80 FR 10325 - Disclosure to Shareholders; Pension Benefit Disclosures
FARM CREDIT ADMINISTRATION Federal Register Volume 80, Issue 38 (February 26, 2015)
Federal Register Volume 80, Issue 38 (February 26, 2015)
| Page Range | 10325-10326 | |
| FR Document | 2015-04023 |
[Federal Register Volume 80, Number 38 (Thursday, February 26, 2015)] [Rules and Regulations] [Pages 10325-10326] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-04023] ======================================================================= ----------------------------------------------------------------------- FARM CREDIT ADMINISTRATION 12 CFR Part 620 RIN 3052-AD02 Disclosure to Shareholders; Pension Benefit Disclosures ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: The Farm Credit Administration (FCA, we or our) amends our regulations related to Farm Credit System (System) bank and association disclosures to shareholders and investors of senior officer compensation in the Summary Compensation Table (Table). Under the final rule, System banks and associations are not required to report in the Table the compensation of employees who are not senior officers and who would not otherwise be considered ``highly compensated employees'' but for the payments related to, or change(s) in value of, the employees' qualified pension plans, provided that the plans were available to all employees on the same basis at the time the employees joined the plans. DATES: Effective Date: The regulation will be effective 30 days after publication in the Federal Register during which time either one or both Houses of Congress are in session. We will publish a notice of the effective date in the Federal Register. Compliance Date: System banks and associations must comply with the final rule for compensation reported in the Table for the fiscal year ending 2015, and may implement the final rule retroactively for the fiscal years ended 2014, 2013, and 2012. However, retroactive application is not required, and we would expect footnote disclosure of the change in calculation for the fiscal years to which the final rule was applied. FOR FURTHER INFORMATION CONTACT: Michael T. Wilson, Policy Analyst, Office of Regulatory Policy, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4124, TTY (703) 883-4056, Or Jeff Pienta, Senior Attorney, Office of General Counsel, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4020, TTY (703) 883-4056. SUPPLEMENTARY INFORMATION: I. Objective The objective of this rule is to improve the quality of disclosure information shareholders receive on senior officer and highly compensated employee compensation. II. Background Congress explained in section 514 of the Farm Credit Banks and Associations Safety and Soundness Act of 1992 (1992 Act) \1\ that disclosures of financial information and compensation paid to senior officers, among other disclosures, provide System shareholders with information necessary to better manage their institution and make informed decisions regarding the operation of their institution. In addition, the FCA Board declared its commitment to support the cooperative business model and structure by encouraging member- borrowers to participate in the management, control, and ownership of their institutions.\2\ Providing member-borrowers with transparent and complete disclosures regarding the compensation of senior officers and certain other highly compensated employees is essential to fostering an environment wherein member-borrowers can do so effectively. --------------------------------------------------------------------------- \1\ Public Law 102-552, 106 Stat. 4131 (1992). \2\ See FCA Policy Statement ``Cooperative Operating Philosophy--Serving the Members of Farm Credit System Institutions'' (FCA-PS-80), dated October 14, 2010. --------------------------------------------------------------------------- With this as one of our objectives, we issued a final rule on October 3, 2012, that enhanced disclosure of senior officer compensation and other related topics. Section 620.6(c)(2)(i) requires System Banks and associations to disclose senior officer compensation for the last 3 fiscal years. For purposes of this reporting requirement only, Sec. 620.6(c)(2)(i) extends the regulatory definition of ``senior officers'' to include any employee whose compensation level was among the five highest paid during the reporting period. The intent of this extension was to ensure that System banks and associations provide shareholders with necessary compensation information on highly compensated employees even though they did not fall within the regulatory definition of ``senior officer.'' The intent was not to provide compensation information on employees who would only reach the ``highly compensated'' threshold solely because of payments related to or change(s) in the value of a qualified pension plan that was available to all employees on the same basis at the time they joined the plan. We believe that application of the existing rule could create such an unintended effect and reduce the effectiveness of the disclosure. Therefore, on November 17, 2014, we proposed amending existing Sec. 620.6(c)(2)(i) to exclude reporting employees' compensation in the Table if the employees were not senior officers and would be considered highly compensated employees solely because of payments related to or change(s) in value of the employees' qualified pension plans provided that the plans were available to all employees on the same basis at the time the employee joined the plan. III. Comments and Our Response The comment period for the proposed rule closed on December 17, 2014 (79 FR 68376, Nov. 17, 2014). We received four comment letters on our proposed rule: One comment letter from the Independent Community Bankers of