BANK OF AMERICA CORP /DE/ | 2013 | FY | 3

 Employee Benefit Plans
Pension and Postretirement Plans
The Corporation sponsors noncontributory trusteed pension plans, a number of noncontributory nonqualified pension plans, and postretirement health and life plans that cover eligible employees. As discussed below, certain of the pension plans were amended, effective June 30, 2012, to freeze benefits earned. The pension plans provide defined benefits based on an employee’s compensation and years of service. The Bank of America Pension Plan (the Pension Plan) provides participants with compensation credits, generally based on years of service. In 2013, the Corporation merged a defined benefit pension plan, which covered eligible employees of certain legacy companies, into the Bank of America Pension Plan. This plan is referred to as the Qualified Pension Plan (Qualified Pension Plans prior to this merger). For account balances based on compensation credits prior to January 1, 2008, the Pension Plan allows participants to select from various earnings measures, which are based on the returns of certain funds or common stock of the Corporation. The participant-selected earnings measures determine the earnings rate on the individual participant account balances in the Pension Plan. Participants may elect to modify earnings measure allocations on a periodic basis subject to the provisions of the Pension Plan. For account balances based on compensation credits subsequent to December 31, 2007, the account balance earnings rate is based on a benchmark rate. For eligible employees in the Pension Plan on or after January 1, 2008, the benefits become vested upon completion of three years of service. It is the policy of the Corporation to fund no less than the minimum funding amount required by ERISA.
The Pension Plan has a balance guarantee feature for account balances with participant-selected earnings, applied at the time a benefit payment is made from the plan that effectively provides principal protection for participant balances transferred and certain compensation credits. The Corporation is responsible for funding any shortfall on the guarantee feature.
As a result of acquisitions, the Corporation assumed the obligations related to the pension plans of certain legacy companies. The benefit structures under these acquired plans have not changed and remain intact in the merged plan. Certain benefit structures are substantially similar to the Pension Plan discussed above; however, certain of these structures do not allow participants to select various earnings measures; rather the earnings rate is based on a benchmark rate. In addition, these structures include participants with benefits determined under formulas based on average or career compensation and years of service rather than by reference to a pension account. Certain of the other structures provide a participant’s retirement benefits based on the number of years of benefit service and a percentage of the participant’s average annual compensation during the five highest paid consecutive years of the last 10 years of employment.
The 2013 merger of the defined benefit pension plan into the Qualified Pension Plan required a remeasurement of the qualified pension obligations and plan assets at fair value as of the merger date in addition to the required December 31 remeasurement. The 2013 remeasurements resulted in an increase in accumulated OCI of $2.0 billion, net-of-tax.
In 2012, in connection with a redesign of the Corporation’s retirement plans, 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 freezing the Qualified Pension Plans, a curtailment was triggered and a remeasurement of the qualified pension obligations and plan assets occurred. 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 and the curtailment impact reduced the projected benefit obligation. The combined impact resulted in a $1.3 billion increase to the net pension assets recognized in other assets and a corresponding increase in accumulated OCI of $832 million, net-of-tax. The impact of the immediate recognition of the prior service cost of $58 million was recorded in personnel expense as a curtailment loss in 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.
As a result of freezing the Qualified Pension Plans, the amortization period for actuarial gains and losses was changed from the average working life to the estimated average lifetime of benefits being paid. In addition, in 2014, the long-term expected return on assets assumption for the Qualified Pension Plan was reduced to 6.0 percent from 6.5 percent in 2013 and 8.0 percent in 2012 to reflect current market conditions and long-term financial goals.
The Corporation assumed the obligations related to the plans of Merrill Lynch. These plans include a terminated U.S. pension plan (the Other Pension Plan), non-U.S. pension plans, nonqualified pension plans and postretirement plans. The non-U.S. pension plans vary based on the country and local practices.
The Corporation has an annuity contract, previously purchased by Merrill Lynch, that guarantees the payment of benefits vested under the Other Pension Plan. The Corporation, under a supplemental agreement, may be responsible for, or benefit from actual experience and investment performance of the annuity assets. The Corporation made no contribution under this agreement in 2013 or 2012. Contributions may be required in the future under this agreement.
The Corporation sponsors a number of noncontributory, nonqualified pension plans (the Nonqualified Pension Plans). As a result of acquisitions, the Corporation assumed the obligations related to the noncontributory, nonqualified pension plans of certain legacy companies including Merrill Lynch. These plans, which are unfunded, provide defined pension benefits to certain employees.
In addition to retirement pension benefits, full-time, salaried employees and certain part-time employees may become eligible to continue participation as retirees in health care and/or life insurance plans sponsored by the Corporation. Based on the other provisions of the individual plans, certain retirees may also have the cost of these benefits partially paid by the Corporation. The obligations assumed as a result of acquisitions are substantially similar to the Corporation’s postretirement health and life plans, except for Countrywide which did not have a postretirement health and life plan. Collectively, these plans are referred to as the Postretirement Health and Life Plans.
The Pension and Postretirement Plans table summarizes the changes in the fair value of plan assets, changes in the projected benefit obligation (PBO), the funded status of both the accumulated benefit obligation (ABO) and the PBO, and the weighted-average assumptions used to determine benefit obligations for the pension plans and postretirement plans at December 31, 2013 and 2012. Amounts recognized at December 31, 2013 and 2012 are reflected in other assets, and in accrued expenses and other liabilities on the Consolidated Balance Sheet. The discount rate assumption is based on a cash flow matching technique and is subject to change each year. This technique utilizes yield curves that are based on Aa-rated corporate bonds with cash flows that match estimated benefit payments of each of the plans to produce the discount rate assumptions. The asset valuation method for the Qualified Pension Plan recognizes 60 percent of the prior year’s market gains or losses at the next measurement date with the remaining 40 percent spread equally over the subsequent four years.
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 2014 is $83 million, $103 million and $106 million, respectively. The Corporation does not expect to make a contribution to the Qualified Pension Plan in 2014.

