EMPLOYEE BENEFIT PLANS

Defined Benefit Pension and Postretirement Benefit Plans

The Corporation has a qualified and a non-qualified defined benefit pension plan, which together provide benefits for substantially all full-time employees hired before January 1, 2007 who continue to meet the eligibility requirements of the plans. Employee benefits expense included defined benefit pension expense of $86 million, $75 million and $47 million in the years ended December 31, 2013, 2012 and 2011, respectively, for the plans. Benefits under the defined benefit plans are based primarily on years of service, age and compensation during the five highest paid consecutive calendar years occurring during the last ten years before retirement.

The Corporation’s postretirement benefit plan continues to provide postretirement health care and life insurance benefits for retirees as of December 31, 1992. The plan also provides certain postretirement health care and life insurance benefits for a limited number of retirees who retired prior to January 1, 2000. For all other employees hired prior to January 1, 2000, a nominal benefit is provided. Employees hired on or after January 1, 2000 and prior to January 1, 2007 are eligible to participate in the plan on a full contributory basis until Medicare-eligible. Employees hired on or after January 1, 2007 are not eligible to participate in the plan. The Corporation funds the pre-1992 retiree plan benefits with bank-owned life insurance. Employee benefits expense included postretirement benefit expense of $2 million in the year ended December 31, 2013 and $6 million in each of the years ended December 31, 2012 and 2011 for the plan.

The following table sets forth reconciliations of plan assets and the projected benefit obligation, the weighted-average assumptions used to determine year-end benefit obligations, and the amounts recognized in accumulated other comprehensive income (loss) for the Corporation’s defined benefit pension plans and postretirement benefit plan at December 31, 2013 and 2012. The Corporation used a measurement date of December 31, 2013 for these plans.



	Defined Benefit Pension Plans
	Qualified						Non-Qualified						Postretirement Benefit Plan
(dollar amounts in millions)	2013			2012			2013			2012			2013			2012
Change in fair value of plan assets:
Fair value of plan assets at January 1	$	1,955		$	1,508		$	—		$	—		$	72		$	69
Actual return on plan assets	136			199			—			—			(2		)	4
Employer contributions	—			300			—			—			3			4
Benefits paid	(56		)	(52		)	—			—			(6		)	(5		)
Fair value of plan assets at December 31	$	2,035		$	1,955		$	—		$	—		$	67		$	72
Change in projected benefit obligation:
Projected benefit obligation at January 1	$	1,897		$	1,592		$	245		$	210		$	79		$	78
Service cost	37			33			4			4			—			—
Interest cost	80			79			9			10			3			3
Actuarial (gain) loss	(260		)	245			(21		)	30			(7		)	3
Benefits paid	(56		)	(52		)	(9		)	(9		)	(6		)	(5		)
Transfer between plans	33			—			(33		)	—			—			—
Projected benefit obligation at December 31	$	1,731		$	1,897		$	195		$	245		$	69		$	79
Accumulated benefit obligation	$	1,598		$	1,718		$	163		$	209		$	69		$	79
Funded status at December 31 (a) (b)	$	304		$	58		$	(195	)	$	(245	)	$	(2	)	$	(7	)
Weighted-average assumptions used:
Discount rate	5.17		%	4.20		%	5.17		%	4.20		%	4.59		%	3.81		%
Rate of compensation increase	4.00			4.00			4.00			4.00			n/a			n/a
Healthcare cost trend rate:
Cost trend rate assumed for next year	n/a			n/a			n/a			n/a			7.50			8.00
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	n/a			n/a			n/a			n/a			5.00			5.00
Year when rate reaches the ultimate trend rate	n/a			n/a			n/a			n/a			2033			2033
Amounts recognized in accumulated other comprehensive income (loss) before income taxes:
Net actuarial loss	$	(403	)	$	(743	)	$	(73	)	$	(106	)	$	(23	)	$	(27	)
Prior service (cost) credit	(31		)	(5		)	28			2			(3		)	(3		)
Balance at December 31	$	(434	)	$	(748	)	$	(45	)	$	(104	)	$	(26	)	$	(30	)


(a)	Based on projected benefit obligation for defined benefit pension plans and accumulated benefit obligation for postretirement benefit plan.


