Retirement and Benefit Plans

12 Months Ended

Dec. 31, 2011

Retirement and Benefit Plans

21. RETIREMENT AND BENEFIT PLANS

The Bancorp's qualified defined benefit plan's benefits were frozen in 1998, except for grandfathered employees. The Bancorp's other retirement plans consist of nonqualified, supplemental retirement plans, which are funded on an as needed basis. A majority of these plans were obtained in acquisitions from prior years. The Bancorp recognizes the overfunded and underfunded status of its pension plans as an asset and liability, respectively. The overfunded and underfunded amounts recognized in other assets and other liabilities, respectively, in the Consolidated Balance Sheets were as follows as of December 31:

($ in millions)		2011	2010
Prepaid benefit cost	$	0	4
Accrued benefit liability		(72)	(34)
Net underfunded status	$	(72)	(30)

The following tables summarize the defined benefit retirement plans as of and for the years ended December 31:

Plans with an Overfunded Status(a)
($ in millions)		2011	2010
Fair value of plan assets at January 1	$	0	182
Actual return on assets		0	31
Contributions		0	0
Settlement		0	0
Benefits paid		0	(16)
Fair value of plan assets at December 31	$	0	197
Projected benefit obligation at January 1	$	0	183
Service cost		0	0
Interest cost		0	10
Settlement		0	0
Actuarial loss		0	16
Benefits paid		0	(16)
Projected benefit obligation at December 31	$	0	193
Overfunded projected benefit obligation recognized in the Consolidated Balance Sheets as an asset	$	0	4

(a) The Bancorp's defined benefit plan had an Overfunded Status at December 31, 2010. The plan was Underfunded at December 31, 2011 and is reflected in the Underfunded Status table.

Plans with an Underfunded Status
($ in millions)		2011	2010
Fair value of plan assets at January 1	$	197	-
Actual return on assets		-	-
Contributions		4	4
Settlement		(10)	-
Benefits paid		(10)	(4)
Fair value of plan assets at December 31	$	181	-
Projected benefit obligation at January 1	$	227	34
Service cost		-	-
Interest cost		11	2
Settlement		(10)	-
Actuarial gain		35	2
Benefits paid		(10)	(4)
Projected benefit obligation at December 31	$	253	34
Unfunded projected benefit obligation recognized in the Consolidated Balance Sheet as a liability	$	(72)	(34)

The estimated net actuarial loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost during 2012is $14 million. The estimated net prior service cost for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost during 2012 is immaterial to the Consolidated Financial Statements.

The following table summarizes net periodic benefit cost and other changes in plan assets and benefit obligations recognized in other comprehensive income for the years ended December 31:

($ in millions)			2011	2010	2009
Components of net periodic benefit cost:
	Service cost	$	0	0	0
	Interest cost		11	12	12
	Expected return on assets		(15)	(14)	(12)
	Amortization of net actuarial loss		11	12	15
	Amortization of net prior service cost		1	1	1
	Settlement		6	0	13
Net periodic benefit cost		$	14	11	29
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
	Net actuarial loss (gain)		50	2	(10)
	Net prior service cost		0	0	0
	Amortization of net actuarial loss		(11)	(12)	(15)
	Amortization of prior service cost		(1)	(1)	(1)
	Settlement		(6)	0	(13)
Total recognized in other comprehensive income			32	(11)	(39)
Total recognized in net periodic benefit cost and
	other comprehensive income	$	46	0	(10)

Fair Value Measurements of Plan Assets

The following table summarizes plan assets measured at fair value on a recurring basis as of December 31:

		Fair Value Measurements Using (a)
2011 ($ in millions)			Level 1	Level 2	Level 3		Total Fair Value
Equity Securities:
	Equity securities (Growth)(b)	$	53	0	0	$	53
	Equity securities (Value)		52	0	0		52
Total equity securities			105	0	0		105
Mutual and exchange traded funds:
	Money market funds		5	0	0		5
	International funds		25	0	0		25
	Commodity funds		9	0	0		9
Total mutual and exchange traded funds			39	0	0		39
Debt securities:
	U.S. Treasury obligations		10	0	0		10
	Agency mortgage backed		0	25	0		25
	Non-agency mortgage backed		0	1	0		1
	Corporate bonds(d)		0	1	0		1
Total debt securities			10	27	0		37
Total plan assets		$	154	27	0	$	181
		Fair Value Measurements Using (a)
2010 ($ in millions)			Level 1	Level 2	Level 3		Total Fair Value
Equity Securities:
	Equity securities (Growth)(b)	$	58	0	0	$	58
	Equity securities (Value)		53	0	0		53
Total equity securities			111	0	0		111
Mutual and exchange traded funds:
	Money market funds		6	0	0		6
	International funds		30	0	0		30
	Commodity funds		11	0	0		11
Total mutual and exchange traded funds			47	0	0		47
Debt securities:
	U.S. Treasury obligations		7	0	0		7
	U.S. Government agencies (c)		0	1	0		1
	Agency mortgage backed		0	24	0		24
	Non-agency mortgage backed		0	6	0		6
	Corporate bonds(d)		0	1	0		1
Total debt securities			7	32	0		39
Total plan assets		$	165	32	0	$	197

a)For further information on fair value hierarchy levels, see Note 27.

b)Includes holdings in Bancorp common stock.

c) Includes debt securities issued by U.S. Government sponsored agencies.

d)Includes private label asset backed securities.

The following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Equity securities

The plan measures common stock using quoted prices which are available in an active market and classifies these investments within Level 1 of the valuation hierarchy.