 
 
 
 
 
 
 
 
Pension and Postretirement Plans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Qualified
Pension Plan (1)
 
Non-U.S.
Pension Plans (1)
 
Nonqualified
and Other
Pension Plans (1)
 
Postretirement
Health and Life
Plans (1)
(Dollars in millions)
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Change in fair value of plan assets
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Fair value, January 1
$
16,274

 
$
15,070

 
$
2,306

 
$
2,022

 
$
3,063

 
$
3,061

 
$
86

 
$
91

Actual return on plan assets
2,873

 
2,020

 
146

 
115

 
(217
)
 
126

 
9

 
10

Company contributions
—

 
—

 
131

 
152

 
98

 
112

 
61

 
117

Plan participant contributions
—

 
—

 
1

 
3

 
—

 
—

 
138

 
139

Settlements and curtailments
—

 
—

 
(80
)
 
—

 
(7
)
 
—

 
—

 
—

Benefits paid
(871
)
 
(816
)
 
(80
)
 
(77
)
 
(217
)
 
(236
)
 
(237
)
 
(290
)
Federal subsidy on benefits paid
n/a

 
n/a

 
n/a

 
n/a

 
n/a

 
n/a

 
15

 
19

Foreign currency exchange rate changes
n/a

 
n/a

 
33

 
91

 
n/a

 
n/a

 
n/a

 
n/a

Fair value, December 31
$
18,276

 
$
16,274

 
$
2,457

 
$
2,306

 
$
2,720

 
$
3,063

 
$
72

 
$
86

Change in projected benefit obligation
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Projected benefit obligation, January 1
$
15,655

 
$
14,891

 
$
2,460

 
$
1,984

 
$
3,334

 
$
3,137

 
$
1,574

 
$
1,619

Service cost
—

 
236

 
32

 
40

 
1

 
1

 
9

 
13

Interest cost
623

 
681

 
98

 
97

 
120

 
138

 
54

 
71

Plan participant contributions
—

 
—

 
1

 
3

 
—

 
—

 
138

 
139

Plan amendments
—

 
—

 
2

 
2

 
—

 
—

 
—

 
—

Settlements and curtailments
17

 
(889
)
 
