American Express 2003 Annual Report Download - page 103

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The following table provides the amounts recognized on the Consolidated Balance Sheets as of December 31:
(Millions) 2003 2002
Accrued benefit liability $(218) $(429)
Prepaid benefit cost 570 400
Intangible asset 11
Minimum pension liability adjustment 23 76
Net amount recognized at December 31, $376 $48
The accumulated benefit obligation for all retirement plans as of September 30, 2003 and 2002 was $2.0 billion and $1.7 bil-
lion, respectively. The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pen-
sion plans with accumulated benefit obligations in excess of plan assets were $247 million, $222 million and $12 million,
respectively, as of December 31, 2003, and $1.2 billion, $1.1 billion and $0.7 billion, respectively, as of December 31, 2002.
In 2003, the Company made a $350 million contribution to the 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 to determine benefit obligations were:
2003 2002
Discount rates 5.7% 6.2%
Rates of increase in compensation levels 4.0% 4.0%
The weighted average assumptions used to determine net periodic benefit cost were:
2003 2002 2001
Discount rates 6.2% 7.0% 7.4%
Rates of increase in compensation levels 4.0% 4.2% 4.4%
Expected long-term rates of return on assets(a) 8.1% 9.3% 9.5%
(a) At the September 30, 2003 measurement date, the Company reduced the weighted average return on assets actuarial assumption to be used in calculating the 2004 expense to 7.9%.
For 2003, the Company assumed a long-term rate of return on assets of 8.1%. In developing the 8.1% expected long-term
rate assumption, management evaluated input from an external consulting firm, including their projection of asset class
return expectations, and long-term inflation assumptions. The Company also considered the historical returns on the
plan assets.
The asset allocation for the Company’s pension plans at September 30, 2003 and 2002, and the target allocation for 2004,
by asset category, are below. Actual allocations will generally be within 5 percent of these targets.
Target
Allocation Percentage of Plan assets at
2004 2003 2002
Equity securities 70% 66% 72%
Debt securities 26% 26% 22%
Real estate/Other 4% 8% 6%
Total 100% 100% 100%
(p.101_axp_ notes to consolidated financial statements)