Employee Benefits and Expenses

9 Months Ended

Sep. 30, 2022

Retirement Benefits [Abstract]

Employee Benefits and Expenses

Note 18: Employee Benefits and Expenses

Pension and Postretirement Plans

We sponsor a frozen noncontributory qualified defined benefit retirement plan, the Wells Fargo & Company Cash Balance Plan (Cash Balance Plan), which covers eligible employees of Wells Fargo. The Cash Balance Plan was frozen on July 1, 2009, and no new benefits accrue after that date. For additional information on our pension and postretirement plans, including plan assumptions, investment strategy and asset allocation, projected benefit payments, and valuation methodologies used for assets measured at fair value, see Note 1 (Summary of Significant Accounting Policies) and Note 21 (Employee Benefits and Other Expenses) in our 2021 Form 10-K.

We recognize settlement losses for our Cash Balance Plan based on an assessment of whether lump sum benefit payments will, in aggregate for the year, exceed the sum of its annual service and interest cost (threshold). Settlement losses of $48 million and $151 million were recognized during the third quarter and first nine months of 2022, respectively, compared with $35 million and $97 million, respectively, for the same periods a year ago, representing the pro rata portion of the net loss in AOCI based on the percentage reduction in the Cash Balance Plan’s projected benefit obligation attributable to lump sum benefit payments during the first nine months of 2022 and

2021. As a result of the settlement losses, we remeasured the Cash Balance Plan obligation and plan assets as of both September 30, 2022 and 2021, and used a discount rate of 5.44% and 2.80%, respectively. In the third quarter and first nine months of 2022, respectively, the result of the settlement losses and remeasurements was:

•a decrease of $143 million and $253 million in the Cash Balance Plan asset; and

•a decrease of $95 million and $102 million in OCI (pre-tax).

In the third quarter and first nine months of 2021, the result of the settlement losses and remeasurement was:

•a decrease of $224 million and increase of $123 million in the Cash Balance Plan asset; and

•a decrease of $189 million and increase of $220 million in OCI (pre-tax).

Table 18.1 presents the components of net periodic benefit cost. The expected long-term rate of return on plan assets and interest cost discount rate in determining net periodic benefit cost for third quarter 2022 were 5.34% and 4.48%, respectively. Service cost is reported in personnel expense and all other components of net periodic benefit cost are reported in other noninterest expense on the consolidated statement of income.

Table 18.1: Net Periodic Benefit Cost

	2022				2021
	Pension benefits				Pension benefits
(in millions)	Qualified		Non-  qualified	Other  benefits	Qualified	Non-  qualified	Other  benefits
Quarter ended September 30,
Service cost	$	5	—	—	4	—	—
Interest cost	95		3	1	77	3	2
Expected return on plan assets	(119)		—	(5)	(150)	—	(5)
Amortization of net actuarial loss (gain)	34		3	(6)	31	4	(5)
Amortization of prior service credit	—		—	(2)	—	—	(2)
Settlement loss	48		—	—	35	—	—
Net periodic benefit cost	$	63	6	(12)	(3)	7	(10)
Nine months ended September 30,
Service cost	$	15	—	—	13	—	—
Interest cost	244		8	6	219	9	8
Expected return on plan assets	(384)		—	(16)	(456)	—	(14)
Amortization of net actuarial loss (gain)	100		9	(17)	106	11	(15)
Amortization of prior service credit	—		—	(7)	—	—	(7)
Settlement loss	157		1	—	97	2	—
Net periodic benefit cost	$	132	18	(34)	(21)	22	(28)

Expenses

Regulatory Charges and Assessments expense, which is included in other noninterest expense, was $207 million and $640 million in the third quarter and first nine months of 2022, respectively, compared with $213 million and $622 million in the same periods a year ago, and primarily consisted of Federal Deposit Insurance Corporation (FDIC) deposit assessment expense.

We may incur expenses related to a variety of loss contingencies, such as customer remediation activities. We establish an accrued liability when a loss event is probable and the amount of the loss can be reasonably estimated. In third quarter 2022, we recognized $2.0 billion of accruals primarily related to a variety of historical matters, including litigation, customer remediation, and regulatory matters, which were included in operating losses. See Note 13 (Legal Actions) for additional information on accruals for legal actions.