(116
)
 
—

 
(7
)
 
—

 
—

 
—

Actuarial loss (gain)
(1,279
)
 
1,552

 
156

 
328

 
(161
)
 
294

 
(197
)
 
(4
)
Benefits paid
(871
)
 
(816
)
 
(80
)
 
(77
)
 
(217
)
 
(236
)
 
(237
)
 
(290
)
Federal subsidy on benefits paid
n/a

 
n/a

 
n/a

 
n/a

 
n/a

 
n/a

 
15

 
19

Foreign currency exchange rate changes
n/a

 
n/a

 
27

 
83

 
n/a

 
n/a

 
—

 
7

Projected benefit obligation, December 31
$
14,145

 
$
15,655

 
$
2,580

 
$
2,460

 
$
3,070

 
$
3,334

 
$
1,356

 
$
1,574

Amount recognized, December 31
$
4,131

 
$
619

 
$
(123
)
 
$
(154
)
 
$
(350
)
 
$
(271
)
 
$
(1,284
)
 
$
(1,488
)
Funded status, December 31
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Accumulated benefit obligation
$
14,145

 
$
15,655

 
$
2,463

 
$
2,345

 
$
3,067

 
$
3,334

 
n/a

 
n/a

Overfunded (unfunded) status of ABO
4,131

 
619

 
(6
)
 
(39
)
 
(347
)
 
(271
)
 
n/a

 
n/a

Provision for future salaries
—

 
—

 
117

 
115

 
3

 
—

 
n/a

 
n/a

Projected benefit obligation
14,145

 
15,655

 
2,580

 
2,460

 
3,070

 
3,334

 
$
1,356

 
$
1,574

Weighted-average assumptions, December 31
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Discount rate
4.85
%
 
4.00
%
 
4.30
%
 
4.23
%
 
4.55
%
 
3.65
%
 
4.50
%
 
3.65
%
Rate of compensation increase
n/a

 
n/a

 
3.40

 
4.37

 
4.00

 
4.00

 
n/a

 
n/a

(1) 
The measurement date for the Qualified Pension Plan, Non-U.S. Pension Plans, Nonqualified and Other Pension Plans, and Postretirement Health and Life Plans was December 31 of each year reported.
n/a = not applicable
Amounts recognized on the Consolidated Balance Sheet at December 31, 2013 and 2012 are presented in the table below.
 
 
 
 
 
 
 
 
Amounts Recognized on Consolidated Balance Sheet
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Qualified
Pension Plan
 
Non-U.S.
Pension Plans
 
Nonqualified
and Other
Pension Plans
 
Postretirement
Health and Life
Plans
(Dollars in millions)
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Other assets
$
4,131

 
$
676

 
$
205

 
$
220

 
$
777

 
$
908

 
$
—

 
$
—

Accrued expenses and other liabilities
—

 
(57
)
 
(328
)
 
(374
)
 
(1,127
)
 
(1,179
)
 
(1,284
)
 
(1,488
)
Net amount recognized at December 31
$
4,131

 
$
619

 
$
(123
)
 
$
(154
)
 
$
(350
)
 
$
(271
)
 
$
(1,284
)
 
$
(1,488
)

Pension Plans with ABO and PBO in excess of plan assets as of December 31, 2013 and 2012 are presented in the table below. For the non-qualified plans not subject to ERISA or non-U.S. pension plans, funding strategies vary due to legal requirements and local practices.
 
