Retirement Plans and Profit Sharing Arrangements

12 Months Ended

Dec. 31, 2011

Retirement Plans and Profit Sharing Arrangements

Retirement Plans and Profit Sharing Arrangements

21. Retirement Plans and Profit Sharing Arrangements

Defined Benefit Plans

Pension Plans

The Company's U.S. non-advisor employees are generally eligible for the Ameriprise Financial Retirement Plan (the "Retirement Plan"), a noncontributory defined benefit plan which is a qualified plan under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Funding of costs for the Retirement Plan complies with the applicable minimum funding requirements specified by ERISA and is held in a trust. The Retirement Plan is a cash balance plan by which the employees' accrued benefits are based on notional account balances, which are maintained for each individual. Each pay period these balances are credited with an amount equal to a percentage of eligible compensation as defined by the Retirement Plan (which includes, but is not limited to, base pay, performance based incentive pay, commissions, shift differential and overtime). Prior to March 1, 2010, the percentage ranged from 2.5% to 10% based on employees' age plus years of service. Effective March 1, 2010, the percentage ranged from 2.5% to 5% based on employees' years of service. Employees eligible for the plan at the time of the change remain under the previous schedule until the new schedule becomes more favorable. Employees' balances are also credited with a fixed rate of interest that is updated each January 1 and is based on the average of the daily five-year U.S. Treasury Note yields for the previous October 1 through November 30, with a minimum crediting rate of 5%. Employees have the option to receive annuity payments or a lump sum payout at vested termination, retirement, death or disability. The Retirement Plan's year-end is September 30.

In addition, the Company sponsors the Ameriprise Financial Supplemental Retirement Plan (the "SRP"), an unfunded non-qualified deferred compensation plan subject to Section 409A of the Internal Revenue Code. This plan is for certain highly compensated employees to replace the benefit that cannot be provided by the Retirement Plan due to IRS limits. The SRP generally parallels the Retirement Plan but offers different payment options.

Most employees outside the United States are covered by local retirement plans, some of which are funded, while other employees receive payments at the time of retirement or termination under applicable labor laws or agreements.

The components of the net periodic benefit cost for all pension plans were as follows:

	Years Ended December 31,
	2011			2010			2009
	(in millions)
Service cost	$	38		$	33		$	32
Interest cost		23			23			25
Expected return on plan assets		(26	)		(23	)		(22	)
Amortization of prior service costs		(1	)		(2	)		(1	)
Amortization of net (gain)/loss		1			—			—
Other		4			3			3
Net periodic benefit cost	$	39		$	34		$	37

The prior service costs are amortized on a straight-line basis over the average remaining service period of active participants. Actuarial gains and losses in excess of 10% of the greater of the projected benefit obligation or the market-related value of assets are amortized on a straight-line basis over the expected average remaining service period of active participants.

The following tables provide a reconciliation of the changes in the benefit obligation and fair value of assets for the pension plans:

	2011			2010
	(in millions)
Benefit obligation, January 1	$	469		$	421
Service cost		38			33
Interest cost		23			23
Benefits paid		(6	)		(6	)
Actuarial loss		40			23
Settlements		(18	)		(24	)
Foreign currency rate changes		—			(1	)
Benefit obligation, December 31	$	546		$	469

	2011			2010
	(in millions)
Fair value of plan assets, January 1	$	327		$	256
Actual return on plan assets		(12	)		39
Employer contributions		72			64
Benefits paid		(6	)		(6	)
Settlements		(18	)		(24	)
Foreign currency rate changes		(1	)		(2	)
Fair value of plan assets, December 31	$	362		$	327

The following table provides the amounts recognized in the Consolidated Balance Sheets, which equal the funded status of the Company's pension plans:

	December 31,
	2011			2010
	(in millions)
Benefit liability	$	(189	)	$	(162	)
Benefit asset		5			20
Net amount recognized	$	(184	)	$	(142	)

The Company complies with the minimum funding requirements in all countries.

The amounts recognized in accumulated other comprehensive income (loss), net of tax, as of December 31, 2011 but not recognized as components of net periodic benefit cost included an unrecognized actuarial loss of $87 million and an unrecognized prior service credit of $5 million. The estimated amounts that will be amortized from accumulated other comprehensive income (loss), net of tax, into net periodic benefit cost in 2012 include a prior service credit of $1 million.

