17. Stock-Based Compensation Plans

As of December 31, 2017, we had the 2014 Stock Incentive Plan, the Employee Stock Purchase Plan, the 2014 Directors Stock Plan, the Amended and Restated 2010 Stock Incentive Plan, the 2005 Directors Stock Plan, the Stock Incentive Plan and the Directors Stock Plan ("Stock-Based Compensation Plans"). As of May 20, 2014, no new grants will be made under the Amended and Restated 2010 Stock Incentive Plan or the 2005 Directors Stock Plan. No grants have been made under the Stock Incentive Plan or the Directors Stock Plan since at least 2005. Under the terms of the 2014 Stock Incentive Plan, grants may be nonqualified stock options, incentive stock options qualifying under Section 422 of the Internal Revenue Code, restricted stock, restricted stock units, stock appreciation rights, performance shares, performance units or other stock-based awards. The 2014 Directors Stock Plan provides for the grant of nonqualified stock options, restricted stock, restricted stock units or other stock-based awards to our nonemployee directors. To date, we have not granted any incentive stock options, restricted stock or performance units under any plans.

As of December 31, 2017, the maximum number of new shares of common stock available for grant under the 2014 Stock Incentive Plan and the 2014 Directors Stock Plan was 9.2 million.

For awards with graded vesting, we use an accelerated expense attribution method. The compensation cost that was charged against net income for stock-based awards granted under the Stock-Based Compensation Plans was as follows:

	For the year ended December 31,
	2017		2016		2015
	(in millions)
Compensation cost	$	80.6	$	73.8	$	69.7
Related income tax benefit		27.1		21.5		22.5
Capitalized as part of an asset		2.5		2.8		2.2

Nonqualified Stock Options

Nonqualified stock options were granted to certain employees under the 2014 Stock Incentive Plan, the Amended and Restated 2010 Stock Incentive Plan and the Stock Incentive Plan. Options outstanding were granted at an exercise price equal to the fair market value of our common stock on the date of grant, and expire ten years after the grant date. These options have graded vesting over a three-year period, except in the case of specific types of terminations. Total options granted were 0.7 million, 1.1 million and 0.6 million during 2017, 2016 and 2015, respectively.

The following is a summary of the status of all of our stock option plans:

	Number of options		Weighted- average exercise price		Intrinsic value
	(in millions)				(in millions)
Options outstanding as of January 1, 2017		7.5	$	44.61
Granted		0.7		62.78
Exercised		2.9		46.07
Expired		1.0		62.59

Options outstanding as of December 31, 2017		4.3	$	42.65	$	120.3


Options vested or expected to vest as of December 31, 2017		4.3	$	42.62	$	120.1


Options exercisable as of December 31, 2017		2.7	$	38.74	$	88.1

The total intrinsic value of stock options exercised was $53.0 million, $25.7 million and $17.4 million during 2017, 2016, and 2015, respectively.

The following is a summary of weighted-average remaining contractual lives for stock options outstanding and the range of exercise prices on the stock options as of December 31, 2017:

Range of exercise prices	Number of options outstanding		Weighted- average remaining contractual life
	(in millions)
$11.07 - $21.69		0.1		1.2
$21.70 - $32.32		1.0		4.6
$32.33 - $42.95		1.2		7.5
$42.96 - $53.58		1.0		6.7
$53.59 - $64.22		1.0		6.7

$11.07 - $64.22		4.3		6.3

The weighted-average remaining contractual lives for stock options exercisable is approximately 5.0 years as of December 31, 2017.

The fair value of stock options is estimated using the Black-Scholes option pricing model. The following is a summary of the assumptions used in this model for the stock options granted during the period:

	For the year ended December 31,
Options	2017			2016			2015
Expected volatility		27.6	%		31.7	%		52.2	%
Expected term (in years)		7.0			6.5			6.5
Risk-free interest rate		2.2	%		1.5	%		1.8	%
Expected dividend yield		2.87	%		4.07	%		2.81	%
Weighted average estimated fair value	$	15.31		$	8.91		$	20.43

We determine expected volatility based on a combination of historical volatility using daily price observations and implied volatility from traded options on our common stock. We believe that incorporating both historical and implied volatility into our expected volatility assumption calculation better reflects market expectations. The expected term represents the period of time that options granted are expected to be outstanding. We determine expected term using historical exercise and employee termination data. The risk-free rate for periods within the expected term of the option is based on the U.S. Treasury risk-free interest rate in effect at the time of grant. The dividend yield is based on historical dividend distributions compared to the closing price of our common shares on the grant date.

As of December 31, 2017, we had $2.8 million of total unrecognized compensation costs related to nonvested stock options. The cost is expected to be recognized over a weighted-average service period of approximately 1.3 years.

Cash received from stock options exercised under these share-based payment arrangements during 2017, 2016 and 2015 was $133.9 million, $15.3 million and $52.7 million, respectively. The actual tax benefits realized for the tax deductions for options exercised under these share-based payment arrangements during 2017, 2016 and 2015 was $18.1 million, $9.0 million and $6.0 million, respectively.

Performance Share Awards

We granted performance share awards to certain employees under the 2014 Stock Incentive Plan and the Amended and Restated 2010 Stock Incentive Plan. The performance share awards are treated as an equity award and are paid in shares. Whether the performance shares are earned depends upon the participant's continued employment through the performance period (except in the case of specific types of terminations) and our performance against three-year goals set at the beginning of the performance period. Performance goals based on various factors must be achieved for any of the performance shares to be earned. If the performance requirements are not met, the performance shares will be forfeited, no compensation cost will be recognized and any previously recognized compensation cost will be reversed. These awards have no maximum contractual term. Dividend equivalents are credited on performance shares outstanding as of the record date. These dividend equivalents are only paid on the shares released. Total performance share awards granted were 0.2 million, 0.3 million and 0.3 million in 2017, 2016 and 2015, respectively.