 
 
 
 
 
 
 
 
 
 
 
Plans with ABO and PBO in Excess of Plan Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Qualified
 Pension Plan
 
Non-U.S.
Pension Plans
 
Nonqualified
and Other
Pension Plans
(Dollars in millions)
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Plans with ABO in excess of plan assets
 
 
 
 
 

 
 

 
 
 
 

PBO
n/a
 
$
7,171

 
$
617

 
$
883

 
$
1,129

 
$
1,182

ABO
n/a
 
7,171

 
606

 
843

 
1,126

 
1,181

Fair value of plan assets
n/a
 
7,114

 
290

 
510

 
2

 
2

Plans with PBO in excess of plan assets
 
 
 
 
 
 
 

 
 
 
 

PBO
n/a
 
$
7,171

 
$
720

 
$
896

 
$
1,129

 
$
1,182

Fair value of plan assets
n/a
 
7,114

 
392

 
522

 
2

 
2


n/a = not applicable
Net periodic benefit cost of the Corporation’s plans for 2013, 2012 and 2011 included the following components.
 
 
 
 
 
 
 
 
 
 
 
 
Components of Net Periodic Benefit Cost
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Qualified Pension Plan
 
Non-U.S. Pension Plans
(Dollars in millions)
2013
 
2012
 
2011
 
2013
 
2012
 
2011
Components of net periodic benefit cost
 

 
 

 
 

 
 

 
 

 
 

Service cost
$
—

 
$
236

 
$
423

 
$
32

 
$
40

 
$
43

Interest cost
623

 
681

 
746

 
98

 
97

 
99

Expected return on plan assets
(1,024
)
 
(1,246
)
 
(1,296
)
 
(121
)
 
(137
)
 
(115
)
Amortization of prior service cost
—

 
9

 
20

 
—

 
—

 
—

Amortization of net actuarial loss (gain)
242

 
469

 
387

 
2

 
(9
)
 
—

Recognized loss (gain) due to settlements and curtailments
17

 
58

 
—

 
(7
)
 
—

 
—

Net periodic benefit cost (income)
$
(142
)
 
$
207

 
$
280

 
$
4

 
$
(9
)
 
$
27

Weighted-average assumptions used to determine net cost for years ended December 31
 

 
 

 
 

 
 

 
 

 
 

Discount rate
4.00
%
 
4.95
%
 
5.45
%
 
4.23
%
 
4.87
%
 
5.32
%
Expected return on plan assets
6.50

 
8.00

 
8.00

 
5.50

 
6.65

 
6.58

Rate of compensation increase
n/a

 
4.00

 
4.00

 
4.37

 
4.42

 
4.85

 
 
 
 
 
 
 
 
 
 
 
 
 
Nonqualified and
Other Pension Plans
 
Postretirement Health
and Life Plans
(Dollars in millions)
2013
 
2012
 
2011
 
2013
 
2012
 
2011
Components of net periodic benefit cost
 

 
 

 
 

 
 

 
 

 
 

Service cost
$
1

 
$
1

 
$
3

 
$
9

 
$
13

 
$
15

Interest cost
120

 
138

 
152

 
54

 
71

 
80

Expected return on plan assets
(109
)
 
(152
)
 
(141
)
 
(5
)
 
(8
)
 
(9
)
Amortization of transition obligation
—

 
—

 
—

 
—

 
32

 
31

Amortization of prior service cost (credits)
—

 
(3
)
 
(8
)
 
4

 
4

 
4

Amortization of net actuarial loss (gain)
25

 
8

 
16

 
(42
)
 
(38
)
 
(17
)
Recognized loss due to settlements and curtailments
2

 
—

 
3

 
6

 
—

 
—

Net periodic benefit cost (income)
$
39

 
$
(8
)
 
$
25

 
$
26

 
$
74

 
$
104

Weighted-average assumptions used to determine net cost for years ended December 31
 

 
 

 
 

 
 

 
 

 
 

