Notes to Financial Statements
1.
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Description of the Plan
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General
The American Express Retirement Savings Plan (the Plan), which became effective June 11, 1973, is a defined
contribution pension plan. Under the terms of the Plan, regular full-time and certain part-time employees of American Express Company and its participating subsidiaries (the Company) can make elective contributions to the Plan beginning
as soon as practicable after their date of hire and are eligible to receive Company contributions, if any, upon completion of six months of service.
The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA).
The following is not a comprehensive description of the Plan, and therefore does not include all situations and limitations covered by the Plan. The Plan Document should be referred to for more complete information. In the event of a conflict
between the following description and the Plan Document, the Plan Document shall control.
Administration
Wells Fargo Bank, N.A. is the Trustee and Recordkeeper for the Plan. The Plan is administered by the Companys Employee
Benefits Administration Committee (EBAC) and the Companys Retirement Savings Plan Investment Committee (RSPIC). The Plan Document requires that the American Express Company Stock Fund be offered as an investment option,
subject to compliance with ERISA. RSPIC has the power to select the other investment options available under the Plan and the manner in which these investment options are invested. Subject to Plan limits, RSPIC also has the power to appoint
investment managers to make investment decisions. Under the terms of the Plan Document, the members of EBAC and RSPIC are appointed by the Companys Vice President, Global Benefits.
Compensation
The participant compensation (commonly referred to as Total Pay) that is used in the calculation of Plan
contributions generally includes an employees base pay plus overtime, shift differentials, and most commissions and incentives. For participants above certain salary grades, as defined by the Plan, Total Pay does not include any incentive pay
which, in the aggregate, is in excess of one times their base salary when calculating Company contributions.
For purposes
of the Plan, compensation is limited to a participants regular cash remuneration up to a maximum of $265,000 and $260,000 in 2015 and 2014, respectively, before tax deductions and certain other withholdings.
Contributions
The Plan currently provides for the following contributions:
Elective Contributions
Each pay period, participants may make Before-Tax Contributions, Roth Contributions, and/or After-Tax Contributions up to 10%
of eligible compensation, or a combination thereof, not to exceed 80% of their Total Pay, to the Plan through payroll deductions. Roth Contributions are a special type of after-tax contribution and are subject to most of the same rules as Before-Tax
Contributions. The Internal Revenue Code of 1986, as amended (the Code) imposes a limitation that is adjusted annually for cost of living increases on participants pre-tax and Roth contributions to plans which are qualified under
Code Section 401(k) and other specified tax favored plans. For 2015 and 2014, this limit was $18,000 and $17,500, respectively, for participants under age 50 and $24,000 and $23,000, respectively, for participants age 50 or older. The Plan complied
with non-discrimination requirements under the Code during 2015 and 2014 by utilizing the safe harbor design for deferrals and matching contributions in accordance with Sections 401(k)(12) and 401(m)(11) of the Code.
3
AMERICAN EXPRESS RETIREMENT SAVINGS PLAN
Notes to Financial Statements
Company Matching Contributions
The Company matches 100% of a participants Before-Tax Contributions and/or Roth Contributions up to 5% of Total Pay after
a participants completion of six months of service.
Profit Sharing Contributions
Upon a participants completion of six months of service, additional Company contributions up to 5% of a
participants Total Pay may be made annually at the Companys discretion which can be based, in part, on the Companys performance. Participants must be employed on the last working day of the Plan year (or be disabled under the terms
of the Plan) to be eligible for any Profit Sharing Contributions made for that Plan year. Profit Sharing Contributions to eligible participants are made regardless of whether the eligible participant contributes to the Plan. Profit Sharing
Contributions comprised 2.00% of participants Total Pay in 2015 and 3.00% of Total Pay in 2014.
Qualified Non-Elective
Contributions
The Company may make Qualified Non-Elective Contributions (QNEC). A QNEC is a discretionary,
fully vested contribution. The Company may designate all or part of a Company profit sharing contribution as a QNEC. Alternatively, the Company may, in its sole discretion, make an additional contribution designated as a QNEC. Any QNECs are fully
vested when made and distributable only under circumstances that permit distributions of Before-Tax Contributions or Roth Contributions (excluding hardship withdrawals). QNECs may be allocated as a uniform percentage of eligible compensation for
designated employees and may be restricted to only such employees employed on the last day of the Plan year. Alternatively, the Company may direct that QNECs be allocated among specifically designated non-highly compensated employees in varying
percentages of compensation as permitted by law.
