Retirement and Benefit Plans

12 Months Ended

Dec. 31, 2012

Retirement and Benefit Plans

20. 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 Bancorp's other defined benefit plans had an underfunded projected benefit obligation at December 31, 2012 and 2011, respectively. The underfunded amounts recognized in other liabilities on the Consolidated Balance Sheets were $71 million and $72 million as of December 31, 2012 and 2011, respectively.

The following table summarizes the defined benefit retirement plans as of and for the years ended December 31:
Plans with an Underfunded Status
($ in millions)		2012	2011
Fair value of plan assets at January 1	$	181	197
Actual return on assets		21	-
Contributions		4	4
Settlement		(10)	(10)
Benefits paid		(11)	(10)
Fair value of plan assets at December 31	$	185	181
Projected benefit obligation at January 1	$	253	227
Service cost		-	-
Interest cost		10	11
Settlement		(10)	(10)
Actuarial loss		14	35
Benefits paid		(11)	(10)
Projected benefit obligation at December 31	$	256	253
Unfunded projected benefit obligation at December 31	$	(71)	(72)

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 2013is $13 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 2013 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)			2012	2011	2010
Components of net periodic benefit cost:
	Service cost	$	0	0	0
	Interest cost		10	11	12
	Expected return on assets		(13)	(15)	(14)
	Amortization of net actuarial loss		14	11	12
	Amortization of net prior service cost		0	1	1
	Settlement		6	6	0
Net periodic benefit cost		$	17	14	11
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
	Net actuarial loss		7	50	2
	Net prior service cost		0	0	0
	Amortization of net actuarial loss		(14)	(11)	(12)
	Amortization of prior service cost		0	(1)	(1)
	Settlement		(6)	(6)	0
Total recognized in other comprehensive income			(13)	32	(11)
Total recognized in net periodic benefit cost and
	other comprehensive income	$	4	46	0

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)
2012 ($ in millions)			Level 1	Level 2	Level 3		Total Fair Value
Equity securities:
	Equity securities (Growth)(b)	$	50	0	0	$	50
	Equity securities (Value)		52	0	0		52
	Equity securities (Blended)		4	0	0		4
Total equity securities			106	0	0		106
Mutual and exchange traded funds:
	Money market funds		4	0	0		4
	International funds		29	0	0		29
	Commodity funds		9	0	0		9
Total mutual and exchange traded funds			42	0	0		42
Debt securities:
	U.S. Treasury obligations		13	0	0		13
	Agency mortgage backed		0	21	0		21
	Non-agency mortgage backed		0	2	0		2
	Corporate bonds(c)		0	1	0		1
Total debt securities			13	24	0		37
Total plan assets		$	161	24	0	$	185
		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(c)		0	1	0		1
Total debt securities			10	27	0		37
Total plan assets		$	154	27	0	$	181

• For further information on fair value hierarchy levels, see Note 1.
• Includes holdings in Bancorp common stock.
• 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		2012		2011	2010
For measuring benefit obligations at year end:
	Discount rate	3.83	%	4.27	5.39
	Rate of compensation increase	4.00		5.00	5.00
	Expected return on plan assets	8.00		8.25	8.25
For measuring net periodic benefit cost:
	Discount rate	4.27		5.39	5.88
	Rate of compensation increase	5.00		5.00	5.00
	Expected return on plan assets	8.00		8.25	8.25

Lowering both the expected rate of return on the plan assets and the discount rate by 0.25% would have increased the 2012 pension expense by approximately $1 million. Lowering the rate of compensation increase by 0.25% would have an immaterial impact on the Bancorp's Consolidated Financial Statements.

Based on the actuarial assumptions, the Bancorp does not expect to contribute to the plan in 2013. Estimated pension benefit payments, which reflect expected future service, are $19 million in 2013, $18 million in 2014, $17 million in 2015, $16 million in 2016 and $15 million in 2017. The total estimated payments for the years 2018 through 2022 is $67 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 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, 2012 and 2011.

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 $256 million and $253 million at December 31, 2012 and 2011, respectively. The Bancorp does not have any defined benefit plans with assets exceeding benefit obligations at December 31, 2012 and 2011, respectively.

Amounts relating to the Bancorp’s defined benefit plans with benefit obligations exceeding assets were as follows at December 31:
($ in millions)		2012	2011
Projected benefit obligation	$	256	253
Accumulated benefit obligation		256	253
Fair value of plan assets		185	181

As of December 31, 2012 and 2011,$123 million and $159 million, respectively, of plan assets were managed through a collective fund and separately managed accounts by Fifth Third Bank, a subsidiary of the Bancorp. Plan assets included $3 million and $5 million of Bancorp common stock as of December 31, 2012 and 2011, respectively. Plan assets are not expected to be returned to the Bancorp during 2013.

The Bancorp's profit sharing plan expense was $46 million for 2012, $35 million for 2011, and $31 million for 2010. Expenses recognized for matching contributions to the Bancorp's defined contribution savings plans were$42 million, $40 million, and $36 million for the years ended December 31, 2012, 2011, and 2010, respectively.