America (ICBA), responding on behalf of its members; one comment from a Farm Credit bank (FCB); one comment letter from a System association; and one comment letter from the Farm Credit Council, responding on behalf of its members. Two commenters supported the proposed rule, one supported it with suggested changes, and one opposed the rule. In the discussion below, we address the significant comments. After careful consideration of the comments, the proposed rule is finalized without any changes. A. Transparency and Quality of Disclosure The ICBA opposes the proposed rule and urges the FCA to withdraw the proposed rule or adopt the ICBA's recommendations. The ICBA asserts that the proposed rule reduces transparency of pension disclosures to System shareholders and seeks to allow System institutions to hide significant enhancements to pensions and other compensation arrangements by not disclosing them. We agree with the ICBA that employee compensation should be reported in this disclosure item if the employee's compensation reaches the highly compensated employee threshold due to large or significant bonuses and other such payments. As we explained in the proposed rule, however, there would be no reporting requirement for this disclosure item solely for employees [[Page 10326]] who are not senior officers and who would not otherwise be considered ``highly compensated employees'' but for payments related to or change(s) in the value of the employee's qualified pension plan. Also, the qualified plan must have been available to all employees on the same basis at the time the employee joined the plan. Thus, the proposed rule did not seek to change the current reporting requirement regarding payments such as those concerning the ICBA. Rather, if any such payout to the employee or change(s) in value to their plan is due to a benefit plan that is not a qualified plan and the plan was not offered to all employees on the same basis when the employee joined the plan, then the payout or change(s) in value would be included in determining whether the employee's compensation reached the five highest paid threshold. Thus, we believe that the proposed rule increases the effectiveness and transparency of the disclosure and better achieves the original intent of the rule, which we did not change. The ICBA also expressed concern that large one-time lump sum payments made to numerous employees at the same time from a qualified pension plan that was available to all employees on the same basis at the time they joined the plan could represent significant cash outlays for the institution during a reporting period. The ICBA believes that System institution owners should be made aware of these payouts. We agree with the ICBA and would expect that such payouts be included in the financial statements or notes thereto or discussed in the management's discussion and analysis section of the annual report if material to the institution's financial condition and results of operations. As discussed above, the intent of this specific disclosure item was not and is not to include such payments in the calculation of the top five highest paid employees. In its comment letter, the ICBA also makes a number of recommendations, such as to disclose all employees' compensation if that compensation exceeds the average income of the citizens in the surrounding geographic area, or to disclose the compensation for the twenty-five (25) highest paid employees for larger System institutions. We believe these recommendations go beyond the scope of the proposed rule and cannot be addressed in this rulemaking. B. Explanatory Notes and Method of Compliance The FCB, the Farm Credit Council, and the System association supported our proposed rule in their comment letters. Furthermore, they expressed that our proposal improves the disclosure language and aligns it with the intended purpose. The FCB also offered two constructive suggestions. The first suggestion was to allow System institutions affected by our proposed rule to disclose in a note to the Table that the calculation formula changed and describe the reason for the change and its effects. Also, because data is reported in the Table for 3 years, the FCB's second suggestion was that each System institution be allowed to choose the method of compliance that works best for that institution's situation. We agree with the suggestion regarding explanatory notes, but do not believe a change to our proposal is necessary. Such disclosure is not prohibited so long as the disclosure is not misleading, incomplete or inaccurate. Whether a System institution opts to restate one or all of the prior years' disclosures or to report the data prospectively beginning for fiscal year ending 2015, we would expect that any change in the method of calculations versus prior years' disclosures be described in a footnote to the Table to the extent needed so that the reported data will not be misleading or incomplete. Therefore, we agree with the FCB's suggestion to the extent that the 3-year reporting period raises issues for affected institutions, but we do not believe that a change to the regulation language is necessary. We have addressed this issue in the compliance date information. IV. Regulatory Flexibility Act Pursuant to section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the FCA hereby certifies that the final rule would not have a significant economic impact on a substantial number of small entities. Each of the banks in the Farm Credit System, considered together with its affiliated associations, has assets and annual income in excess of the amounts that would qualify them as small entities. Therefore, Farm Credit System institutions are not ``small entities'' as defined in the Regulatory Flexibility Act. List of Subjects in 12 CFR Part 620 Accounting, Agriculture, Banks, banking, Reporting and recordkeeping requirements, Rural areas. For the reasons stated in the preamble, part 620 of chapter VI, title 12 of the Code of Federal Regulations is amended as follows: PART 620--DISCLOSURE TO SHAREHOLDERS 0 1. The authority citation for part 620 continues to read as follows: Authority: Secs. 4.3, 4.3A, 4.19, 5.9, 5.19 of the Farm Credit Act (12 U.S.C. 2154, 2154a, 2207, 2243, 2252, 2254); sec. 424 of Pub. L. 100-233, 101 Stat. 1568, 1656, sec. 514 of Pub. L. 102-552, 106 Stat. 4102. 