Conversion Contributions
For eligible employees on the Companys United States payroll or on unpaid leave of absence on July 1, 2007 and who
generally commenced service prior to April 1, 2007, the Company makes Conversion Contributions equal to a percentage of compensation. The amount of the participants Conversion Contributions is based on his/her projected attained age plus
completed years of service with the Company as of December 31, 2008 and varies depending on the division of employment. Conversion Contributions range from 0-8% of Total Pay.
Disability Contributions
Certain qualifying participants who become disabled, as defined by the Plan Document, are eligible to receive contributions
similar to Company Conversion, Profit Sharing and/or Matching Contributions.
Transfer of Account Balances
A participants account balance may be transferred among the Plans investment options upon receipt of instructions
from the participant. Account balances may be allocated among the Plans investment options on a daily basis.
Participant
Rollovers
A rollover contribution is a transfer to the Plan of a qualified distribution in accordance with the
provisions of the Plan. Rollovers are accepted into the Plan, but are not subject to Company contributions.
4
AMERICAN EXPRESS RETIREMENT SAVINGS PLAN
Notes to Financial Statements
In-Plan Roth Conversions
The Plan allows for in-Plan Roth conversions.
Vesting
Participants are immediately vested in their elective Before-Tax, Roth and After-Tax Contributions and rollovers, if any, as
well as the investment earnings on the foregoing. Other contributions become vested as set forth below:
Company Matching Contributions
Company Matching Contributions and investment earnings thereon are immediately 100% vested.
Profit Sharing Contributions
Profit Sharing Contributions and investment earnings thereon are 100% vested after the earlier of three years of service or, if
still employed by the Company or an affiliate, at or after attainment of age 65, disability or death.
Qualified Non-Elective
Contributions
QNECs are immediately 100% vested and investment earnings thereon are immediately 100% vested.
Conversion Contributions
Conversion Contributions and investment earnings thereon are 100% vested after the earlier of three years of service or, if
still employed by the Company or an affiliate, at or after attainment of age 65, disability or death.
Disability Contributions
Disability Contributions are immediately 100% vested.
Forfeitures
Forfeitures of terminated participants non-vested accounts, as well as amounts attributable to outstanding checks not
cashed within 180 days with respect to which the payee cannot be located, are used to pay Plan expenses or to reduce future Company contributions. Amounts attributable to uncashed checks may, in accordance with EBACs direction, be allocated
wholly or partly to a reserve to cover future claims for these benefits or be treated in accordance with the normal rules for forfeitures. Forfeited non-vested balances were $1.3 million and $1.5 million as of December 31, 2015 and 2014,
respectively. Accrued 2015 Profit Sharing Contributions made to the Plan in March 2016 were reduced by $1 million from forfeited account balances.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at
any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts and Plan assets will be distributed in accordance with the Plan Document.
Notes Receivable from Participants
Notes receivable from participants (loans) are carried at their unpaid principal balance plus any accrued but unpaid interest.
Participants are allowed to apply for a loan from the Plan for a minimum amount of $500 up to the lesser of $50,000 or 50% of their vested balance, subject to certain restrictions set forth in the Plan and the Code. General purpose loans are limited
to terms of 59 months. Loans to purchase a principal residence have a maximum term of 359 months. Loan repayment amounts, including principal and interest, are deducted each pay period and allocated to participants investment accounts in
accordance with the election in effect for new contributions at the time of repayment. Terminated participants who have an outstanding loan may default and not repay the loan, subject to income tax regulations, or make arrangements with the
Recordkeeper to pay the loan off in full, or make installment payments.
5
AMERICAN EXPRESS RETIREMENT SAVINGS PLAN
Notes to Financial Statements
Loans are collateralized by the participants remaining vested account
balance and the interest rate is fixed for the life of the loan. Effective September 1, 2012, the interest rate determination is based on the prime rate (as reported in the Wall Street Journal on the last business day of the month prior to the
month in which the loan is issued) plus one percentage point. In the event of a loan default, EBAC may direct the Trustee to treat the outstanding loan balance as an early withdrawal of funds from the Plan, thereby subjecting the participant to
income tax plus any penalties imposed by the Code based on the loan balance. Loans outstanding to participants at December 31, 2015, carried interest rates varying from 3.25% to 9.50% and will mature at various dates through October 2045.
