American Express 2003 Annual Report Download - page 104

The Company invests in a diversified portfolio to ensure that adverse or unexpected results from a security class will not
have a detrimental impact on the entire portfolio. Diversification is interpreted to include diversification by asset type, per-
formance and risk characteristics and number of investments. Asset classes and ranges considered appropriate for invest-
ment of the plans assets are determined by each plan’s investment committee. The asset classes include U.S. and non-U.S.
equities, emerging market equities, U.S. and non-U.S. investment grade and high-yield bonds and real estate.
The Company’s retirement plans expect to make benefit payments to retirees as follows (millions): 2004, $135; 2005, $139;
2006, $145; 2007, $151; 2008, $156; and 2009 – 2013, $890. In addition, the Company expects to contribute $58 million
to its pension plans in 2004.
The Company sponsors defined contribution retirement plans, the principal plan being a 401(k) savings plan with a profit
sharing and stock bonus plan feature which covers most employees in the United States. The defined contribution plan
expense was $145 million, $131 million and $86 million in 2003, 2002 and 2001, respectively.
Other Postretirement Benefits
The Company sponsors postretirement benefit plans that provide health care, life insurance and other postretirement ben-
efits to retired U.S. employees. Net periodic postretirement benefit expenses were $42 million, $38 million and $25 million
in 2003, 2002 and 2001, respectively. The liabilities recognized on the Consolidated Balance Sheets for the Company’s
defined postretirement benefit plans (other than pension plans) at December 31, 2003 and 2002 were $234 million and
$223 million, respectively.
On December 8, 2003, the Medicare Drug, Improvement and Modernization Act of 2003 (the “Act”) was signed into law
which expands Medicare to include an outpatient drug benefit beginning in 2006. The Act’s Prescription Drug subsidy pro-
vided to plan sponsors will likely result in a financial benefit to the Company. The bill was signed into law subsequent to
the Company’s measurement valuation date of September 30, 2003; therefore, the expense and liability amounts shown in
this disclosure do not reflect the potential effect of this Act. The Company is currently evaluating the impacts of the Act on
its postretirement health care plan.
(Note 16) INCOME TAXES
The provisions (benefits) for income taxes were as follows:
(Millions) 2003 2002 2001
Federal $844 $725 $ (36)
State and local 142 81 59
Foreign 261 250 262
Total $1,247 $1,056 $ 285
Accumulated net earnings of certain foreign subsidiaries, which totaled $2.9 billion at December 31, 2003, are intended to
be permanently reinvested outside the United States. Accordingly, federal taxes, which would have aggregated $450 mil-
lion, have not been provided on those earnings.
The current and deferred components of the provision (benefit) for income taxes were as follows:
(Millions) 2003 2002 2001
Current $860 $903 $ 765
Deferred 387 153 (480)
Total $1,247 $1,056 $ 285
(p.102_axp_ notes to consolidated financial statements)