0 2. Section 620.6(c)(2)(i) is revised to read as follows: Sec. 620.6 Disclosures in the annual report to shareholders relating to directors and senior officers. * * * * * (c) * * * (2) * * * (i) If applicable, when any employee who is not a senior officer has annual compensation at a level that is among the five highest paid by the institution during the reporting period, include the highly compensated employee(s) in the aggregate number and amount of compensation reported in the Compensation Table. However, exclude any such employee from the Compensation Table if the employee would be considered highly compensated solely because of payments related to or change(s) in value of the employee's qualified pension plan provided that the plan was available to all similarly situated employees on the same basis at the time the employee joined the plan. * * * * * Dated: February 19, 2015. Mary Alice Donner, Acting Secretary, Farm Credit Administration Board. [FR Doc. 2015-04023 Filed 2-25-15; 8:45 am] BILLING CODE 6705-01-P
![Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations 10325
(Approved by the Office of Management Jeff Pienta, Senior Attorney, Office of threshold solely because of payments
and Budget under control numbers General Counsel, Farm Credit related to or change(s) in the value of a
0579–0040, 0579–0224, 0579–0393, Administration, McLean, VA 22102– qualified pension plan that was
and 0579–0425) 5090, (703) 883–4020, TTY (703) 883– available to all employees on the same
Done in Washington, DC, this 20th day of 4056. basis at the time they joined the plan.
February 2015. SUPPLEMENTARY INFORMATION:
We believe that application of the
Kevin Shea, existing rule could create such an
I. Objective unintended effect and reduce the
Administrator, Animal and Plant Health
Inspection Service. The objective of this rule is to effectiveness of the disclosure.
improve the quality of disclosure Therefore, on November 17, 2014, we
[FR Doc. 2015–04074 Filed 2–25–15; 8:45 am]
information shareholders receive on proposed amending existing
BILLING CODE 3410–34–P
senior officer and highly compensated § 620.6(c)(2)(i) to exclude reporting
employee compensation. employees’ compensation in the Table if
the employees were not senior officers
FARM CREDIT ADMINISTRATION II. Background and would be considered highly
Congress explained in section 514 of compensated employees solely because
12 CFR Part 620 of payments related to or change(s) in
the Farm Credit Banks and Associations
RIN 3052–AD02 Safety and Soundness Act of 1992 (1992 value of the employees’ qualified
Act) 1 that disclosures of financial pension plans provided that the plans
Disclosure to Shareholders; Pension information and compensation paid to were available to all employees on the
Benefit Disclosures senior officers, among other disclosures, same basis at the time the employee
provide System shareholders with joined the plan.
ACTION: Final rule.
information necessary to better manage III. Comments and Our Response
SUMMARY: The Farm Credit their institution and make informed
The comment period for the proposed
Administration (FCA, we or our) decisions regarding the operation of
rule closed on December 17, 2014 (79
amends our regulations related to Farm their institution. In addition, the FCA
FR 68376, Nov. 17, 2014). We received
Credit System (System) bank and Board declared its commitment to
four comment letters on our proposed
association disclosures to shareholders support the cooperative business model
rule: One comment letter from the
and investors of senior officer and structure by encouraging member-
Independent Community Bankers of
compensation in the Summary borrowers to participate in the America (ICBA), responding on behalf
Compensation Table (Table). Under the management, control, and ownership of of its members; one comment from a
final rule, System banks and their institutions.2 Providing member- Farm Credit bank (FCB); one comment
associations are not required to report in borrowers with transparent and letter from a System association; and
the Table the compensation of complete disclosures regarding the one comment letter from the Farm
employees who are not senior officers compensation of senior officers and Credit Council, responding on behalf of
and who would not otherwise be certain other highly compensated its members. Two commenters
considered ‘‘highly compensated employees is essential to fostering an supported the proposed rule, one
employees’’ but for the payments related environment wherein member- supported it with suggested changes,
to, or change(s) in value of, the borrowers can do so effectively. and one opposed the rule. In the
employees’ qualified pension plans, With this as one of our objectives, we discussion below, we address the
provided that the plans were available issued a final rule on October 3, 2012, significant comments. After careful
to all employees on the same basis at the that enhanced disclosure of senior consideration of the comments, the
time the employees joined the plans. officer compensation and other related proposed rule is finalized without any
DATES: Effective Date: The regulation topics. Section 620.6(c)(2)(i) requires changes.