Tax Deferrals
As long as the Plan remains qualified and the related Trust (the Trust) remains tax exempt, amounts invested in the
Plan through Before-Tax Contributions and Company contributions and rollovers, as well as the investment earnings on such amounts, are not subject to federal income tax until distributed to the participant. After-Tax Contributions are taxed when
contributed, with earnings taxed upon distribution. Roth Contributions are taxed when contributed, and earnings on Roth Contributions and rolled-in Roth amounts qualify for tax-free distribution if a participant (i) reaches age 59-1/2, dies or
becomes disabled (as defined by federal law) and (ii) has a Roth Contribution account with the Plan (or another plan from which a direct rollover of Roth contributions is received) for at least five taxable years. If those conditions are not
met, earnings on Roth Contributions are taxed when distributed. Amounts that are converted to Roth status through an in-plan Roth conversion are taxed when converted (with the exception of After-Tax Contributions; however, earnings on After-Tax
Contributions are subject to tax when converted), and thereafter are subject to the Roth taxation rules.
Distributions and
Withdrawals
Upon termination of employment due to disability, death or retirement at or after attainment of the
Plans normal retirement age (65), participants or their beneficiaries are fully vested and eligible to receive a distribution of the full value of their accounts. If employment ends for other reasons, participants are eligible to receive a
distribution of their vested account balance. When employment ends, participants (or their beneficiaries) may elect to receive their vested balance as a lump sum cash amount, American Express Company common shares, if applicable, shares of any
investment available through the Self-Directed Brokerage Account (SDA), if applicable, or a combination of cash and shares. If the account balance is greater than $1,000, a participant may elect to defer distribution until April 1st
of the year following the year in which the participant attains age 70-1/2. If the account balance is $1,000 or less, a distribution will be made in a lump sum following the end of employment. Participants may request a withdrawal of all or a
portion of their vested account balance subject to limitations under the terms of the Plan and certain tax penalties imposed by the Code. Distributions and withdrawals are recorded when paid. Distributions may be rolled over to a qualified
Individual Retirement Account (IRA) or other qualified employer retirement plan, if that plan allows rollovers.
Expenses
The Company, in its discretion, may pay certain administrative expenses, with any expenses not paid by the Company being
charged to the Plan. Expenses related to separately managed investment funds, such as investment management fees, brokerage commissions, stock transfer, or other taxes and charges incurred in the purchase or sale of investments, are generally paid
out of the applicable investment funds, and are included in the Statement of Changes in Net Assets Available for Benefits. Fees, commissions, and other charges and administrative expenses that are attributable to the investment funds as a whole are
generally paid from the Plan. All such expenses that are paid by the Plan are included within the administrative expenses on the Statement of Changes in Net Assets Available for Benefits. The expenses reported on the Statement of Changes in Net
Assets Available for Benefits do not include fees and expenses incurred indirectly by the Plan from the underlying mutual funds and collective trusts in which the Plan may invest. Additional expenses are associated with the SDA and participants
electing to invest through the SDA are charged directly for these fees through their SDA. The Plan does not pay any fees or expenses specifically associated with the SDA from general plan assets.
6
AMERICAN EXPRESS RETIREMENT SAVINGS PLAN
Notes to Financial Statements
Effective January 1, 2016, Wells Fargo Institutional
Retirement & Trust reduced fees charged to the Plan for recordkeeping of participant accounts, as well as trust and custody of plan assets, and the Plans fee structure was changed to provide for a flat per-participant fee rather than
an asset-based fee for recordkeeping services. Also effective January 1, 2016, the Plans investment adviser, NEPC, LLC restructured its fees to receive a higher proportion of its compensation in the form of a flat fee and reduced the
asset-based fees charged to the Plans Retirement Funds.
2.
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Summary of Significant Accounting Policies
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Use of Estimates
The accompanying financial statements have been prepared on the accrual basis of accounting in conformity with accounting
principles generally accepted in the United States of America (GAAP). Accounting estimates are an integral part of the financial statements. These estimates are based, in part, on managements assumptions concerning future events.
Among the more significant assumptions are those that relate to fair value measurements. These accounting estimates reflect the best judgment of management, but actual results could differ.
