JP Morgan Chase 2010 Annual Report Download - page 201

JPMorgan Chase & Co./2010 Annual Report 201
Note 9 – Pension and other postretirement
employee benefit plans
The Firm’s defined benefit pension plans and its other postretire-
ment employee benefit (“OPEB”) plans (collectively the “Plans”)
are accounted for in accordance with U.S. GAAP for retirement
benefits.
Defined benefit pension plans
The Firm has a qualified noncontributory U.S. defined benefit
pension plan that provides benefits to substantially all U.S. employ-
ees. 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
retirement, based on eligible compensation and years of service.
Employees begin to accrue plan benefits after completing one year
of service, and benefits generally vest after three years of service. In
November 2009, the Firm announced certain changes to the pay
credit schedule and amount of eligible compensation recognized
under the U.S. plan effective February 1, 2010. The Firm also offers
benefits through defined benefit pension plans to qualifying em-
ployees in certain non-U.S. locations based on factors such as
eligible compensation, age and/or years of service.
It is the Firm’s policy to fund the pension plans in amounts suffi-
cient to meet the requirements under applicable laws. On January
15, 2009, and August 28, 2009, the Firm made discretionary cash
contributions to its U.S. defined benefit pension plan of $1.3 billion
and $1.5 billion, respectively. The amount of potential 2011 contri-
butions to the U.S. defined benefit pension plans, if any, is not
determinable at this time. The expected amount of 2011 contribu-
tions to the non-U.S. defined benefit pension plans is $166 million
of which $154 million is contractually required.
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 Firm announced that,
effective May 1, 2009, pay credits would no longer be provided on
compensation amounts above the maximum stipulated by law. The
Excess Retirement Plan had an unfunded projected benefit obliga-
tion in the amount of $266 million and $267 million, at December
31, 2010 and 2009, respectively.
Defined contribution plans
JPMorgan Chase currently provides two qualified defined contribu-
tion plans in the U.S. and other similar arrangements in certain
non-U.S. locations, all of which are administered in accordance
with applicable local laws and regulations. The most significant of
these plans is The JPMorgan Chase 401(k) Savings Plan (the
“401(k) Savings Plan”), which covers substantially all U.S. employ-
ees. The 401(k) Savings Plan allows employees to make pretax and
Roth 401(k) contributions to tax-deferred investment portfolios. The
JPMorgan Chase Common Stock Fund, which is an investment
option under the 401(k) Savings Plan, is a nonleveraged employee
stock ownership plan.
The Firm matched eligible employee contributions up to 5% of
benefits-eligible compensation (e.g., base pay) on a per pay period
basis through April 30, 2009, and then amended the plan to pro-
vide that thereafter matching contributions would be made annu-
ally. Employees begin to receive matching contributions after
completing a one-year-of-service requirement. Employees with total
annual cash compensation of $250,000 or more are not eligible for
matching contributions. Matching contributions are immediately
vested for employees hired before May 1, 2009, and will vest after
three years of service for employees hired on or after May 1, 2009.
The 401(k) Savings Plan also permits discretionary profit-sharing
contributions by participating companies for certain employees,
subject to a specified vesting schedule.
Effective August 10, 2009, JPMorgan Chase Bank, N.A. became the
sponsor of the WaMu Savings Plan and that plan’s assets were
merged into the 401(k) Savings Plan effective March 31, 2010.
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 ser-
vice and date of hire and provide for limits on the Firm’s share of
covered medical benefits. The medical and life insurance benefits
are both contributory. Postretirement medical benefits 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.