Discount rate
3.65
%
 
4.65
%
 
5.20
%
 
3.65
%
 
4.65
%
 
5.10
%
Expected return on plan assets
3.75

 
5.25

 
5.25

 
6.50

 
8.00

 
8.00

Rate of compensation increase
4.00

 
4.00

 
4.00

 
n/a

 
n/a

 
n/a


n/a = not applicable
Net periodic postretirement health and life expense was determined using the “projected unit credit” actuarial method. Gains and losses for all benefit plans except postretirement health care are recognized in accordance with the standard amortization provisions of the applicable accounting guidance. For the Postretirement Health Care Plans, 50 percent of the unrecognized gain or loss at the beginning of the fiscal year (or at subsequent remeasurement) is recognized on a level basis during the year.
The discount rate and expected return on plan assets impact the net periodic benefit cost (income) recorded for the plans. With all other assumptions held constant, a 25 bps decline in the discount rate would result in an increase of approximately $7 million, while a 25 bps decline in the expected return on plan assets would result in an increase of approximately $41 million for the Qualified Pension Plan. For the Postretirement Health and Life Plans, the 25 bps decline in the discount rate would result in an increase of approximately $9 million. For the Non-U.S. Pension Plans and the Nonqualified and Other Pension Plans, the 25 bps decline in rates would not have a significant impact.
Assumed health care cost trend rates affect the postretirement benefit obligation and benefit cost reported for the Postretirement Health and Life Plans. The assumed health care cost trend rate used to measure the expected cost of benefits covered by the Postretirement Health and Life Plans is 7.00 percent for 2014, reducing in steps to 5.00 percent in 2019 and later years. A one-percentage-point increase in assumed health care cost trend rates would have increased the service and interest costs, and the benefit obligation by $2 million and $54 million in 2013. A one-percentage-point decrease in assumed health care cost trend rates would have lowered the service and interest costs, and the benefit obligation by $2 million and $47 million in 2013.
Pre-tax amounts included in accumulated OCI for employee benefit plans at December 31, 2013 and 2012 are presented in the table below.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax Amounts included in Accumulated OCI
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Qualified
Pension Plan
 
Non-U.S.
Pension Plans
 
Nonqualified
and Other
Pension Plans
 
Postretirement
Health and
Life Plans
 
Total
(Dollars in millions)
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Net actuarial loss (gain)
$
2,794

 
$
6,164

 
$
271

 
$
144

 
$
855

 
$
718

 
$
(171
)
 
$
(28
)
 
$
3,749

 
$
6,998

Prior service cost (credits)
—

 
—

 
(9
)
 
5

 
—

 
—

 
24

 
29

 
15

 
34

Amounts recognized in accumulated OCI
$
2,794

 
$
6,164

 
$
262

 
$
149

 
$
855

 
$
718

 
$
(147
)
 
$
1

 
$
3,764

 
$
7,032


Pre-tax amounts recognized in OCI for employee benefit plans in 2013 included the following components.
 
 
 
 
 
 
 
 
 
 
Pre-tax Amounts Recognized in OCI in 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Dollars in millions)
Qualified
Pension Plan
 
Non-U.S.
Pension Plans
 
Nonqualified
and Other
Pension Plans
 
Postretirement
Health and
Life Plans
 
Total
Current year actuarial loss (gain)
$
(3,128
)
 
$
113

 
$
164

 
$
(180
)
 
$
(3,031
)
Amortization of actuarial gain (loss)
(242
)
 
(2
)
 
(27
)
 
36

 
(235
)
Current year prior service cost
—

 
2

 
—

 
—

 
2

Amortization of prior service cost
—

 
—

 
—

 
(4
)
 
(4
)
Amounts recognized in OCI
$
(3,370
)
 
$
113

 
$
137

 
$
(148
)
 
$
(3,268
)

The estimated pre-tax amounts that will be amortized from accumulated OCI into expense in 2014 are presented in the table below.
 
 
 
 
 
 
 
 
 
 
Estimated Pre-tax Amounts Amortized from Accumulated OCI into Period Cost in 2014
 
 
 
 
 
 
 
 
 
 
(Dollars in millions)
Qualified
Pension Plan
 
Non-U.S.
Pension Plans
 
Nonqualified
and Other
Pension Plans
 
Postretirement
Health and
Life Plans
 
Total
Net actuarial loss (gain)
$
108

 
$
3

 
$
25

 
$
(85
)
 
$
51

Prior service cost
—

 
1

 
—

 
4

 
5

Total amounts amortized from accumulated OCI
$
108

 
$
4

 
$
25

 
$
(81
)
 
