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Employee Incentive, Retirement, Deferred Compensation, and Career Achievement Plans
 12 Months Ended
Dec. 31, 2021
Retirement Benefits [Abstract]  
Employee Incentive, Retirement, Deferred Compensation, and Career Achievement Plans Employee Incentive, Retirement, Deferred Compensation, and Career Achievement Plans
Schwab’s share-based incentive plans provide for granting options and restricted stock units to employees and directors. In addition, we offer retirement and employee stock purchase plans to eligible employees and sponsor deferred compensation plans for eligible officers and non-employee directors.

A summary of share-based compensation expense and related income tax benefit is as follows:
Year Ended December 31,202120202019
Stock option expense$36 $36 $51 
Restricted stock unit expense200 156 120 
Employee stock purchase plan expense18 12 12 
Total share-based compensation expense$254 $204 $183 
Income tax benefit on share-based compensation expense (1)
$(60)$(49)$(44)
(1) Excludes income tax benefits from stock options exercised and restricted stock units vested of $93 million, $14 million, and $23 million in 2021, 2020, and 2019, respectively.

The Company issues shares for stock options and restricted stock units from treasury stock. At December 31, 2021, the Company was authorized to grant up to 58 million common shares under its existing stock incentive plans. Additionally, at December 31, 2021, the Company had 30 million shares reserved for future issuance under its employee stock purchase plan.

As of December 31, 2021, there was $297 million of total unrecognized compensation cost related to outstanding stock options and restricted stock units, which is expected to be recognized through 2025 with a remaining weighted-average service period of 0.7 years for stock options, 1.9 years for restricted stock units, and 0.5 years for performance-based stock units.

Acquisition of TD Ameritrade: Upon the completion of the TD Ameritrade acquisition on October 6, 2020, TD Ameritrade’s equity awards, whether vested or unvested, were assumed by the Company and converted into equity awards based on CSC common stock taking into account the defined exchange ratio of 1.0837. Otherwise, these share-based awards are subject to the same terms and conditions that were applicable immediately before the merger, except for performance-based restricted stock units which were converted into time-based restricted stock units. The fair value of the stock options assumed by the Company was determined using an option pricing model. The portion of the fair value of the replacement awards related to services provided prior to the acquisition was $94 million and was accounted for as consideration transferred. The remaining portion of the fair value of $73 million is associated with future services and had a remaining weighted-average service period of 1.9 years on the acquisition date. A change in the actual or estimated forfeiture rate from the amount originally or subsequently estimated will result in an adjustment to compensation expense based on the full acquisition-date fair value of awards not expected to vest, regardless of whether those awards were treated as consideration transferred or stock-based compensation for future services.

Stock Option Plan

Options are granted for the purchase of shares of common stock at an exercise price not less than market value on the date of grant, and expire ten years from the date of grant. Options generally vest annually over a one- to four-year period from the date of grant.
 
Stock option activity is summarized below:
Number
of Options
(In millions)		Weighted- Average Exercise Price
per Share		Weighted- Average Remaining Contractual
Life (in years)		Aggregate Intrinsic
Value
Outstanding at December 31, 202024 $33.67 5.36$452 
Granted2 64.49   
Exercised(9)27.80   
Forfeited (1)
— 45.99   
Expired (1)
— 35.00   
Outstanding at December 31, 202117 $39.11 5.38$782 
Vested and expected to vest at December 31, 202117 $39.09 5.38$782 
Vested and exercisable at December 31, 202113 $34.93 4.54$650 
(1) Number of options was less than 500 thousand.

The aggregate intrinsic value in the table above represents the difference between CSC’s closing stock price and the exercise price of each in-the-money option on the last trading day of the period presented.