Investment Valuation and Income Recognition
Investments are reported at fair value. Investments traded on securities exchanges, including common stocks, preferred stocks
and corporate debt instruments, are valued at the year-end closing market prices or, in the absence of a closing price, the last reported trade price at the financial statement date. The fair value of the Plans U.S. Government and agency
securities, municipal bonds and foreign bonds, are valued at closing bid quotations at the financial statement date or the last available date that the security was traded and are obtained from pricing services engaged by the Plans Trustee.
Purchases and sales of securities are reflected on a trade-date basis. Dividend income is recorded on the ex-dividend
date. Interest income is recorded on an accrual basis. As required by the Plan, all dividend and interest income is reinvested into the same investment funds in which the dividends and interest income arose with the exception of the American Express
Company Stock Fund, which is an Employee Stock Ownership Plan (ESOP). The ESOP holds shares of American Express Company stock on behalf of participants. Dividends are automatically reinvested in the American Express Company Stock Fund,
unless participants elect that the dividends paid with respect to their interest in the fund be distributed in cash in the form of withdrawal payments.
The Plan presents in the Statement of Changes in Net Assets Available for Benefits the net appreciation in the fair value of
its investments, which consists of the realized gains or losses and the unrealized appreciation or depreciation on those investments.
7
AMERICAN EXPRESS RETIREMENT SAVINGS PLAN
Notes to Financial Statements
Subsequent Events
The Plan has evaluated subsequent events for potential recognition and disclosure through the date the financial statements
were issued. Changes in certain fee structures effective January 1, 2016 are discussed in Note 1 (Expenses).
Recently Issued
Accounting Standards
In July 2015, the Financial Accounting Standards Board (FASB) issued new accounting guidance
on defined contribution plan accounting. The guidance provides a number of changes aimed to simplify the accounting and disclosure requirements of retirement plan financial statements. The guidance is summarized into three parts:
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Part I, Fully Benefit-Responsive Investment Contracts (FBRICs)
FBRICs will now be measured at
contract value and will no longer be required to be reconciled from fair value to contract value. In addition, since these investments are no longer disclosed at fair value, they are no longer required to be disclosed on the fair value tables.
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Part II, Plan Investment Disclosure
Plan assets are no longer required to be disaggregated in
the fair value tables and can be disclosed by general type. In addition there is no longer a requirement to disclose a detailed reconciliation of net appreciation/depreciation or net assets five percent or greater.
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Part III, Measurement Date Practical Expedient
Plan assets will be allowed to be measured on a
month-end date that is closest to a plans fiscal year-end when its year-end does not coincide with a month-end.
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The guidance requires retrospective application and will be effective for the plan year beginning January 1, 2016, with
early adoption permitted. The Plan elected to early adopt Part I and Part II, which did not have a material impact on the Plans financial statements and related disclosures. The Plan has elected not to early adopt Part III for this plan year
and does not expect it to have a material impact on the Plans financial statements as the Plan year-end coincides with a month-end.
In May 2015, the FASB issued new guidance on fair value measurement. The guidance eliminates the requirement for the Plan
to categorize investments using the Net Asset Value practical expedient in the fair value hierarchy table; however, the fair value of these investments must still be disclosed separately. The guidance, which is to be retrospectively
applied, will be effective for the plan year beginning on January 1, 2016. Early adoption is permitted; however, the Plan has elected not to early adopt for this plan year. The standard will impact the Plans disclosures around
investments using the Net Asset Value practical expedient, but will not have an impact on its Statements of Net Assets Available for Benefits or Statement of Changes in Net Assets Available for Benefits.
8
AMERICAN EXPRESS RETIREMENT SAVINGS PLAN
Notes to Financial Statements
3.
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Fair Value Measurements
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Fair value is defined as the price that would
be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date, based on the Plans principal or, in the absence of a principal, most advantageous market for the
specific asset or liability.
GAAP provides for a three-level hierarchy of inputs to valuation techniques used to measure
fair value, defined as follows:
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Level 1 Inputs that are quoted prices (unadjusted) for identical assets or liabilities in active
markets that the Plan can access.
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Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the asset or liability, including:
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Quoted prices for similar assets or liabilities in active markets;
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Quoted prices for identical or similar assets or liabilities in markets that are not active;
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Inputs other than quoted prices that are observable for the asset or liability; and
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Inputs that are derived principally from or corroborated by observable market data by correlation or other
means.
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Level 3 Inputs that are unobservable and reflect the Plans own assumptions about the assumptions
market participants would use in pricing the asset or liability based on the best information available in the circumstances (e.g., internally derived assumptions surrounding the timing and amount of expected cash flows).