The following is a summary of activity for the nonvested performance share awards:

	Number of performance share awards		Weighted- average grant-date fair value
	(in millions)
Nonvested performance share awards as of January 1, 2017		0.9	$	44.23
Granted		0.2		62.98
Vested		0.3		44.88

Nonvested performance share awards as of December 31, 2017		0.8	$	48.82

The total intrinsic value of performance share awards vested was $15.9 million, $18.1 million and $20.1 million during 2017, 2016 and 2015, respectively.

Performance share awards above represent initial target awards and do not reflect potential increases or decreases resulting from the final performance objectives to be determined at the end of the respective performance period. The actual number of shares to be awarded at the end of each performance period will range between 0% and 150% of the initial target awards.

The fair value of performance share awards is determined based on the closing stock price of our common shares on the grant date. The weighted-average grant-date fair value of performance share awards granted during 2017, 2016 and 2015 was $62.98, $37.38 and $51.33, respectively.

As of December 31, 2017, we had $4.2 million of total unrecognized compensation cost related to nonvested performance share awards granted. The cost is expected to be recognized over a weighted-average service period of approximately 1.2 years.

Actual tax benefits realized for the tax deductions for performance share awards paid out under these share-based payment arrangements for 2017, 2016 and 2015 was $5.4 million, $4.8 million and $7.4 million, respectively.

Restricted Stock Units

We issue restricted stock units under the 2014 Stock Incentive Plan, the 2014 Directors Stock Plan, the Amended and Restated 2010 Stock Incentive Plan, the 2005 Directors Stock Plan, the Stock Incentive Plan, and the Directors Stock Plan. Restricted stock units are treated as an equity award and are paid in shares. These awards have no maximum contractual term. Dividend equivalents are credited on restricted stock units outstanding as of the record date. These dividend equivalents are only paid on the shares released. Restricted stock units granted were 0.8 million, 1.3 million and 0.9 million in 2017, 2016 and 2015, respectively.

Restricted stock units were issued to certain employees and agents pursuant to the 2014 Stock Incentive Plan, the Amended and Restated 2010 Stock Incentive Plan and Stock Incentive Plan. Under these plans, awards have graded or cliff vesting over a three-year service period. When service for PFG ceases (except in the case of specific types of terminations), all vesting stops and unvested units are forfeited.

Pursuant to the 2014 Directors Stock Plan and the 2005 Directors Stock Plan, restricted stock units are granted to each non-employee director in office immediately following each annual meeting of stockholders and, at the discretion of the Nominating and Governance Committee, to each person who becomes a member of the Board other than on the date of the annual meeting of stockholders. Under these plans, awards are granted on an annual basis and cliff vest after a one-year service period. When service to PFG ceases, all vesting stops and unvested units are forfeited.

The following is a summary of activity for the nonvested restricted stock units:

	Number of restricted stock units		Weighted- average grant-date fair value
	(in millions)
Nonvested restricted stock units as of January 1, 2017		3.0	$	43.77
Granted		0.8		62.85
Vested		0.9		45.46
Canceled		0.1		46.81

Nonvested restricted stock units as of December 31, 2017		2.8	$	48.70

The total intrinsic value of restricted stock units vested was $59.9 million, $46.2 million and $53.6 during 2017, 2016 and 2015, respectively.

The fair value of restricted stock units is determined based on the closing stock price of our common shares on the grant date. The weighted-average grant-date fair value of restricted stock units granted during 2017, 2016 and 2015 was $62.85, $37.59 and $51.35, respectively.

As of December 31, 2017, we had $43.9 million of total unrecognized compensation cost related to nonvested restricted stock unit awards granted under these plans. The cost is expected to be recognized over a weighted-average period of approximately 1.7 years.

The actual tax benefits realized for the tax deductions for restricted stock unit payouts under these share-based payment arrangements for 2017, 2016 and 2015 was $20.8 million, $16.1 million and $18.8 million, respectively.

Employee Stock Purchase Plan

Under our Employee Stock Purchase Plan, participating employees have the opportunity to purchase shares of our common stock on a semi-annual basis. Beginning in 2018, the offering period will move to a quarterly basis. Employees may purchase up to $25,000 worth of company stock each year. Employees may purchase shares of our common stock at a price equal to 85% of the shares' fair market value as of the beginning or end of the purchase period, whichever is lower. Under the Employee Stock Purchase Plan, employees purchased 0.5 million, 0.7 million and 0.6 million shares during 2017, 2016 and 2015, respectively.

We recognize compensation expense for the fair value of the discount granted to employees participating in the employee stock purchase plan in the period of grant. Shares of the Employee Stock Purchase Plan are treated as an equity award. The weighted-average fair value of the discount on the stock purchased was $14.72, $14.00 and $7.29 during 2017, 2016 and 2015, respectively. The total intrinsic value of the Employee Stock Purchase Plan shares settled was $7.9 million, $10.2 million and $4.1 million during 2017, 2016 and 2015, respectively.

Cash received from shares issued under these share-based payment arrangements for 2017, 2016 and 2015 was $27.6 million, $25.5 million and $23.4 million, respectively. The actual tax benefit realized for the tax deductions for the settlement of the share-based payment arrangements for 2017, 2016 and 2015 was $2.0 million, $0.6 million and $0.6 million, respectively.

As of December 31, 2017, a total of 2.9 million of new shares were available to be made issuable by us for this plan.