The accumulated benefit obligation for all pension plans as of December 31, 2011 and 2010 was $493 million and $423 million, respectively. The accumulated benefit obligation and fair value of plan assets for pension plans with accumulated benefit obligations that exceeded the fair value of plan assets were as follows:

	December 31,
	2011		2010
	(in millions)
Accumulated benefit obligation	$	434	$	376
Fair value of plan assets		282		248

The projected benefit obligation and fair value of plan assets for pension plans with projected benefit obligations that exceeded the fair value of plan assets were as follows:

	December 31,
	2011		2010
	(in millions)
Projected benefit obligation	$	470	$	410
Fair value of plan assets		282		248

The weighted average assumptions used to determine benefit obligations for pension plans were as follows:

	2011			2010
Discount rates		4.15	%		4.75	%
Rates of increase in compensation levels		4.27			4.25

The weighted average assumptions used to determine net periodic benefit cost for pension plans were as follows:

	2011			2010			2009
Discount rates		4.75	%		5.28	%		6.22	%
Rates of increase in compensation levels		4.25			4.22			4.23
Expected long-term rates of return on assets		8.00			8.00			8.20

In developing the expected long-term rate of return on assets, management evaluated input from an external consulting firm, including their projection of asset class return expectations and long-term inflation assumptions. The Company also considered historical returns on the plans' assets. Discount rates are based on yields available on high-quality corporate bonds that would generate cash flows necessary to pay the benefits when due.

The Company's pension plans' assets are invested in an aggregate diversified portfolio to minimize the impact of any adverse or unexpected results from a security class on the entire portfolio. Diversification is interpreted to include diversification by asset type, performance and risk characteristics and number of investments. When appropriate and consistent with the objectives of the plans, derivative instruments may be used to mitigate risk or provide further diversification, subject to the investment policies of the plans. Asset classes and ranges considered appropriate for investment of the plans' assets are determined by each plan's investment committee. The target allocations are 70% equity securities, 20% debt securities and 10% all other types of investments, except for the assets in pooled pension funds which are 82% equity securities, 14% debt securities, and 4% all other types of investments. Actual allocations will generally be within 5% of these targets. At December 31, 2011, there were no significant holdings of any single issuer and the exposure to derivative instruments was not significant.

The following tables present the Company's pension plan assets measured at fair value on a recurring basis:

	December 31, 2011
Asset Category	Level 1		Level 2		Level 3		Total
	(in millions)
Equity securities:
U.S. large cap stocks	$	75	$	9	$	—	$	84
U.S. small cap stocks		38		1		—		39
Non-U.S. large cap stocks		14		23		—		37
Emerging markets		10		15		—		25
Debt securities:
U.S. investment grade bonds		17		15		—		32
U.S. high yield bonds		—		11		—		11
Non-U.S. investment grade bonds		—		16		—		16
Real estate investment trusts		—		—		11		11
Hedge funds		—		—		12		12
Pooled pension funds		—		80		—		80
Cash equivalents		15		—		—		15
Total	$	169	$	170	$	23	$	362

	December 31, 2010
Asset Category	Level 1		Level 2		Level 3		Total
	(in millions)
Equity securities:
U.S. large cap stocks	$	72	$	3	$	—	$	75
U.S. small cap stocks		33		1		—		34
Non-U.S. large cap stocks		12		18		—		30
Emerging markets		15		14		—		29
Debt securities:
U.S. investment grade bonds		13		9		—		22
U.S. high yield bonds		—		11		—		11
Non-U.S. investment grade bonds		—		12		—		12
Real estate investment trusts		—		—		8		8
Hedge funds		—		—		9		9
Pooled pension funds		—		79		—		79
Cash equivalents		18		—		—		18
Total	$	163	$	147	$	17	$	327

Equity securities are managed to track the performance of common market indices for both U.S. and non-U.S. securities, primarily across large cap, small cap and emerging market asset classes. Debt securities are managed to track the performance of common market indices for both U.S. and non-U.S. investment grade bonds as well as a pool of U.S. high yield bonds. Real estate investment trusts are managed to track the performance of a broad population of investment grade non-agricultural income producing properties. The Company's investments in hedge funds include investments in a multi-strategy fund and an off-shore fund managed to track the performance of broad fund of fund indices. Pooled pension funds are managed to return 1.5% in excess of a common index of similar pooled pension funds on a rolling three year basis. Cash equivalents consist of holdings in a money market fund that seeks to equal the return of the three month U.S. Treasury bill.

The fair value of real estate investment trusts is based primarily on the underlying cash flows of the properties within the trusts which are significant unobservable inputs and classified as Level 3. The fair value of the hedge funds is based on the proportionate share of the underlying net assets of the funds, which are significant unobservable inputs and classified as Level 3. The fair value of pooled pension funds and equity securities held in collective trust funds is based on the fund's NAV and classified as Level 2 as they trade in principal-to-principal markets. Equity securities and mutual funds traded in active markets are classified as Level 1. For debt securities and cash equivalents, the valuation techniques and classifications are consistent with those used for the Company's own investments as described in Note 14.