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The Plan monitors the market conditions and evaluates the fair value hierarchy levels at least annually. For any transfers in
and out of the levels of the fair value hierarchy, the Plan elects to disclose the fair value measurement at the beginning of the reporting period during which the transfer occurred.
The Plan, in partnership with a third-party, corroborates the prices provided by its Trustees pricing services to test
their reasonableness by comparing their prices to valuations from different pricing sources as well as comparing prices to the sale prices received from sold securities. In instances where price discrepancies are identified between different pricing
sources, the Plan would evaluate such discrepancies to ensure that the prices used for its calculation represent the fair value of the underlying investment securities.
Financial Assets Carried at Fair Value
Financial assets disclosed in the tables below represent two types of assets. Assets held in funds (either mutual funds or
common/collective trusts) are disclosed in the table according to the appropriate fund category (the underlying securities of those funds are not disclosed separately). Assets held in separate accounts (which are wholly owned by the Plan) are
disclosed according to the appropriate category of the individual securities of those separately managed accounts; these individual securities include common stocks, fixed income securities, mutual funds, and common/collective trusts. Because of
this, the classification of financial assets in the table does not correspond to the classification of the investment options available to Plan participants.
9
AMERICAN EXPRESS RETIREMENT SAVINGS PLAN
Notes to Financial Statements
The following table summarizes the Plans financial assets measured at
fair value on a recurring basis, categorized by GAAPs valuation hierarchy (as described above), as of December 31, 2015:
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Description
(Thousands)
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Total
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Level 1
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Level 2
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Money market funds
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$
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56,157
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$
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56,157
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$
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Corporate debt instruments
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55,244
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55,244
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Common stocks
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1,805,722
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1,805,722
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U.S. Government and agency obligations
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181,742
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181,742
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Common/collective trusts
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796,700
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796,700
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Mutual funds
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686,769
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686,769
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Self-directed brokerage accounts
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136,764
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136,762
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2
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Other investments
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76,028
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76,028
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Total
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$
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3,795,126
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$
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2,685,410
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$
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1,109,716
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The following table summarizes the Plans financial assets measured at fair value
on a recurring basis, categorized by GAAPs valuation hierarchy (as described above), as of December 31, 2014:
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Description
(Thousands)
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Total
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Level 1
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Level 2
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Money market funds
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$
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33,929
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$
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33,929
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$
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Common stocks
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2,123,018
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2,123,018
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Common/collective trusts
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818,513
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818,513
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Mutual funds
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991,406
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991,406
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Self-directed brokerage accounts
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148,594
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148,594
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Total
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$
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4,115,460
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$
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3,296,947
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$
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818,513
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There were no transfers in and/or out of the Plans Level 3 assets for the years
ended December 31, 2015 and 2014.
Valuation Techniques Used in the Fair Value Measurement of Financial Assets
Carried at Fair Value
For the financial assets measured at fair value on a recurring basis (categorized in the
valuation hierarchy table above), the Plan applies the following valuation techniques:
Level 1:
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Money market funds are valued by the net asset value (the NAV), which represents the exit price.
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Investments in American Express Company common stock, other stock and active publicly traded equity securities
are valued at the official closing price of U.S. public exchanges or, if there is no official closing price that day, at the last reported trade price at the financial statement date.
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Mutual funds held within the Plan are open-end mutual funds that are registered with the Securities and
Exchange Commission under the Investment Company Act of 1940. These investments are required to make publicly available the daily NAV of the fund and to transact at this price. Hence, open-end mutual funds transact at quoted prices. In addition, the
mutual funds held by the Plan are actively traded.
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10
AMERICAN EXPRESS RETIREMENT SAVINGS PLAN
Notes to Financial Statements
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Self-directed brokerage accounts are primarily comprised of Common stock, Mutual funds and Corporate debt
instruments and are valued at fair value using the corresponding valuation techniques as previously described.