$
56


Plan Assets
The Qualified Pension Plan has been established as a retirement vehicle for participants, and trusts have been established to secure benefits promised under the Qualified Pension Plan. The Corporation’s policy is to invest the trust assets in a prudent manner for the exclusive purpose of providing benefits to participants and defraying reasonable expenses of administration. The Corporation’s investment strategy is designed to provide a total return that, over the long term, increases the ratio of assets to liabilities. The strategy attempts to maximize the investment return on assets at a level of risk deemed appropriate by the Corporation while complying with ERISA and any applicable regulations and laws. The investment strategy utilizes asset allocation as a principal determinant for establishing the risk/return profile of the assets. Asset allocation ranges are established, periodically reviewed and adjusted as funding levels and liability characteristics change. Active and passive investment managers are employed to help enhance the risk/return profile of the assets. An additional aspect of the investment strategy used to minimize risk (part of the asset allocation plan) includes matching the equity exposure of participant-selected earnings measures. For example, the common stock of the Corporation held in the trust is maintained as an offset to the exposure related to participants who elected to receive an earnings measure based on the return performance of common stock of the Corporation. No plan assets are expected to be returned to the Corporation during 2014.
The assets of the Non-U.S. Pension Plans are primarily attributable to a U.K. pension plan. This U.K. pension plan’s assets are invested prudently so that the benefits promised to members are provided with consideration given to the nature and the duration of the plan’s liabilities. The current investment strategy was set following an asset-liability study and advice from the trustee’s investment advisors. The selected asset allocation strategy is designed to achieve a higher return than the lowest risk strategy while maintaining a prudent approach to meeting the plan’s liabilities.
The expected return on asset assumption was developed through analysis of historical market returns, historical asset class volatility and correlations, current market conditions, anticipated future asset allocations, the funds’ past experience, and expectations on potential future market returns. The expected return on asset assumption is determined using the calculated market-related value for the Qualified Pension Plan and the Other Pension Plan and the fair value for the Non-U.S. Pension Plans and Postretirement Health and Life Plans. The expected return on asset assumption represents a long-term average view of the performance of the assets in the Qualified Pension Plan, the Non-U.S. Pension Plans, the Other Pension Plan, and Postretirement Health and Life Plans, a return that may or may not be achieved during any one calendar year. The terminated Other U.S. Pension Plan is invested solely in an annuity contract which is primarily invested in fixed-income securities structured such that asset maturities match the duration of the plan’s obligations.
The target allocations for 2014 by asset category for the Qualified Pension Plan, Non-U.S. Pension Plans, Nonqualified and Other Pension Plans, and Postretirement Health and Life Plans are presented in the table below.
 
 
 
 
 
2014 Target Allocation
 
 
 
 
 
 
Percentage
Asset Category
Qualified
Pension Plan
Non-U.S.
Pension Plans
Nonqualified
and Other
Pension Plans
Postretirement
Health and Life
Plans
Equity securities
30 - 60
10 - 35
0 - 5
20 - 50
Debt securities
40 - 70
40 - 80
95 - 100
50 - 80
Real estate
0 - 10
0 - 15
0 - 5
0 - 5
Other
0 - 5
0 - 15
0 - 5
0 - 5

Equity securities for the Qualified Pension Plan include common stock of the Corporation in the amounts of $200 million (1.10 percent of total plan assets) and $156 million (0.96 percent of total plan assets) at December 31, 2013 and 2012.
Fair Value Measurements
For information on fair value measurements, including descriptions of Level 1, 2 and 3 of the fair value hierarchy and the valuation methods employed by the Corporation, see Note 1 – Summary of Significant Accounting Principles and Note 20 – Fair Value Measurements.
Combined plan investment assets measured at fair value by level and in total at December 31, 2013 and 2012 are summarized in the Fair Value Measurements table.
 