The following table provides a summary of changes in Level 3 assets measured at fair value on a recurring basis:

Asset Category	Real Estate Investment Trusts		Hedge Funds
Balance at January 1, 2010	$	5	$	—
Actual return on plan assets:
Relating to assets still held at the reporting date		1		—
Purchases, sales, and settlements, net		2		9
Balance at December 31, 2010		8		9
Actual return on plan assets:
Relating to assets still held at the reporting date		1		—
Purchases		2		11
Sales		—		(8	)
Balance at December 31, 2011	$	11	$	12

The Company's pension plans expect to make benefit payments to retirees as follows:

	(in millions)
2012	$	45
2013		48
2014		49
2015		51
2016		53
2017-2021		250

The Company expects to contribute $46 million to its pension plans in 2012.

Other Postretirement Benefits

The Company sponsors defined benefit postretirement plans that provide health care and life insurance to retired U.S. employees. Net periodic postretirement benefit costs were nil, nil and $2 million in 2011, 2010 and 2009, respectively.

The following table provides a reconciliation of the changes in the defined postretirement benefit plan obligation:

	2011			2010
	(in millions)
Benefit obligation, January 1	$	21		$	22
Interest cost		1			1
Benefits paid		(5	)		(5	)
Participant contributions		4			4
Actuarial gain		(2	)		(1	)
Benefit obligation, December 31	$	19		$	21

The recognized liabilities for the Company's defined postretirement benefit plans are unfunded. At December 31, 2011 and 2010, the recognized liabilities were $19 million and $21 million, respectively, which was equal to the funded status of the Company's postretirement benefit plans.

The amounts recognized in accumulated other comprehensive income (loss), net of tax, as of December 31, 2011 but not recognized as components of net periodic benefit cost included an unrecognized actuarial gain of $7 million and an unrecognized prior service cost of nil. The estimated amount that will be amortized from accumulated other comprehensive income (loss), net of tax, into net periodic benefit cost in 2012 is approximately $1 million.

The weighted average assumptions used to determine benefit obligations for other postretirement benefits were as follows:

	2011			2010
Discount rates		4.15	%		4.90	%
Healthcare cost increase rates:
Following year		7.00			7.50
Decreasing to the year 2016		5.00			5.00

Discount rates are based on yields available on high-quality corporate bonds that would generate cash flows necessary to pay the benefits when due.

A one percentage-point change in the assumed healthcare cost trend rates would not have a material effect on the postretirement benefit obligation or net periodic postretirement benefit costs.

The Company's defined benefit postretirement plans expect to make benefit payments to retirees as follows:

	(in millions)
2012	$	2
2013		2
2014		2
2015		1
2016		1
2017-2021		7

The Company expects to contribute $2 million to its defined benefit postretirement plans in 2012.

The following is a summary of unrealized losses included in other comprehensive income related to the Company's defined benefit plans:

	2011			2010			2009
	(in millions)
Net unrealized defined benefit losses at January 1	$	(24	)	$	(20	)	$	(39	)
Net gains (losses)		(77	)		(4	)		15
Prior service cost (credit)		(2	)		(2	)		14
Income tax benefit (provision)		28			2			(10	)
Net unrealized defined benefit losses at December 31	$	(75	)	$	(24	)	$	(20	)

Defined Contribution Plan

In addition to the plans described previously, the Company's employees are generally eligible to participate in the Ameriprise Financial 401(k) Plan (the "401(k) Plan"). The 401(k) Plan allows eligible employees to make contributions through payroll deductions up to IRS limits and invest their contributions in one or more of the 401(k) Plan investment options, which include the Ameriprise Financial Stock Fund. Effective March 1, 2010, the Company matches 100% of the first 5% of eligible compensation an employee contributes on a pretax or Roth 401(k) basis for each annual period. Prior to March 1, 2010, the Company matched 100% of the first 3% of base pay an employee contributed on a pretax basis each pay period. Effective March 1, 2010, the Company no longer makes an annual discretionary variable match. Prior to May 2009, the Company also made contributions equal to 1% of base pay each pay period, which were automatically invested in the Ameriprise Financial Stock Fund.

Under the 401(k) Plan, employees become eligible for contributions under the plan during the pay period they reach 60 days of service. Fixed and variable match contributions and stock contributions are fully vested after five years of service, vesting ratably over the first five years of service. The Company's defined contribution plan expense was $33 million, $32 million and $16 million in 2011, 2010 and 2009, respectively.

Threadneedle Profit Sharing Plan

On an annual basis, Threadneedle employees are eligible for a profit sharing arrangement. The employee profit sharing plan provides for profit sharing of 30% based on an internally defined recurring pretax operating income measure for Threadneedle, which primarily includes pretax income related to investment management services and investment portfolio income excluding gains and losses on asset disposals, certain reorganization expenses, EPP and EIP expenses and other non-recurring expenses. Compensation expense related to the employee profit sharing plan was $54 million, $52 million and $32 million in 2011, 2010 and 2009, respectively.