Quarterly report pursuant to Section 13 or 15(d)

Pension and Postretirement Plans

v2.4.0.6
Pension and Postretirement Plans
 9 Months Ended
Sep. 30, 2012
Compensation and Retirement Disclosure [Abstract]  
Pension and Postretirement plans
NOTE 14 – Pension, Postretirement and Certain Compensation Plans
 
Pension and Postretirement Plans

The Corporation sponsors noncontributory trusteed pension plans that cover substantially all officers and employees, a number of noncontributory nonqualified pension plans, and postretirement health and life plans. Additional information on these plans is presented in Note 19 – Employee Benefit Plans to the Consolidated Financial Statements of the Corporation's 2011 Annual Report on Form 10-K.

In connection with a redesign of the Corporation's retirement plans, on January 24, 2012, the Compensation and Benefits Committee of the Board approved amendments to freeze benefits earned in the Qualified Pension Plans effective June 30, 2012. As a result of acquisitions, the Corporation assumed the obligations related to the pension plans of certain legacy companies. These acquired pension plans have been merged into a separate defined benefit pension plan which, together with the Bank of America Pension Plan, are referred to as the Qualified Pension Plans. As a result of freezing the Qualified Pension Plans, a curtailment was triggered and a remeasurement of the qualified pension obligations and plan assets occurred as of January 24, 2012. As of the remeasurement date, the plan assets had increased in value from the prior measurement date resulting in an increase in the funded status of the plan of approximately $431 million. Additionally, the curtailment impact reduced the projected benefit obligation by approximately $889 million. The combined impact resulted in a $1.3 billion increase to the net pension assets recognized in other assets and a corresponding decrease in unrecognized losses in accumulated OCI of $1.3 billion ($832 million after-tax). The impact of the immediate recognition of the prior service cost of $58 million was recorded in personnel expense as a curtailment loss during the nine months ended September 30, 2012. All economic assumptions were consistent with the prior year end including the weighted-average discount rate of 4.95 percent used for remeasurement of the qualified pension plans.

Net periodic benefit cost of the Corporation’s plans for the three and nine months ended September 30, 2012 and 2011 included the following components.

Components of Net Periodic Benefit Cost
 
Three Months Ended September 30, 2012
(Dollars in millions)
Qualified Pension Plans
 
Non-U.S. Pension Plans
 
Nonqualified and Other Pension Plans (1)
 
Postretirement
Health and Life
Plans
Service cost
$
5

 
$
10

 
$
—

 
$
3

Interest cost
170

 
25

 
34

 
19

Expected return on plan assets
(313
)
 
(36
)
 
(38
)
 
(3
)
Amortization of transition obligation
—

 
—

 
—

 
15

Amortization of prior service cost
—

 
—

 
—

 
2

Amortization of net actuarial loss (gain)
116

 
(2
)
 
2

 
(21
)
Net periodic benefit cost
$
(22
)
 
$
(3
)
 
$
(2
)
 
$
15

 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2011
Service cost
$
105

 
$
12

 
$
1

 
$
4

Interest cost
187

 
27

 
39

 
20

Expected return on plan assets
(323
)
 
(31
)
 
(36
)
 
(3
)
Amortization of transition obligation
—

 
—

 
—

 
8

Amortization of prior service cost (credits)
5

 
—

 
(2
)
 
1

Amortization of net actuarial loss (gain)
96

 
—

 
4

 
(4
)
Net periodic benefit cost
$
70

 
$
8

 
$
6

 
$
26

 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2012
Service cost
$
236

 
$
30

 
$
—

 
$
10

Interest cost
511

 
74

 
104

 
55

Expected return on plan assets
(934
)
 
(105
)
 
(114
)
 
(6
)
Amortization of transition obligation
—

 
—

 
—

 
31

Amortization of prior service cost (credits)
9

 
—

 
(4
)
 
4

Amortization of net actuarial loss (gain)
354

 
(6
)
 
7

 
(31
)
Recognized loss due to settlements and curtailments
58

 
—

 
4

 
—

Net periodic benefit cost
$
234

 
$
(7
)
 
$
(3
)
 
$
63

 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2011
Service cost
$
317

 
$
33

 
$
2

 
$
11

Interest cost
560

 
75

 
115

 
60

Expected return on plan assets
(972
)
 
(87
)
 
(106
)
 
(7
)
Amortization of transition obligation
—

 
—

 
—

 
24

Amortization of prior service cost (credits)
15

 
—

 
(6
)
 
3

Amortization of net actuarial loss (gain)
290

 
—

 
12

 
(13
)
Recognized loss due to settlements and curtailments
—

 
—

 
3

 
—

Net periodic benefit cost
$
210

 
$
21

 
$
20

 
$
78

(1) 
Includes nonqualified pension plans and the terminated Merrill Lynch U.S. pension plan.

The Corporation's best estimate of its contributions to be made to the Non-U.S. Pension Plans, Nonqualified and Other Pension Plans, and Postretirement Health and Life Plans in 2012 is $114 million, $124 million and $115 million, respectively. For the nine months ended September 30, 2012, the Corporation contributed $104 million, $90 million and $87 million, respectively, to these plans. The Corporation has not made and does not expect to make a contribution to the Qualified Pension Plans in 2012.

Certain Compensation Plans

During the nine months ended September 30, 2012, the Corporation issued 289 million RSUs to certain employees under the Key Associate Stock Plan. Certain awards are earned based on the achievement of specified performance criteria. Vested RSUs may be settled in cash or in shares of common stock depending on the terms of the applicable award. Seven million of these RSUs were authorized to be settled in shares of common stock with the remainder in cash only. Certain awards contain clawback provisions which permit the Corporation to cancel all or a portion of the award under specified circumstances. The compensation cost for cash-settled awards and awards subject to certain clawback provisions, which in the aggregate represent substantially all of the awards in 2012, is accrued over the vesting period and adjusted to fair value based upon changes in the share price of the Corporation's common stock. The Corporation hedges a portion of the RSUs using a combination of economic and cash flow hedges as described in Note 3 – Derivatives.