US Bank 2003 Annual Report Download - page 92

During 2001, the Company also maintained several
Employee Benefits
unfunded, non-qualified, supplemental executive retirement
Employee Investment Plan The Company has defined programs that provided additional defined pension benefits
contribution retirement savings plans which allow qualified for senior managers and executive employees. As of
employees, at their option, to make contributions up to September 30, 2001, a supplemental executive retirement
certain percentages of pre-tax base salary through salary plan of USBM was frozen for substantially all participants
deductions under Section 401(k) of the Internal Revenue but with service credit running through December 31, 2001.
Code. Employee contributions are invested, at the Effective January 1, 2002, substantially all of these
employees’ direction, among a variety of investment programs were merged into one non-qualified retirement
alternatives. Employee contributions are 100 percent plan. Because all the non-qualified plans were unfunded, the
matched by the Company, up to the first four percent of an aggregate accumulated benefit obligations exceeded the
employee’s compensation. The Company’s matching assets. The assumptions used in computing the present value
contribution vests immediately; however, a participant must of the accumulated benefit obligation, the projected benefit
be employed on December 31st to receive that year’s obligation and net pension expense are substantially
matching contribution. Although the matching contribution consistent with those assumptions used for the funded
is initially invested in the Company’s common stock, an qualified plans. The Company recognized a settlement loss
employee can reinvest the matching contributions among of $3.5 million on this plan in 2003, related to the level of
various investment alternatives. Total expense was payouts made from the plan. In 2002, the Company
$48.5 million, $50.5 million and $43.7 million in 2003, recognized combined curtailment and settlement gains of
2002 and 2001, respectively. $11.7 million related to changes in the non-qualified
pension plans in connection with the mergers of the
Pension Plans Pension benefits are provided to substantially
prior plans.
all employees based on years of service and employees’
In general, the Company’s pension plan objectives
compensation while employed with the Company.
include maintaining a funded status sufficient to meet
Employees are fully vested after five years of service. Prior
participant benefit obligations over time while reducing
to their acquisition dates, employees of certain acquired
long-term funding requirements and pension costs. The
companies were covered by separate, noncontributory
Company has an established process for evaluating all the
pension plans that provided benefits based on years of
plans, their performance and significant plan assumptions,
service and compensation. Generally, the Company merges
including the assumed discount rate and the long-term rate
plans of acquired companies into its existing pension plans
of return (‘‘LTROR’’). At least annually, an independent
when it becomes practicable.
consultant is engaged to assist U.S. Bancorp’s Compensation
As of January 1, 2002, the Company’s two existing
Committee in evaluating plan objectives, funding policies
pension plans were merged under a new final average-pay
and plan investment policies considering its long-term
benefit structure. During 2001, the Company had
investment time horizon and asset allocation strategies. The
maintained two different qualified pension plans, with three
process also evaluates significant plan assumptions.
different pension benefit structures: the former USBM’s cash
Although plan assumptions are established annually, the
balance pension benefit structure, a final average pay benefit
Company may update its analysis on an interim basis in
structure for the former Firstar organization, and a cash
order to be responsive to significant events that occur
balance pension benefit structure related to the Mercantile
during the year, such as plan mergers and amendments.
acquisition. The benefit structure of the new combined plan
did not become effective for the Mercantile acquisition until Funding Practices The Company’s funding policy is to
January 1, 2003. Under the new plan’s benefit structure, a contribute amounts to its plans sufficient to meet the
participant’s future retirement benefits are based on a minimum funding requirements of the Employee Retirement
participant’s highest five year average annual compensation Income Security Act of 1974, plus such additional amounts
during his or her last 10 years before retirement or as the Company determines to be appropriate. During 2003
termination from the Company. Generally, under the two and 2002, the Company made contributions of
previous cash balance pension benefit structures, the $310.8 million and $150.0 million, respectively, to the
participant’s earned retirement benefits based on their qualified pension plan in accordance with this policy. In
average compensation over their career. Retirement benefits 2004, the Company anticipates no minimum funding
under the former Firstar benefit structure were earned based requirement and therefore does not expect to make any
on final average pay and years of service, similar to the new contributions to the plan. Contributions made to the plan
plan. Plan assets primarily consist of various equity mutual were invested in accordance with established investment
funds and other miscellaneous assets. policies and asset allocation strategies.
90 U.S. Bancorp
Note 18