(b)	The Corporation recognizes the overfunded and underfunded status of the plans in “accrued income and other assets” and “accrued expenses and other liabilities,” respectively, on the consolidated balance sheets.

n/a - not applicable

The accumulated benefit obligation exceeded the fair value of plan assets for the non-qualified defined benefit pension plan and the postretirement benefit plan at December 31, 2013 and 2012. The following table details the changes in plan assets and benefit obligations recognized in other comprehensive income (loss) for the year ended December 31, 2013.



	Defined Benefit Pension Plans
(in millions)	Qualified		Non-Qualified			Postretirement Benefit Plan		Total
Actuarial gain arising during the period	$	263	$	21		$	2	$	286
Amortization of net actuarial loss	76		11			2		89
Amortization of prior service cost (credit)	7		(6		)	1		2
Total recognized in other comprehensive income (loss)	$	346	$	26		$	5	$	377

Components of net periodic defined benefit cost and postretirement benefit cost, the actual return on plan assets and the weighted-average assumptions used were as follows.



	Defined Benefit Pension Plans
(dollar amounts in millions)	Qualified									Non-Qualified
Years Ended December 31	2013			2012			2011			2013			2012			2011
Service cost	$	37		$	33		$	29		$	4		$	4		$	3
Interest cost	80			79			76			9			10			11
Expected return on plan assets	(132		)	(114		)	(115		)	—			—			—
Amortization of prior service cost (credit)	7			4			4			(6		)	(2		)	(2		)
Amortization of net loss	76			54			34			11			7			7
Net periodic defined benefit cost	$	68		$	56		$	28		$	18		$	19		$	19
Actual return on plan assets	$	136		$	199		$	92		n/a			n/a			n/a
Actual rate of return on plan assets	7.05		%	13.33		%	5.85		%	n/a			n/a			n/a
Weighted-average assumptions used:
Discount rate	4.20		%	4.99		%	5.51		%	4.20		%	4.99		%	5.51		%
Expected long-term return on plan assets	7.25			7.50			7.75			n/a			n/a			n/a
Rate of compensation increase	4.00			4.00			4.00			4.00			4.00			4.00

n/a - not applicable



(dollar amounts in millions)	Postretirement Benefit Plan
Years Ended December 31	2013			2012			2011
Interest cost	$	3		$	3		$	4
Expected return on plan assets	(4		)	(3		)	(4		)
Amortization of transition obligation	—			4			4
Amortization of prior service cost	1			1			1
Amortization of net loss	2			1			1
Net periodic postretirement benefit cost	$	2		$	6		$	6
Actual return on plan assets	$	(2	)	$	4		$	3
Actual rate of return on plan assets	(2.29		)%	6.39		%	5.00		%
Weighted-average assumptions used:
Discount rate	3.81		%	4.55		%	4.95		%
Expected long-term return on plan assets	5.00			5.00			5.00
Healthcare cost trend rate:
Cost trend rate assumed	8.00			8.00			8.00
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	5.00			5.00			5.00
Year that the rate reaches the ultimate trend rate	2033			2032			2031

The expected long-term rate of return of plan assets is the average rate of return expected to be realized on funds invested or expected to be invested over the life of the plan, which has an estimated average life of approximately 15 years as of December 31, 2013. The expected long-term rate of return on plan assets is set after considering both long-term returns in the general market and long-term returns experienced by the assets in the plan. The returns on the various asset categories are blended to derive one long-term rate of return. The Corporation reviews its pension plan assumptions on an annual basis with its actuarial consultants to determine if assumptions are reasonable and adjusts the assumptions to reflect changes in future expectations.

The estimated portion of balances remaining in accumulated other comprehensive income (loss) that are expected to be recognized as a component of net periodic benefit cost in the year ended December 31, 2014 are as follows.



	Defined Benefit Pension Plans
(in millions)	Qualified		Non-Qualified			Postretirement Benefit Plan		Total
Net loss	$	31	$	7		$	1	$	39
Prior service cost (credit)	6		(4		)	1		3

Assumed healthcare cost trend rates have a significant effect on the amounts reported for the postretirement benefit plan. A one-percentage-point change in 2013 assumed healthcare and prescription drug cost trend rates would have the following effects.