 
 
 
 
 
 
 
Fair Value Measurements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
(Dollars in millions)
Level 1
 
Level 2
 
Level 3
 
Total
Cash and short-term investments
 

 
 

 
 

 
 

Money market and interest-bearing cash
$
2,586

 
$
—

 
$
—

 
$
2,586

Cash and cash equivalent commingled/mutual funds
—

 
223

 
—

 
223

Fixed income
 

 
 

 
 

 
 

U.S. government and government agency securities
1,590

 
2,245

 
12

 
3,847

Corporate debt securities
—

 
1,233

 
—

 
1,233

Asset-backed securities
—

 
1,455

 
—

 
1,455

Non-U.S. debt securities
547

 
502

 
6

 
1,055

Fixed income commingled/mutual funds
89

 
1,279

 
—

 
1,368

Equity
 

 
 

 
 

 
 

Common and preferred equity securities
7,463

 
—

 
—

 
7,463

Equity commingled/mutual funds
213

 
2,308

 
—

 
2,521

Public real estate investment trusts
127

 
—

 
—

 
127

Real estate
 

 
 

 
 

 
 

Private real estate
—

 
—

 
119

 
119

Real estate commingled/mutual funds
—

 
7

 
462

 
469

Limited partnerships
—

 
117

 
145

 
262

Other investments (1)
—

 
662

 
135

 
797

Total plan investment assets, at fair value
$
12,615

 
$
10,031

 
$
879

 
$
23,525

 
 
 
 
 
 
 
 
 
December 31, 2012
Cash and short-term investments
 

 
 

 
 

 
 

Money market and interest-bearing cash
$
1,404

 
$
—

 
$
—

 
$
1,404

Cash and cash equivalent commingled/mutual funds
—

 
96

 
—

 
96

Fixed income
 

 
 

 
 

 
 

U.S. government and government agency securities
1,317

 
2,829

 
13

 
4,159

Corporate debt securities
—

 
1,062

 
—

 
1,062

Asset-backed securities
—

 
1,109

 
—

 
1,109

Non-U.S. debt securities
70

 
535

 
10

 
615

Fixed income commingled/mutual funds
99

 
1,432

 
—

 
1,531

Equity
 

 
 

 
 

 
 

Common and preferred equity securities
7,432

 
—

 
—

 
7,432

Equity commingled/mutual funds
290

 
2,316

 
—

 
2,606

Public real estate investment trusts
236

 
—

 
—

 
236

Real estate
 

 
 

 
 

 
 

Private real estate
—

 
—

 
110

 
110

Real estate commingled/mutual funds
—

 
10

 
324

 
334

Limited partnerships
—

 
110

 
231

 
341

Other investments (1)
22

 
543

 
129

 
694

Total plan investment assets, at fair value
$
10,870

 
$
10,042

 
$
817

 
$
21,729

(1) 
Other investments include interest rate swaps of $435 million and $311 million, participant loans of $87 million and $76 million, commodity and balanced funds of $229 million and $239 million and other various investments of $46 million and $68 million at December 31, 2013 and 2012.
The Level 3 Fair Value Measurements table presents a reconciliation of all plan investment assets measured at fair value using significant unobservable inputs (Level 3) during 2013, 2012 and 2011.
 
 
 
 
 
 
 
 
 
 
 
 
Level 3 Fair Value Measurements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2013
(Dollars in millions)
Balance
January 1
 
Actual Return on
Plan Assets Still
Held at the
Reporting Date
 
Purchases
 
Sales and Settlements
 
Transfers into/
(out of) Level 3
 
Balance
December 31
Fixed income
 

 
 

 
 

 
 
 
 

 
 

U.S. government and government agency securities
$
13

 
$
—

 
$
—

 
$
(1
)
 
$
—

 
$
12

Non-U.S. debt securities
10

 
(2
)
 
—

 
(2
)
 
—

 
6

Real estate
 

 
 

 
 
 
 

 
 

 
 

Private real estate
110

 
4

 
7

 
(2
)
 
—

 
119

Real estate commingled/mutual funds
324

 
15

 
123

 
—

 
—

 
462

Limited partnerships
231

 
8

 
23

 
(89
)
 
(28
)
 
145

Other investments
129

 
(6
)
 
