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 these incentive plans with cash payouts was $61 million and $30 million for the three months ended September 30, 2014 and 2013, respectively and $157 million and $108 million for the nine months ended September 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 September 30, 2014, approximately 17 million shares remained available for grant.

Shares or units of restricted stock may be granted to employees and directors. Generally, grants to employees either cliff vest after three years or vest pro rata annually over three years. Restricted stock grants may be subject to one or more criteria, including employment, performance, or other conditions as established by the Compensation Committee at the time of grant. Any shares of restricted stock that are forfeited will again become available for issuance under the Stock Plan. An employee or director has the right to vote the shares of restricted stock after grant unless and until they are forfeited. Compensation cost for restricted stock is equal to the fair market value of the shares on the grant date of the award and is amortized to compensation expense over the vesting period. Dividends are paid on awarded but unvested restricted stock. SunTrust does not pay dividends on unvested RSU awards but instead accrue and reinvest them in equivalent shares of SunTrust common stock and pay them only if the underlying RSU award vests. Generally, RSU awards are classified as equity.

Stock options were 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 granted during the nine months ended September 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 nine 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 nine months ended September 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 nine months ended September 30, was as follows:



	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2014		2013		2014		2013
Stock-based compensation expense:
Stock options		$—		$1		$1		$5
Restricted stock	7		9		21		24
RSUs	5		2		27		15
Total stock-based compensation expense		$12		$12		$49		$44

The recognized stock-based compensation tax benefit was $5 million for both the three months ended September 30, 2014 and 2013, and $19 million and $17 million for the nine months ended September 30, 2014 and 2013, respectively.

Retirement Plans

SunTrust did not contribute to either of its noncontributory qualified retirement plans ("Retirement Benefit Plans") during the nine months ended September 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 nine months ended September 30, 2014, the contributions/benefit payments were $2 million and $4 million, respectively. During the three and nine months ended September 30, 2013, the contributions/benefits payments were $3 million and $7 million, respectively.

SunTrust contributed less than $1 million to the Postretirement Welfare Plan during both the three and nine months ended September 30, 2014 and 2013. 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 nine months ended September 30, were as follows:



	Three Months Ended September 30
	2014						2013
(Dollars in millions)	Pension Benefits ¹			Other Postretirement Benefits			Pension Benefits ¹			Other Postretirement Benefits
Service cost		$2			$—			$2			$—
Interest cost/(credit)	31			(1		)	28			1
Expected return on plan assets	(50		)	(1		)	(48		)	(1		)
Recognized net actuarial loss	4			—			6			—
Net periodic benefit		($13	)		($2	)		($12	)		$—



	Nine Months Ended September 30
	2014						2013
(Dollars in millions)	Pension Benefits ¹			Other Postretirement Benefits			Pension Benefits ¹			Other Postretirement Benefits
Service cost		$4			$—			$4			$—
Interest cost	93			2			84			4
Expected return on plan assets	(150		)	(4		)	(143		)	(4		)
Amortization of prior service credit	—			(4		)	—			—
Recognized net actuarial loss	12			—			19			—
Net periodic benefit		($41	)		($6	)		($36	)		$—

¹ Administrative fees are recognized in service cost for each of the periods presented.