	One-Percentage-Point
(in millions)	Increase		Decrease
Effect on postretirement benefit obligation	$	5	$	(4	)
Effect on total service and interest cost	—		—

Plan Assets

The Corporation’s overall investment goals for the qualified defined benefit pension plan are to maintain a portfolio of assets of appropriate liquidity and diversification; to generate investment returns (net of operating costs) that are reasonably anticipated to maintain the plan’s fully funded status or to reduce a funding deficit, after taking into account various factors, including reasonably anticipated future contributions and expense and the interest rate sensitivity of the plan’s assets relative to that of the plan’s liabilities; and to generate investment returns (net of operating costs) that meet or exceed a customized benchmark as defined in the plan investment policy. Derivative instruments are permissible for hedging and transactional efficiency, but only to the extent that the derivative use enhances the efficient execution of the plan’s investment policy. The plan does not directly invest in securities issued by the Corporation and its subsidiaries. The Corporation’s target allocations for plan investments are 41 percent to 51 percent equity securities and 49 percent to 59 percent fixed income, including cash. Equity securities include collective investment and mutual funds and common stock. Fixed income securities include U.S. Treasury and other U.S. government agency securities, mortgage-backed securities, corporate bonds and notes, municipal bonds, collateralized mortgage obligations and money market funds.

Fair Value Measurements

The Corporation’s qualified defined benefit pension plan utilizes fair value measurements to record fair value adjustments and to determine fair value disclosures. The Corporation’s qualified benefit pension plan categorizes investments recorded at fair value into a three-level hierarchy, based on the markets in which the investment are traded and the reliability of the assumptions used to determine fair value. Refer to Note 2 for a description of the three-level hierarchy.

Following is a description of the valuation methodologies and key inputs used to measure the fair value of the Corporation’s qualified defined benefit pension plan investments, including an indication of the level of the fair value hierarchy in which the investments are classified.

Collective investment funds

Fair value measurement is based upon the net asset value (NAV) provided by the administrator of the fund. Collective investment fund NAVs are based primarily on observable inputs, generally the quoted prices for underlying assets owned by the fund, and are included in Level 2 of the fair value hierarchy.

Mutual funds

Fair value measurement is based upon the NAV provided by the administrator of the fund. Mutual fund NAVs are quoted in an active market exchange, such as the New York Stock Exchange, and are included in Level 1 of the fair value hierarchy.

Common stock

Fair value measurement is based upon the closing price quoted in an active market exchange, such as the New York Stock Exchange. Level 1 common stock includes domestic and foreign stock and real estate investment trusts. The fair value of American Depositary Receipts is based upon independent pricing models utilizing primarily observable inputs, generally the quoted prices for the underlying securities, and is included in Level 2 of the fair value hierarchy.

U.S. Treasury and other U.S. government agency securities

Fair value measurement is based upon quoted prices in an active market exchange, such as the New York Stock Exchange. Level 1 securities include U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets.

Corporate and Municipal bonds and notes

Fair value measurement is based upon quoted prices of securities with similar characteristics or pricing models based on observable market data inputs, primarily interest rates, spreads and prepayment information. Level 2 securities include corporate bonds, municipal bonds, foreign bonds and foreign notes.

Collateralized mortgage obligations

Fair value measurement is based upon independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors, such as credit loss and liquidity assumptions, and are included in Level 2 of the fair value hierarchy.

U.S. Government agency mortgage-backed securities

Fair value measurement is based upon quoted prices of securities with similar characteristics or pricing models based on observable market data inputs, primarily interest rates, spreads and prepayment information and are included in Level 2 of the fair value hierarchy.

Private placements

Fair value is measured using the NAV provided by fund management as quoted prices in active markets are not available. Management considers additional discounts to the provided NAV for market and credit risk. Private placements are included in Level 3 of the fair value hierarchy.

Securities purchased under agreements to resell

Fair value measurement is based upon independent pricing models or other model-based valuation techniques such as the present value of future cash flows, and is included in Level 2 of the fair value hierarchy.

Fair Values

The fair values of the Corporation’s qualified defined benefit pension plan investments measured at fair value on a recurring basis at December 31, 2013 and 2012, by asset category and level within the fair value hierarchy, are detailed in the table below.