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Level 2:
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The fair values for the Plans Corporate debt instruments, U.S. Government and agency obligations (which
also include state and local government obligations) and Other investments (asset-backed securities, foreign sovereign debt and private placement bonds), are obtained primarily from pricing services engaged by the Plans Trustee. The fair
values provided by the pricing service are estimated using pricing models, where the inputs to those models are based on observable market inputs or recent trades of similar securities. The inputs to the valuation techniques applied by the pricing
service vary depending on the type of security being priced but are typically benchmark yields, benchmark security prices, credit spreads, prepayment speeds, reported trades, and broker-dealer quotes, all with reasonable levels of transparency. The
pricing service does not apply any adjustments to the pricing models used. In addition, the Plan did not apply any adjustments to the prices received from the pricing services for 2015 and 2014. The Plan reaffirms its understanding of the valuation
techniques used by its pricing services at least annually. The Plan classifies the prices obtained from the pricing services within Level 2 of the fair value hierarchy because the underlying inputs are directly observable from active markets or
recent trades of similar securities in inactive markets. However, the pricing models used do entail a certain amount of subjectivity, and therefore differing judgments in how the underlying inputs are modeled could result in different estimates of
fair value.
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Common/collective trusts are investment funds formed by the pooling of investments by institutional investors,
such as a group of not necessarily affiliated pension or retirement plans, typically with the intention of achieving cost savings over similar investment options such as mutual funds. Common/collective trusts are similar to mutual funds, with a
named investment manager and documented investment objective. These investments, however, are not registered with the SEC (unlike mutual funds, which are registered) and participation is not open to the public. The NAV is measured by the custodian
or investment manager as of the close of regular daily trading. These investments are classified within Level 2 of the fair value hierarchy. When measuring the fair value of such funds, the NAV, as provided by the fund sponsor, is corroborated with
observable inputs provided by pricing services for the securities. In certain instances, NAVs may require adjustments to more appropriately reflect the fair value. No adjustments to NAVs were required.
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Level 3:
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There are no Level 3 securities held by the Plan.
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The fair values of the financial instruments are estimates based upon the market conditions and perceived risks as of
December 31, 2015 and 2014, and require management judgment. The Plans valuation techniques used to measure the fair value of its investments may produce fair values that may not be indicative of a future sale, or reflective of future
fair values. The use of different techniques to determine the fair value of these types of investments could result in different estimates of fair value at the reporting date.
11
AMERICAN EXPRESS RETIREMENT SAVINGS PLAN
Notes to Financial Statements
The investment options available to participants include nine core investment options (the Core Investment
Options), of which five are actively managed and four are passively managed (also known as index funds). In addition, target date funds (the Retirement Funds) that invest in a mix of the actively managed Core Investment Options
based on target retirement dates are also available. Additional investment options include an SDA and the American Express Company Stock Fund. A participant may currently elect to invest contributions in any combination of investment options in
increments of 1% and change investment elections for future contributions on any business day the New York Stock Exchange is open. Participants are only able to allocate 10% of their future contributions to the American Express Company Stock Fund,
and transfers of balances from other investment options into the American Express Company Stock Fund are only permitted to the extent the participants investment in the American Express Company Stock Fund after the transfer does not exceed 10%
of the participants overall Plan balance. Special rules and restrictions may apply to the SDA.
A brief description
of the investment options available to participants at December 31, 2015, is set forth below:
Core Investment
Options
RSPIC has created five actively managed Core Investment Options to provide diversified and actively
managed options to participants. Four of these actively managed Core Investment Options (The Diversified Bond Fund, The U.S. Large-Cap Equity Fund, The U.S. Small/Mid-Cap Equity Fund, and The International Equity Fund) represent a broad asset class
(e.g., U.S. Large-Cap Equity, U.S. Small/Mid-Cap Equity, Bonds, etc.) using several active managers within each Fund. These actively managed Core Investment Options seek to outperform a broad market index by buying and selling a limited number of
investments (stocks, bonds, or other investments) using their investment management skills.
During the Plan year, RSPIC
replaced the PIMCO Total Return Bond Fund, a mutual fund, with J.P. Morgan Investment Management Inc., a separately managed account within the Diversified Bond Fund. The JPMorgan Core Bond strategy account holds fixed income securities directly,
including Corporate debt instruments and U.S. Government and agency obligations, among other investments. These investment classes are reported as such in the Statement of Net Assets beginning with the year ended December 31, 2015.
The actively managed Stable Value Fund invests in diversified pools of U.S. Government and agency fixed income securities
together with book value wrap agreements issued by creditworthy insurance companies or banks with the objective to protect a participants original investment while offering a competitive rate of interest with minimum risk.
The Stable Value Fund holds a portfolio of book value wrap contracts that are fully benefit-responsive and comprised of both an
investment and a contractual component. The investment component consists of units of common/collective trusts of fixed income strategies and a portfolio of actively managed fixed income securities, referred to as the Stable Value Fund assets.
