and provide for limits on the Firm’s share of covered
medical benefits. The medical benefits are contributory, while the life
insurance benefits are noncontributory. Postretirement medical bene-
fits also are offered to qualifying U.K. employees.
JPMorgan Chase’s U.S. OPEB obligation is funded with corporate-
owned life insurance (“COLI”) purchased on the lives of eligible
employees and retirees. While the Firm owns the COLI policies, COLI
proceeds (death benefits, withdrawals and other distributions) may
be used only to reimburse the Firm for its net postretirement benefit
claim payments and related administrative expense. The U.K. OPEB
plan is unfunded.