will be effective 30 days after System Banks and associations to
publication in the Federal Register disclose senior officer compensation for A. Transparency and Quality of
during which time either one or both the last 3 fiscal years. For purposes of Disclosure
Houses of Congress are in session. We this reporting requirement only, The ICBA opposes the proposed rule
will publish a notice of the effective § 620.6(c)(2)(i) extends the regulatory and urges the FCA to withdraw the
date in the Federal Register. definition of ‘‘senior officers’’ to include proposed rule or adopt the ICBA’s
Compliance Date: System banks and any employee whose compensation recommendations. The ICBA asserts that
associations must comply with the final level was among the five highest paid the proposed rule reduces transparency
rule for compensation reported in the during the reporting period. The intent of pension disclosures to System
Table for the fiscal year ending 2015, of this extension was to ensure that shareholders and seeks to allow System
and may implement the final rule System banks and associations provide institutions to hide significant
retroactively for the fiscal years ended shareholders with necessary enhancements to pensions and other
2014, 2013, and 2012. However, compensation information on highly compensation arrangements by not
retroactive application is not required, compensated employees even though disclosing them. We agree with the
and we would expect footnote they did not fall within the regulatory ICBA that employee compensation
disclosure of the change in calculation definition of ‘‘senior officer.’’ The intent should be reported in this disclosure
for the fiscal years to which the final was not to provide compensation item if the employee’s compensation
rule was applied. information on employees who would reaches the highly compensated
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FOR FURTHER INFORMATION CONTACT: only reach the ‘‘highly compensated’’ employee threshold due to large or
Michael T. Wilson, Policy Analyst, significant bonuses and other such
1 PublicLaw 102–552, 106 Stat. 4131 (1992).
Office of Regulatory Policy, Farm Credit 2 See
payments. As we explained in the
FCA Policy Statement ‘‘Cooperative
Administration, McLean, VA 22102– Operating Philosophy—Serving the Members of
proposed rule, however, there would be
5090, (703) 883–4124, TTY (703) 883– Farm Credit System Institutions’’ (FCA–PS–80), no reporting requirement for this
4056, Or dated October 14, 2010. disclosure item solely for employees
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![10326 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations
who are not senior officers and who our proposed rule in their comment PART 620—DISCLOSURE TO
would not otherwise be considered letters. Furthermore, they expressed that SHAREHOLDERS
‘‘highly compensated employees’’ but our proposal improves the disclosure
for payments related to or change(s) in language and aligns it with the intended ■ 1. The authority citation for part 620
the value of the employee’s qualified purpose. The FCB also offered two continues to read as follows:
pension plan. Also, the qualified plan constructive suggestions. The first Authority: Secs. 4.3, 4.3A, 4.19, 5.9, 5.19
must have been available to all suggestion was to allow System of the Farm Credit Act (12 U.S.C. 2154,
employees on the same basis at the time institutions affected by our proposed 2154a, 2207, 2243, 2252, 2254); sec. 424 of
the employee joined the plan. Thus, the rule to disclose in a note to the Table Pub. L. 100–233, 101 Stat. 1568, 1656, sec.
proposed rule did not seek to change the 514 of Pub. L. 102–552, 106 Stat. 4102.
that the calculation formula changed
current reporting requirement regarding and describe the reason for the change ■ 2. Section 620.6(c)(2)(i) is revised to
payments such as those concerning the and its effects. Also, because data is read as follows:
ICBA. Rather, if any such payout to the
reported in the Table for 3 years, the
employee or change(s) in value to their § 620.6 Disclosures in the annual report to
FCB’s second suggestion was that each shareholders relating to directors and
plan is due to a benefit plan that is not
System institution be allowed to choose senior officers.