Under the book value wrap contracts, the book value wrap provider is obligated to provide sufficient funds to cover participant benefit withdrawals and certain types of investment transfers regardless of the market value of the Stable Value
Fund assets. A portion of the Stable Value Fund assets are held in a separate account at MetLife as a condition for MetLife to provide their life insurance separate account contract, which provides similar participant benefit payments as a book
value wrap contract. The assets in the MetLife separate account are not subject to the liabilities of the general account of MetLife. While the contracts are designed to protect the Stable Value Fund against interest rate risk, the Stable Value Fund
is still exposed to risk if issuers of the Stable Value Fund assets default on payment of interest or principal, but this risk is mitigated because all Stable Value Fund assets are backed by the U.S. government. The contracts may not cover
participant benefit payments at contract value upon the occurrence of certain events, described below, involving the Stable Value Fund, American Express as its plan sponsor (its Plan Sponsor) or Ameriprise Trust Company, an affiliate of
Ameriprise Financial, Inc., its investment manager.
12
AMERICAN EXPRESS RETIREMENT SAVINGS PLAN
Notes to Financial Statements
Fully benefit-responsive book value wrap contracts held by a separately
managed account created for a defined contribution plan are now required to be reported at contract value, rather than fair value on the Statements of Net Assets. Contract value is the relevant measure for fully benefit-responsive investment
contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. Contract value represents contributions made under each contract, plus earnings, less participant
withdrawals, and administrative expenses.
Certain events might limit the ability of the Plan to transact at contract value
with the contract issuer and therefore also limit the ability of the Plan to transact at contract value with the participants of the Plan. These events may be different under each contract. Examples of such events include the following:
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The Plans failure to qualify under Section 401(a) of the Internal Revenue Code or the failure of
the trust to be tax-exempt under Section 501(a) of the Internal Revenue Code;
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Premature termination of the contracts;
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Plan termination or merger;
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Changes to the Plans administration of competing investment options; and
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Bankruptcy of the Plan Sponsor or other Plan Sponsor events (for example, divestitures or spinoffs of a
subsidiary) that significantly affect the Plans normal operations.
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The Plan believes no such
events are probable of occurring.
In addition, certain events allow the issuer to terminate the contracts with the Plan
and settle at an amount different from contract value. Those events may be different under each contract. Examples of such events include the following:
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An uncured violation of the Plans investment guidelines;
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A breach of material obligation under the contract;
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A material misrepresentation; and
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A material amendment to the agreements without the consent of the issuer.
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The Plan believes no such events are probable of occurring.
RSPIC has also created four passively-managed (index) Core Investment Options: The Diversified Bond Index Fund, The U.S.
Large-Cap Equity Index Fund, The U.S. Small/Mid-Cap Equity Index Fund, and The International Equity Index Fund, which currently use a single index fund as the underlying investment in each Fund. Each passively-managed Core Investment Option seeks to
mirror the investments and track the performance of a broad market index that includes hundreds or thousands of stocks or bonds.
Self-Directed Accounts
The SDA gives participants the opportunity to invest in a wide variety of mutual funds in addition to the specific investment
options mentioned above. Participants may request a Prospectus for any of the funds available through the SDA.
13
AMERICAN EXPRESS RETIREMENT SAVINGS PLAN
Notes to Financial Statements
American Express Company Stock Fund
The Plan Document requires that this Fund be offered as an investment option under the Plan, subject to compliance with ERISA.
The American Express Company Stock Fund is an ESOP. This Fund invests primarily in American Express Company common shares and holds a small amount of cash or other short-term cash equivalents to meet requests for investment transfers, withdrawals,
and distributions. Participants have full voting rights for the common shares underlying the units that are allocated to the American Express Company Stock Fund.
A full, detailed description of the Plans investment options, and associated terms and conditions, is available to all
participants.
5.
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Risks and Uncertainties
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The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate,
market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will continue to occur in the near term and that such changes
could materially affect the amounts reported in the Statements of Net Assets Available for Benefits and the Statement of Changes in Net Assets Available for Benefits.
On October 16, 2015, a putative class action, captioned
Houssain v. American Express Company, et al.
