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2008 Annual Report
2008 Annual Report
IV. Financial Statements and Notes
Deposit Insurance Fund (DIF) – Cont.
9. Operating Expenses
10. Provision for
11. Employee Benefits
Eligible FDIC employees also may participate in a FDIC-sponsored tax-deferred 401(k) savings plan with matching contributions up to five percent. Under the Federal Thrift Savings Plan (TSP), FDIC provides FERS employees with an automatic contribution of 1 percent of pay and an additional matching contribution up to 4 percent of pay. CSRS employees also can contribute to the TSP. However, CSRS employees do not receive agency matching contributions.
Postretirement Benefits Other Than Pensions
The FDIC provides certain life and dental insurance coverage for its eligible retirees, the retirees’ beneficiaries, and covered dependents. Retirees eligible for life and dental insurance coverage are those who have qualified due to: 1) immediate enrollment upon appointment or five years of participation in the plan and 2) eligibility for an immediate annuity. The life insurance program provides basic coverage at no cost to retirees and allows converting optional coverages to direct-pay plans. For the dental coverage, retirees are responsible for a portion of the dental premium.
The FDIC has elected not to fund the postretirement life and dental benefit liabilities. As a result, the DIF recognized the underfunded status (difference between the accumulated postretirement benefit obligation and the plan assets at fair value) as a liability. Since there are no plan assets, the plan’s benefit liability is equal to the accumulated postretirement benefit obligation. At December 31, 2008 and 2007, the liability was $114.1 million and $116.2 million, respectively, which is recognized in the “Postretirement benefit liability” line item on the Balance Sheet. The cumulative actuarial gains/losses (changes in assumptions and plan experience) and prior service costs/credits (changes to plan provisions that increase or decrease benefits) were $25.0 million and $19.6 million at December 31, 2008 and 2007, respectively. These amounts are reported as accumulated other comprehensive income in the “Unrealized postretirement benefit gain” line item on the Balance Sheet.
The DIF’s expenses for postretirement benefits for 2008 and 2007 were $7.7 million and $7.2 million, respectively, which are included in the current and prior year’s operating expenses on the Statement of Income and Fund Balance. The changes in the actuarial gains/losses and prior service costs/credits for 2008 and 2007 of $5.3 million and $17.4 million, respectively, are reported as other comprehensive income in the “Unrealized postretirement benefit gain” line item. Key actuarial assumptions used in the accounting for the plan include the discount rate of 6.5 percent, the rate of compensation increase of 4.10 percent, and the dental coverage trend rate of 7.0 percent. The discount rate of 6.5 percent is based upon rates of return on high-quality fixed income investments whose cash flows match the timing and amount of expected benefit payments.
12. Commitments and Off-Balance-Sheet Exposure
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