a qualified plan and the plan was not
offered to all employees on the same the method of compliance that works * * * * *
basis when the employee joined the best for that institution’s situation. We (c) * * *
plan, then the payout or change(s) in agree with the suggestion regarding (2) * * *
value would be included in determining explanatory notes, but do not believe a (i) If applicable, when any employee
whether the employee’s compensation change to our proposal is necessary. who is not a senior officer has annual
reached the five highest paid threshold. Such disclosure is not prohibited so compensation at a level that is among
Thus, we believe that the proposed rule long as the disclosure is not misleading, the five highest paid by the institution
increases the effectiveness and incomplete or inaccurate. Whether a during the reporting period, include the
transparency of the disclosure and System institution opts to restate one or highly compensated employee(s) in the
better achieves the original intent of the all of the prior years’ disclosures or to aggregate number and amount of
rule, which we did not change. report the data prospectively beginning compensation reported in the
The ICBA also expressed concern that for fiscal year ending 2015, we would Compensation Table. However, exclude
large one-time lump sum payments expect that any change in the method of any such employee from the
made to numerous employees at the calculations versus prior years’ Compensation Table if the employee
same time from a qualified pension plan disclosures be described in a footnote to would be considered highly
that was available to all employees on the Table to the extent needed so that compensated solely because of
the same basis at the time they joined the reported data will not be misleading payments related to or change(s) in
the plan could represent significant cash or incomplete. Therefore, we agree with value of the employee’s qualified
outlays for the institution during a the FCB’s suggestion to the extent that pension plan provided that the plan was
reporting period. The ICBA believes that the 3-year reporting period raises issues available to all similarly situated
System institution owners should be for affected institutions, but we do not employees on the same basis at the time
made aware of these payouts. We agree believe that a change to the regulation the employee joined the plan.
with the ICBA and would expect that language is necessary. We have * * * * *
such payouts be included in the addressed this issue in the compliance
financial statements or notes thereto or Dated: February 19, 2015.
date information.
discussed in the management’s Mary Alice Donner,
discussion and analysis section of the IV. Regulatory Flexibility Act Acting Secretary, Farm Credit Administration
annual report if material to the Board.
institution’s financial condition and Pursuant to section 605(b) of the [FR Doc. 2015–04023 Filed 2–25–15; 8:45 am]
results of operations. As discussed Regulatory Flexibility Act (5 U.S.C. 601 BILLING CODE 6705–01–P
above, the intent of this specific et seq.), the FCA hereby certifies that the
disclosure item was not and is not to final rule would not have a significant
include such payments in the economic impact on a substantial DEPARTMENT OF TRANSPORTATION
calculation of the top five highest paid number of small entities. Each of the
employees. banks in the Farm Credit System, Federal Aviation Administration
In its comment letter, the ICBA also considered together with its affiliated
makes a number of recommendations, associations, has assets and annual 14 CFR Part 25
such as to disclose all employees’ income in excess of the amounts that
[Docket No. FAA–2014–0710; Special
compensation if that compensation would qualify them as small entities.
Conditions No. 25–574–SC
exceeds the average income of the Therefore, Farm Credit System
citizens in the surrounding geographic institutions are not ‘‘small entities’’ as Special Conditions: Boeing Model 767–
area, or to disclose the compensation for defined in the Regulatory Flexibility 2C Series Airplanes; Isolation or
the twenty-five (25) highest paid Act. Protection of Airplane Electronic-
employees for larger System System Security From Unauthorized
institutions. We believe these List of Subjects in 12 CFR Part 620
Internal Access
recommendations go beyond the scope Accounting, Agriculture, Banks,
rmajette on DSK2VPTVN1PROD with RULES
of the proposed rule and cannot be AGENCY: Federal Aviation
banking, Reporting and recordkeeping
addressed in this rulemaking. Administration (FAA), DOT.
requirements, Rural areas.
ACTION: Final special conditions; request
B. Explanatory Notes and Method of For the reasons stated in the
Compliance for comments.
preamble, part 620 of chapter VI, title 12
The FCB, the Farm Credit Council, of the Code of Federal Regulations is SUMMARY: These special conditions are
and the System association supported amended as follows: issued for Boeing Model 767–2C series
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Document Created: 2015-12-18 13:04:53
Document Modified: 2015-12-18 13:04:53
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Rules and Regulations | |
| Action | Final rule. | |
| Contact | Michael T. Wilson, Policy Analyst, Office of Regulatory Policy, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4124, TTY (703) 883-4056, Or | |
| FR Citation | 80 FR 10325 | |
| RIN Number | 3052-AD02 | |
| CFR Associated | Accounting; Agriculture; Banks; Banking; Reporting and Recordkeeping Requirements and Rural Areas |
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