(in millions)	Total		Level 1		Level 2		Level 3
December 31, 2013
Cash equivalent securities:
Mutual funds	$	23	$	23	$	—	$	—
Equity securities:
Collective investment funds	463		—		463		—
Mutual funds	73		73		—		—
Common stock	483		483		—		—
Fixed income securities:
U.S. Treasury and other U.S. government agency securities	329		329		—		—
Corporate and municipal bonds and notes	496		—		496		—
Collateralized mortgage obligations	4		—		4		—
U.S. government agency mortgage-backed securities	2		—		2		—
Mutual funds	113		113		—		—
Private placements	36				—		36
Other assets:
Securities purchased under agreements to resell	6		—		6		—
Total investments at fair value	$	2,028	$	1,021	$	971	$	36
December 31, 2012
Cash equivalent securities:
Mutual funds	$	21	$	21	$	—	$	—
Equity securities:
Collective investment funds	507		—		507		—
Mutual funds	53		53		—		—
Common stock	420		420		—		—
Fixed income securities:
U.S. Treasury and other U.S. government agency securities	534		534		—		—
Corporate and municipal bonds and notes	308		—		308		—
Collateralized mortgage obligations	5		—		5		—
U.S. government agency mortgage-backed securities	2		—		2		—
Mutual funds	69		69		—		—
Private placements	30		—		—		30
Other assets:
Securities purchased under agreements to resell	4		—		4		—
Total investments at fair value	$	1,953	$	1,097	$	826	$	30

The table below provides a summary of changes in the Corporation’s qualified defined benefit pension plan’s Level 3 investments measured at fair value on a recurring basis for the years ended December 31, 2013 and 2012.



			Net Gains (Losses)
(in millions)	Balance at Beginning of Period		Realized		Unrealized			Purchases		Sales			Balance at End of Period
Year Ended December 31, 2013
Private placements	$	30	$	—	$	(4	)	$	46	$	(36	)	$	36
Year Ended December 31, 2012
Private placements	$	26	$	—	$	2		$	11	$	(9	)	$	30

There were no assets in the non-qualified defined benefit pension plan at December 31, 2013 and 2012. The postretirement benefit plan is fully invested in bank-owned life insurance policies. The fair value of bank-owned life insurance policies is based on the cash surrender values of the policies as reported by the insurance companies and are classified in Level 2 of the fair value hierarchy.

Cash Flows

The Corporation expects to make no employer contributions to the qualified and non-qualified defined benefit pension plans and postretirement benefit plan for the year ended December 31, 2014.



	Estimated Future Benefit Payments
(in millions) Years Ended December 31	Qualified Defined Benefit Pension Plan		Non-Qualified Defined Benefit Pension Plan		Postretirement Benefit Plan (a)
2014	$	64	$	11	$	7
2015	68		11		6
2016	73		11		6
2017	79		12		6
2018	84		12		6
2019 - 2023	504		66		26


(a)	Estimated benefit payments in the postretirement benefit plan are net of estimated Medicare subsidies.

Defined Contribution Plans

Substantially all of the Corporation’s employees are eligible to participate in the Corporation’s principal defined contribution plan (a 401(k) plan). Under this plan, the Corporation makes core matching cash contributions of 100 percent of the first 4 percent of qualified earnings contributed by employees (up to the current IRS compensation limit), invested based on employee investment elections. Employee benefits expense included expense for the plan of $20 million for each of the years ended December 31, 2013, 2012 and 2011.

The Corporation also provides a profit sharing plan for the benefit of substantially all employees who work at least 1,000 hours in a plan year and are not accruing a benefit in the defined benefit pension plan. Under the profit sharing plan, the Corporation makes an annual discretionary allocation to the individual account of each eligible employee ranging from 3 percent to 8 percent of annual compensation, determined based on combined age and years of service. The allocations are invested based on employee investment elections. The employee fully vests in the defined contribution pension plan after three years of service, at age 65 if still employed, or in the event of death while an employee. Before an employee is eligible to participate, the plan requires the equivalent of one year of service. The Corporation recognized $7 million, $7 million and $4 million in employee benefits expense for this plan for the years ended December 31, 2013, 2012 and 2011, respectively.

Deferred Compensation Plans

The Corporation offers optional deferred compensation plans under which certain employees may make an irrevocable election to defer incentive compensation and/or a portion of base salary until retirement or separation from the Corporation. The employee may direct deferred compensation into one or more deemed investment options. Although not required to do so, the Corporation invests actual funds into the deemed investments as directed by employees, resulting in a deferred compensation asset, recorded in “other short-term investments” on the consolidated balance sheets that offsets the liability to employees under the plan, recorded in “accrued expenses and other liabilities.” The earnings from the deferred compensation asset are recorded in “interest on short-term investments” and “other noninterest income” and the related change in the liability to employees under the plan is recorded in “salaries” expense on the consolidated statements of income.