Information on stock options granted and exercised is presented below:
Year Ended December 31,202120202019
Weighted-average fair value of options granted per share$19.51 $11.56 $11.97 
Cash received from options exercised221 79 118 
Tax benefit realized on options exercised61 11 17 
Aggregate intrinsic value of options exercised322 71 108 

We use an option pricing model to estimate the fair value of options granted. The model takes into account the contractual term of the stock option, expected volatility, dividend yield, and the risk-free interest rate. Expected volatility is based on the implied volatility of publicly-traded options on CSC’s stock. Dividend yield is based on the average historical CSC dividend yield. The risk-free interest rate is based on the yield of a U.S. Treasury zero-coupon issue with a remaining term similar to the contractual term of the option. We use historical option exercise data, which includes employee termination data, to estimate the probability of future option exercises. The assumptions used to value the options granted during the years presented and their expected lives were as follows:
Year Ended December 31,202120202019
Weighted-average expected dividend yield1.36 %2.08 %1.85 %
Weighted-average expected volatility37 %36 %30 %
Weighted-average risk-free interest rate0.8 %1.0 %2.5 %
Expected life (in years)
4.2 - 5.4
4.3 - 5.9
4.2 - 5.9

Restricted Stock Units

Restricted stock units are awards that entitle the holder to receive shares of CSC’s common stock following a vesting period. Restricted stock units are restricted from transfer or sale and generally vest annually over a one- to four-year period, while performance-based restricted stock units also require the Company to achieve certain financial or other measures prior to vesting. The fair value of restricted stock units is based on the market price of the Company’s stock on the date of grant. The grant date fair value is amortized to compensation expense on a straight-line basis over the requisite service period. The fair value of the restricted stock units that vested during each of the years 2021, 2020, and 2019 was $317 million, $175 million, and $123 million, respectively.
 
The Company’s restricted stock units activity is summarized below:
Number
of Units
(In millions)		Weighted- Average Grant Date Fair Value
per Unit
Outstanding at December 31, 202010 $40.85 
Granted4 64.18 
Vested(4)41.25 
Forfeited(1)45.63 
Outstanding at December 31, 20219 $49.69 

Retirement and Deferred Compensation Plans

Employees can participate in Schwab’s qualified retirement plan, the SchwabPlan Retirement Savings and Investment Plan. The Company may match certain employee contributions or make additional contributions to this plan at its discretion. The Company’s total expense was $187 million, $136 million, and $118 million in 2021, 2020, and 2019, respectively.

Schwab’s deferred compensation plan for officers permits participants to defer the receipt of certain cash compensation. The deferred compensation plan for non-employee directors permits participants to defer receipt of all or a portion of their director fees and to receive either a grant of stock options, or upon ceasing service as a director, the number of shares of CSC’s common stock that would have resulted from investing the deferred fee amount into CSC’s common stock. The deferred compensation liability was $194 million and $176 million at December 31, 2021 and 2020, respectively.

Effective upon the completion of the TD Ameritrade acquisition on October 6, 2020, TD Ameritrade’s 401(k) and deferred profit-sharing plan was terminated and all unvested balances in the plan became fully vested. TD Ameritrade employees employed immediately prior to the acquisition who continued as employees of TDA Holding, CSC, or any of their subsidiaries after completion of the acquisition became eligible to participate in the SchwabPlan Retirement Savings and Investment Plan and make rollover contributions from their TD Ameritrade plan balances to the SchwabPlan Retirement Savings and Investment Plan.

Financial Consultant Career Achievement Plan

The financial consultant career achievement plan is a noncontributory, unfunded, nonqualified plan for eligible financial consultants. A financial consultant is eligible for earned cash payments after retirement contingent upon meeting certain performance levels, tenure, age, and client transitioning requirements. Allocations to the plan are calculated annually based on performance levels achieved and eligible compensation and are subject to general creditors of the Company. Full vesting occurs when a financial consultant reaches 60 years of age and has at least ten years of service with the Company.

The following table presents the changes in projected benefit obligation:
December 31,20212020
Projected benefit obligation at beginning of year$92 $83 
Benefit cost (1)
16 17 
Actuarial loss/(gain) (2)
11 (8)
Projected benefit obligation at end of year (3)
$119 $92 
(1) Includes service cost and interest cost, which are recognized in compensation and benefits expense and other expense, respectively, in the consolidated statements of income.
(2) Actuarial loss/(gain) is reflected in the consolidated statements of comprehensive income and is included in AOCI on the consolidated balance sheets.
(3) This amount is recognized as a liability in accrued expenses and other liabilities on the consolidated balance sheets.