American Express 2002 Annual Report Download - page 80

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I78 AXP INOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table provides the amounts recognized on the Consolidated Balance Sheets as of December 31:
(Millions) 2002 2001
Accrued benefit liability $ (429) $ (359)
Prepaid benefit cost 400 17
Intangible asset 11
Minimum pension liability adjustment 76 159
Net amount recognized at December 31, $48 $ (182)
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with accu-
mulated benefit obligations in excess of plan assets were $1,222 million, $1,149 million and $726 million, respectively, as of
December 31, 2002, and $612 million, $553 million and $326 million, respectively, as of December 31, 2001. As a result of a
significant decrease in the fair value of plan assets in the company’s U.S. and certain non-U.S. pension plans, more plans had an
accumulated benefit obligation that exceeded the fair value of the plan assets. In 2002, the company made a $289 million
contribution to the United Kingdom pension plan such that at the measurement date the fair market value of the plan assets
exceeded the accumulated benefit obligation.
The prior service costs are amortized on a straight-line basis over the average remaining service period of active participants.
Gains and losses in excess of 10 percent of the greater of the benefit obligation and the market-related value of assets are
amortized over the average remaining service period of active participants.
The weighted average assumptions used in the accounting for the company’s defined benefit plans were:
2002 2001
Discount rates 6.2% 7.0%
Rates of increase in compensation levels 4.0% 4.2%
Expected long-term rates of return on assets(a) 9.3% 9.5%
(a) At the September 30, 2002 measurement date, the company reduced the weighted average return on assets actuarial assumption to be used in calculating the 2003 pension expense to 8.1%.
The company also has a defined contribution retirement plan (a 401(k) savings plan with a profit sharing and stock bonus plan
feature) covering most employees in the United States. The defined contribution plan expense was $121 million, $76 million
and $151 million in 2002, 2001 and 2000, respectively.
Other Postretirement Benefits
The company sponsors postretirement benefit plans that provide health care, life insurance and other postretirement benefits to
retired U.S. employees. Net periodic postretirement benefit expenses were $38 million, $25 million and $26 million in 2002,
2001 and 2000, respectively. The liabilities recognized on the Consolidated Balance Sheets for the company’s defined postretire-
ment benefit plans (other than pension plans) at December 31, 2002 and 2001 were $223 million and $212 million, respectively.
Note 16 INCOME TAXES
The provisions (benefits) for income taxes were as follows:
(Millions) 2002 2001 2000
Federal $ 725 $ (36) $ 748
State and local 81 59 76
Foreign 250 262 274
Total $ 1,056 $ 285 $ 1,098
Accumulated net earnings of certain foreign subsidiaries, which totaled $2.4 billion at December 31, 2002, are intended to be
permanently reinvested outside the United States. Accordingly, federal taxes, which would have aggregated $332 million, have
not been provided on those earnings.