13

 
(1
)
 
—

 
135

Total
$
817

 
$
19

 
$
166

 
$
(95
)
 
$
(28
)
 
$
879

 
 
 
 
 
 
 
 
 
 
 
 
 
2012
Fixed income
 

 
 

 
 

 
 
 
 

 
 

U.S. government and government agency securities
$
13

 
$
—

 
$
—

 
$
—

 
$
—

 
$
13

Non-U.S. debt securities
10

 
(1
)
 
1

 
(1
)
 
1

 
10

Real estate
 

 
 

 
 
 
 

 
 

 
 

Private real estate
113

 
(2
)
 
2

 
(3
)
 
—

 
110

Real estate commingled/mutual funds
249

 
13

 
62

 
—

 
—

 
324

Limited partnerships
232

 
8

 
11

 
(20
)
 
—

 
231

Other investments
122

 
7

 
4

 
(4
)
 
—

 
129

Total
$
739

 
$
25

 
$
80

 
$
(28
)
 
$
1

 
$
817

 
 
 
 
 
 
 
 
 
 
 
 
 
2011
Fixed income
 
 
 
 
 
 
 
 
 
 
 
U.S. government and government agency securities
$
14

 
$
(1
)
 
$
—

 
$
—

 
$
—

 
$
13

Non-U.S. debt securities
9

 
—

 
3

 
(2
)
 
—

 
10

Real estate
 
 
 
 
 
 
 
 
 
 
 

Private real estate
110

 
—

 
3

 
—

 
—

 
113

Real estate commingled/mutual funds
215

 
26

 
9

 
(1
)
 
—

 
249

Limited partnerships
230

 
(6
)
 
13

 
(5
)
 
—

 
232

Other investments
94

 
1

 
26

 
—

 
1

 
122

Total
$
672

 
$
20

 
$
54

 
$
(8
)
 
$
1

 
$
739


Projected Benefit Payments
Benefit payments projected to be made from the Qualified Pension Plan, Non-U.S. Pension Plans, Nonqualified and Other Pension Plans, and Postretirement Health and Life Plans are presented in the table below.
 
 
 
 
 
 
 
 
 
 
Projected Benefit Payments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Postretirement Health and Life Plans
(Dollars in millions)
Qualified
Pension Plan (1)
 
Non-U.S.
Pension Plans (2)
 
Nonqualified
and Other
Pension Plans (2)
 
Net Payments (3)
 
Medicare
Subsidy
2014
$
927

 
$
60

 
$
243

 
$
142

 
$
17

2015
920

 
61

 
245

 
140

 
17

2016
910

 
64

 
242

 
137

 
17

2017
903

 
69

 
239

 
132

 
17

2018
894

 
71

 
235

 
127

 
17

2019 – 2023
4,399

 
428

 
1,132

 
558

 
76

(1) 
Benefit payments expected to be made from the plan’s assets.
(2) 
Benefit payments expected to be made from a combination of the plans’ and the Corporation’s assets.
(3) 
Benefit payments (net of retiree contributions) expected to be made from a combination of the plans’ and the Corporation’s assets.
Defined Contribution Plans
The Corporation maintains qualified defined contribution retirement plans and nonqualified defined contribution retirement plans. As a result of the Merrill Lynch acquisition, the Corporation also maintains the Merrill Lynch 401(k) Savings & Investment Plan, which is closed to new participants, with certain exceptions. The Corporation contributed $1.1 billion, $886 million and $723 million in 2013, 2012 and 2011, respectively, to the qualified defined contribution plans. In connection with the 2012 redesign of the Corporation’s retirement plans, an additional contribution is being made annually to certain of these plans. The expense in 2013 and 2012 related to the additional annual contribution was $410 million and $174 million. At December 31, 2013 and 2012, 235 million shares of the Corporation’s common stock were held by these plans. Payments to the plans for dividends on common stock were $10 million, $10 million and $9 million in 2013, 2012 and 2011, respectively.
Certain non-U.S. employees are covered under defined contribution pension plans that are separately administered in accordance with local laws.

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