, was filed in
the United States District Court for the Southern District of New York under the Employee Retirement Income Security Act of 1974 (ERISA) relating to disclosures of the Costco cobrand relationship. On May 10, 2016, the plaintiff
filed an amended complaint naming certain officers of the Company as defendants and alleging that the defendants violated certain ERISA fiduciary obligations by, among other things, allowing the investment of the Plan assets in American Express
common stock when American Express common stock was not a prudent investment and misrepresenting and failing to disclose material facts to Plan participants in connection with the administration of the Plan. The amended complaint seeks, among
other remedies, an unspecified amount of damages. The defendants moved to dismiss the amended complaint on May 31, 2016.
The Plan has received a favorable determination letter from the Internal Revenue Service (the IRS) dated
May 16, 2014, stating that the Plan is qualified under section 401(a) of the Internal Revenue Code of 1986, as amended (the Code), and therefore, the related trust is exempt from taxation. The Plan has been amended in accordance
with proposed amendments submitted May 6, 2014 and adopted June 17, 2014, as detailed in the determination letter. Additionally, the Plan has been amended after the period covered by the determination letter. The Plan is required to
operate in conformity with the Code to maintain its qualification. The Company believes the Plan, as amended, is currently designed and being operated in compliance with the applicable requirements of the Code, and therefore, believes that the Plan,
as amended, is qualified, the related trust is tax-exempt, and the Plan satisfies the requirements of Section 4975(e)(7) of the Code.
GAAP requires plan management to evaluate tax positions taken by the Plan and recognize a tax liability or asset if the Plan
has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The Company has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2015, there are no uncertain
positions taken or expected to be taken that would require recognition of a liability, or asset, or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, the Plan is no longer subject to
examination for tax years prior to 2013, which is the earliest open year for U.S. federal tax purposes.
14
AMERICAN EXPRESS RETIREMENT SAVINGS PLAN
Notes to Financial Statements
7.
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Reconciliation of Financial Statements to Form 5500
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The following is a reconciliation of net assets available for benefits per the financial statements to Form 5500 as of
December 31, 2015 and 2014:
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(Thousands)
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2015
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2014
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Net assets available for benefits per the financial statements
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$
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4,485,917
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$
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4,818,564
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Plus: Difference between contract value and fair value of fully benefit-responsive investment
contracts
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1,061
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4,510
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Less: Loans deemed distributed
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(980
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)
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(950
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)
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Net assets available for benefits per the Form 5500
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$
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4,485,998
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$
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4,822,124
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The following is a reconciliation of net (loss) income per the financial statements to
Form 5500 for the year ended December 31, 2015:
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(Thousands)
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2015
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Net decrease in net assets available for benefits per the financial statements
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$
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(332,647
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)
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Change in deemed distributions of participant loans
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(30
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)
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Adjustment for difference between contract value and fair value of fully benefit- responsive
investment contracts
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(3,449
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)
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Net (loss) per the Form 5500
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$
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(336,126
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)
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8.
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Related Parties and Parties-In-Interest Transactions
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The Plan allows for transactions with, and certain investments in, certain parties that may perform services for, or have
fiduciary responsibilities to, the Plan, including Wells Fargo Bank, N.A., the Trustee, and its affiliates as well as investment managers appointed by RSPIC. Transactions with these parties are considered party-in-interest transactions, but not
considered prohibited transactions under ERISA. As noted in Supplemental Schedule H, Line 4i, the Plan held investments with parties-in-interest in Wells Fargo Bank, N.A., and its affiliates, Ameriprise Financial, Inc., and its affiliates, the
Vanguard Group, and Vanguard Fiduciary Trust as of both December 31, 2015 and 2014, and J.P. Morgan Investment Management, Inc. and its affiliates as of December 31, 2015. Notes Receivable from Participants, as discussed in Footnote
1, are also considered party-in-interest transactions.
Additionally, the Company is considered a party-in-interest as well
as a related party. As of December 31, 2015 and 2014, the Plan held 7,348,437 million shares of American Express Company common stock valued at $511 million and 8,114,933 million shares valued at $755 million, respectively. During the
2015 plan year the Plan acquired 108,427 shares of American Express Company common stock valued at $9 million through dividend reinvestments and sold 590,633 shares valued at $47 million.
15
SUPPLEMENTAL SCHEDULES
16
In 2015, the Company untimely remitted a contribution deducted from a participants paycheck. The Company remitted the
delinquent participant contribution to the Plan on December 9, 2015 and restored lost earnings on February 8, 2016.