NOTE 11 - EMPLOYEE BENEFIT PLANS

The Company sponsors various short-term incentive plans and LTI plans for eligible employees, which may be delivered through various incentive programs, such as RSUs, restricted stock, and LTI cash. AIP is the Company's short-term cash incentive plan for key employees that provides for potential annual cash awards based on the Company's performance and/or the achievement of business unit and individual performance objectives. Awards under the LTI cash plan generally cliff vest over a period of three years from the date of the award and are paid in cash. All incentive awards are subject to clawback provisions. Compensation expense for incentive plans with cash payouts was $51 million and $39 million for the three months ended June 30, 2014 and 2013, respectively and $96 million and $78 million for the six months ended June 30, 2014 and 2013.

Stock-Based Compensation

The Company provides stock-based awards through the 2009 Stock Plan under which the Compensation Committee of the Board of Directors has the authority to grant stock options, stock appreciation rights, restricted stock, and RSUs to key employees of the Company. Some awards may have performance or other conditions, such as vesting tied to the Company's total shareholder return relative to a peer group or vesting tied to the achievement of an absolute financial performance target.

In February 2014, the Compensation Committee and Board of Directors approved, subject to shareholder approval, an amendment to the 2009 Stock Plan to remove the sub-limit on shares available for grant that may be issued as restricted stock or RSUs. Following shareholder approval of the Plan amendment, which occurred on April 22, 2014, all of the 17 million remaining authorized shares previously under the Plan became available for grant as stock options, stock appreciation rights, restricted stock, or RSUs. Prior to the Plan amendment, only a portion of such shares were available to be granted as either restricted stock or RSUs. At June 30, 2014, approximately 17 million shares remained available for grant.

Stock options are granted at an exercise price that was no less than the fair market value of a share of SunTrust common stock on the grant date and were either tax-qualified incentive stock options or non-qualified stock options. Stock options typically vest pro-rata over three years and generally have a maximum contractual life of ten years. Upon exercise, shares are generally issued from treasury stock. No stock options were issued during the six months ended June 30, 2014, consistent with the Company's decision to discontinue the issuance of stock options in 2014. The weighted average fair value of options granted during the first six months of 2013 was $7.37 per share. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model based on the following assumptions for the six months ended June 30, 2013:



Dividend yield	1.28	%
Expected stock price volatility	30.98
Risk-free interest rate (weighted average)	1.02
Expected life of options	6 years

Stock-based compensation expense recognized in noninterest expense for the three and six months ended June 30, were as follows:



	Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)	2014		2013		2014		2013
Stock-based compensation expense:
Stock options		$—		$1		$1		$4
Restricted stock	6		8		14		15
RSUs	7		4		21		13
Total stock-based compensation expense		$13		$13		$36		$32

The recognized stock-based compensation tax benefit was $5 million for both the three months ended June 30, 2014 and 2013, and $14 million and $12 million for the six months ended June 30, 2014 and 2013, respectively.

Retirement Plans

SunTrust did not contribute to either of its noncontributory qualified retirement plans ("Retirement Benefit Plans") during the six months ended June 30, 2014. The expected long-term rates of return on plan assets net of administrative fees for the Retirement Benefit Plans are 7.0% for the SunTrust Retirement Plan and 6.5% for the NCF Retirement Plan for 2014.

Anticipated employer contributions/benefit payments for 2014 are $7 million for the SERP. During the three and six months ended June 30, 2014, the actual contributions/benefit payments were $1 million and $2 million, respectively.

SunTrust contributed less than $1 million to the Postretirement Welfare Plan during the three and six months ended June 30, 2014. Additionally, SunTrust expects to receive a Medicare Part D Subsidy reimbursement for 2014 of less than $1 million. The expected pre-tax long-term rate of return on plan assets for the Postretirement Welfare Plan is 5.25% for 2014.

Components of net periodic benefit for the three and six months ended June 30, were as follows:



	Three Months Ended June 30
	2014							2013
(Dollars in millions)	Pension Benefits				Other Postretirement Benefits			Pension Benefits				Other Postretirement Benefits
Service cost		$1		¹		$—			$1		¹		$—
Interest cost	31				1			28				2
Expected return on plan assets	(50		)	¹	(1		)	(48		)	¹	(2		)
Amortization of prior service credit	—				(2		)	—				—
Recognized net actuarial loss	4				—			7				—
Net periodic benefit		($14	)			($2	)		($12	)			$—



	Six Months Ended June 30
	2014							2013
(Dollars in millions)	Pension Benefits				Other Postretirement Benefits			Pension Benefits				Other Postretirement Benefits
Service cost		$2		¹		$—			$2		¹		$—
Interest cost	62				2			56				3
Expected return on plan assets	(100		)	¹	(3		)	(95		)	¹	(3		)
Amortization of prior service credit	—				(3		)	—				—
Recognized net actuarial loss	8				—			13				—
Net periodic benefit		($28	)			($4	)		($24	)			$—