Mutual and exchange traded funds

All of the plan's mutual and exchange traded funds are publicly traded. The plan measures the value of these investments using the fund's quoted prices that are available in an active market and classifies these investments within Level 1 of the valuation hierarchy.

Debt securities

For certain U.S. Treasury obligations and federal agency securities, the plan measures the fair value based on quoted prices, which are available in an active market and classifies these investments within Level 1 of the valuation hierarchy. Where quoted prices are not available, the plan measures the fair value of these investments based on matrix pricing models that include the bid price, which factors in the yield curve and other characteristics of the security including the interest rate, prepayment speeds and length of maturity. Therefore, these investments are classified within Level 2 of the valuation hierarchy.

Plan Assumptions

The plan assumptions are evaluated annually and are updated as necessary. The discount rate assumption reflects the yield on a portfolio of high quality fixed-income instruments that have a similar duration to the plan's liabilities. The expected long-term rate of return assumption reflects the average return expected on the assets invested to provide for the plan's liabilities. In determining the expected long-term rate of return, the Bancorp evaluated actuarial and economic inputs, including long-term inflation rate assumptions and broad equity and bond indices long-term return projections, as well as actual long-term historical plan performance.

The following table summarizes the plan assumptions for the years ended December 31:

Weighted Average Assumptions		2011		2010	2009
For measuring benefit obligations at year end:
	Discount rate	4.27	%	5.39	5.88
	Rate of compensation increase	5.00		5.00	5.00
	Expected return on plan assets	8.25		8.25	8.50
For measuring net periodic benefit cost:
	Discount rate	5.39		5.88	6.11
	Rate of compensation increase	5.00		5.00	5.00
	Expected return on plan assets	8.25		8.25	8.50

Lowering both the expected rate of return on the plan and the discount rate by 0.25% would have increased the 2011 pension expense by approximately $1 million.

Based on the actuarial assumptions, the Bancorp does not expect to contribute to the plan in 2012. Estimated pension benefit payments, which reflect expected future service, are $20 million in 2012, $17 million in 2013, $16 million in 2014, $16 million in 2015 and $15 million in 2016. The total estimated payments for the years 2017 through 2021 is $66 million.

Investment Policies and Strategies

The Bancorp's policy for the investment of plan assets is to employ investment strategies that achieve a range of weighted-average target asset allocations relating to equity securities (including the Bancorp's common stock), fixed income securities (including federal agency obligations, corporate bonds and notes) and cash.

The following table provides the Bancorp's targeted and actual weighted-average asset allocations by asset category for the years ended December 31:

Weighted-average asset allocation	Targeted range		2011		2010
Equity securities			74	%	72
Bancorp common stock			2		2
Total equity securities(a)	70-80	%	76		74
Total fixed income securities	20-25		21		23
Cash	0-5		3		3
Total			100	%	100

• Includes mutual and exchange traded funds.

The risk tolerance for the plan is determined by management to be “moderate to aggressive”, recognizing that higher returns involve some volatility and that periodic declines in the portfolio's value are tolerated in an effort to achieve real capital growth. There were no significant concentrations of risk associated with the investments of the Bancorp's benefit and retirement plan at December 31, 2011 and 2010.

Permitted asset classes of the plan include cash and cash equivalents, fixed income (domestic and non-U.S. bonds), equities (U.S., non-U.S., emerging markets and REITS), equipment leasing precious metals, commodity transactions and mortgages. The plan utilizes derivative instruments including puts, calls, straddles or other option strategies, as approved by management.

Prohibited asset classes of the plan include venture capital, short sales, limited partnerships and leveraged transactions. Per ERISA, the Bancorp's common stock cannot exceed ten percent of the fair value of plan assets.

Fifth Third Bank, as Trustee, is expected to manage the plan assets in a manner consistent with the plan agreement and other regulatory, federal and state laws. The Fifth Third Bank Pension, Profit Sharing and Medical Plan Committee (the “Committee”) is the plan administrator. The Trustee is required to provide to the Committee monthly and quarterly reports covering a list of plan assets, portfolio performance, transactions and asset allocation. The Trustee is also required to keep the Committee apprised of any material changes in the Trustee's outlook and recommended investment policy.

Other Information on Retirement and Benefit Plans

The accumulated benefit obligation for all defined benefit plans was $253 million and $227 million at December 31, 2011 and 2010, respectively. Amounts relating to the Bancorp's defined benefit plans with assets exceeding benefit obligations were as follows at December 31:

($ in millions)		2011	2010
Projected benefit obligation	$	0	193
Accumulated benefit obligation		0	193
Fair value of plan assets		0	197

Amounts relating to the Bancorp's defined benefit plans with benefit obligations exceeding assets were as follows at December 31:

($ in millions)		2011	2010
Projected benefit obligation	$	253	34
Accumulated benefit obligation		253	34
Fair value of plan assets		181	0

As of December 31, 2011 and 2010,$159 million and $172 million, respectively, of plan assets were managed through mutual funds by Fifth Third Bank, a subsidiary of the Bancorp. Plan assets included $5 million of Bancorp common stock as of December 31, 2011 and 2010. Plan assets are not expected to be returned to the Bancorp during 2012.

The Bancorp's profit sharing plan expense was $35 million for 2011, $31 million for 2010, and $17 million for 2009. Expenses recognized for matching contributions to the Bancorp's defined contribution savings plans were $40 million for the year ended December 31, 2011, and $36 million for the years ended December 31, 2010 and 2009, respectively.