American Airlines 2010 Annual Report Download - page 87

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84
10. Retirement Benefits (Continued)
2010
2009
Assumed health care trend rates at
December 31
Health care cost trend rate assumed for
next year
8.0%
7.0%
Rate to which the cost trend rate is
assumed to decline (the ultimate
trend rate)
4.5%
4.5%
Year that the rate reaches the ultimate
trend rate
2018
2015
A one percentage point change in the assumed health care cost trend rates would have the following effects (in
millions):
One Percent
Increase
One Percent
Decrease
Impact on 2010 service and interest cost
22
(22)
Impact on postretirement benefit obligation
as of December 31, 2010
235
(231)
The Company is required to make minimum contributions to its defined benefit pension plans under the minimum
funding requirements of ERISA, the Pension Funding Equity Act of 2004 and the Pension Protection Act of 2006.
The Company estimates its 2011 required contribution to its defined benefit pension plans to be approximately
$520 million under the provisions of these acts which reflects the Preservation of Access to Care for Medical
Beneficiaries and Pension Relief Act of 2010 (the Relief Act), H.R. 3962. The Relief Act provides for temporary,
targeted funding relief (subject to certain terms and conditions) for single employer and multiemployer pension
plans that suffered significant losses in asset value due to the steep market slide in 2008. Under the Relief Act,
the Company’s 2010 minimum required contribution to its defined benefit pension plans was reduced from $525
million to approximately $460 million
The following benefit payments, which reflect expected future service as appropriate, are expected to be paid:
Pension
Retiree Medical
and Other
2011
574
173
2012
602
170
2013
665
169
2014
729
170
2015
785
173
2016 – 2020
4,959
989
During 2008, AMR recorded a settlement charge totaling $103 million related to lump sum distributions from the
Company’s defined benefit pension plans to pilots who retired. Pursuant to U.S. GAAP, the use of settlement
accounting is required if, for a given year, the cost of all settlements exceeds, or is expected to exceed, the sum
of the service cost and interest cost components of net periodic pension expense for a plan. Under settlement
accounting, unrecognized plan gains or losses must be recognized immediately in proportion to the percentage
reduction of the plan's projected benefit obligation.