Notes to Consolidated Financial Statements
NOTE 15 (2 OF 3)
During 2008, the decline in the fair value of pension assets increased the number of plans having accumulated benefit obligations in excess of plan assets as of December 31, 2008 compared to December 31, 2007.
Net Periodic Cost
The following table displays the details of net periodic pension and other postretirement costs:
(dollars in millions) |
||||||||||||||||||
|
Pension |
|
Health Care and Life |
|
||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Years Ended December 31, |
2008 |
|
2007 |
|
2006 |
|
2008 |
|
2007 |
|
2006 |
|
||||||
Service cost |
$ |
382 |
|
$ |
442 |
|
$ |
581 |
|
$ |
306 |
|
$ |
354 |
|
$ |
356 |
|
Interest cost |
|
1,966 |
|
|
1,975 |
|
|
1,995 |
|
|
1,663 |
|
|
1,592 |
|
|
1,499 |
|
Expected return on plan assets |
|
(3,187 |
) |
|
(3,175 |
) |
|
(3,173 |
) |
|
(321 |
) |
|
(317 |
) |
|
(328 |
) |
Amortization of prior service cost |
|
62 |
|
|
43 |
|
|
44 |
|
|
395 |
|
|
392 |
|
|
360 |
|
Actuarial loss, net |
|
40 |
|
|
98 |
|
|
182 |
|
|
222 |
|
|
316 |
|
|
290 |
|
Net periodic benefit (income) cost |
|
(737 |
) |
|
(617 |
) |
|
(371 |
) |
|
2,265 |
|
|
2,337 |
|
|
2,177 |
|
Termination benefits |
|
32 |
|
|
— |
|
|
47 |
|
|
7 |
|
|
— |
|
|
14 |
|
Settlement loss |
|
364 |
|
|
— |
|
|
56 |
|
|
— |
|
|
— |
|
|
— |
|
Curtailment loss and other, net |
|
— |
|
|
— |
|
|
— |
|
|
24 |
|
|
— |
|
|
— |
|
Subtotal |
|
396 |
|
|
— |
|
|
103 |
|
|
31 |
|
|
— |
|
|
14 |
|
Total (income) cost |
$ |
(341 |
) |
$ |
(617 |
) |
$ |
(268 |
) |
$ |
2,296 |
|
$ |
2,337 |
|
$ |
2,191 |
|
Other pretax changes in plan assets and benefit obligations recognized in other comprehensive (income) loss are as follows:
(dollars in millions) |
||||||||||||
|
Pension |
|
Health Care and Life |
|
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
At December 31, |
2008 |
|
2007 |
|
2008 |
|
2007 |
|
||||
Other changes in plan assets and benefit obligations |
||||||||||||
recognized in other comprehensive (income) |
||||||||||||
loss (pretax) |
||||||||||||
Actuarial (gain) loss, net |
$ |
13,686 |
|
$ |
(1,317 |
) |
$ |
1,030 |
|
$ |
(444 |
) |
Prior service cost |
|
293 |
|
|
– |
|
|
(6 |
) |
|
– |
|
Reversal of amortization items: |
||||||||||||
Prior service cost |
|
(62 |
) |
|
(43 |
) |
|
(395 |
) |
|
(392 |
) |
Actuarial loss, net |
|
(404 |
) |
|
(98 |
) |
|
(222 |
) |
|
(316 |
) |
Total recognized in other comprehensive (income) loss (pretax) |
$ |
13,513 |
|
$ |
(1,458 |
) |
$ |
407 |
|
$ |
(1,152 |
) |
The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from Accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year are $114 million and $112 million, respectively. The estimated net loss and prior service cost for the defined benefit postretirement plans that will be amortized from Accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year are $238 million and $401 million, respectively.
Additional Information
As a result of the adoption of SFAS No. 158 in 2006, we no longer record an additional minimum pension liability. In prior years, as a result of changes in interest rates and changes in investment returns, an adjustment to the additional minimum pension liability was required for a number of plans, as indicated below. The adjustment in the liability was recorded as a charge or (credit) to Accumulated other comprehensive loss, net of tax, in shareowners' investment in the consolidated balance sheets. The Additional Minimum Pension Liability at December 31, 2006, was reduced by $809 million, ($526 million after-tax) based on the final measurement just prior to the adoption of SFAS No. 158. The remaining $396 million, ($262 million after-tax), was reversed as a result of the adoption of SFAS No. 158.
(dollars in millions) |
|||||||||
Years Ended December 31, |
2008 |
|
2007 |
|
2006 |
|
|||
|---|---|---|---|---|---|---|---|---|---|
Decrease in minimum liability included in other |
|||||||||
comprehensive income, net of tax |
$ |
— |
|
$ |
— |
|
$ |
(526 |
) |
Assumptions
The weighted-average assumptions used in determining benefit obligations follow:
|
Pension |
|
Health Care and Life |
|
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
At December 31, |
2008 |
|
2007 |
|
2008 |
|
2007 |
|
||||
Discount rate |
|
6.75 |
% |
|
6.50 |
% |
|
6.75 |
% |
|
6.50 |
% |
Rate of compensation increases |
|
4.00 |
|
|
4.00 |
|
|
N/A |
|
|
4.00 |
|
The weighted-average assumptions used in determining net periodic cost follow:
|
Pension |
|
Health Care and Life |
|
||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Years Ended December 31, |
2008 |
|
2007 |
|
2006 |
|
2008 |
|
2007 |
|
2006 |
|
||||||
Discount rate |
|
6.50 |
% |
|
6.00 |
% |
|
5.75 |
% |
|
6.50 |
% |
|
6.00 |
% |
|
5.75 |
% |
Expected return on plan assets |
|
8.50 |
|
|
8.50 |
|
|
8.50 |
|
|
8.25 |
|
|
8.25 |
|
|
8.25 |
|
Rate of compensation increase |
|
4.00 |
|
|
4.00 |
|
|
4.00 |
|
|
4.00 |
|
|
4.00 |
|
|
4.00 |
|