American Express 2004 Annual Report Download - page 115

Download and view the complete annual report

Please find page 115 of the 2004 American Express annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 128

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128

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 per-
cent 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 following tables provide a reconciliation of the
changes in the plans’ benefit obligation and fair value
of assets for all plans accounted for under SFAS No. 87:
RECONCILIATION OF CHANGE IN BENEFIT OBLIGATION
(Millions) 2004 2003
Benefit obligation, October 1
prior year $ 2,133 $ 1,845
Service cost 136 115
Interest cost 128 118
Benefits paid (57) (53)
Actuarial loss 102 72
Plan amendments
(a)
(3) 25
Settlements/curtailments (63) (77)
Foreign currency exchange
rate changes 76 88
Benefit obligation at September 30, $ 2,452 $ 2,133
(a) The plan amendment in 2004 reduced the future benefit accruals under
the Plan for employees supporting U.S. Business Travel effective January 1,
2005. In 2003 a cost of living adjustment was provided to certain retired
participants of the Plan.
RECONCILIATION OF CHANGE IN FAIR VALUE OF PLAN ASSETS
(Millions) 2004 2003
Fair value of plan assets, October 1
prior year $ 1,944 $ 1,352
Actual return on plan assets 246 241
Employer contributions 62 398
Benefits paid (57) (53)
Settlements (63) (75)
Foreign currency exchange
rate changes 74 81
Fair value of plan assets
at September 30, $ 2,206 $ 1,944
The Company complies with the minimum funding
requirements in all countries. The following table rec-
onciles the plans’ funded status (benefit obligation less
fair value of plan assets) to the amounts recognized on
the Consolidated Balance Sheets:
FUNDED STATUS
(Millions) 2004 2003
Funded status at September 30, $ (246) $ (189)
Unrecognized net actuarial loss 583 553
Unrecognized prior service cost 74
Unrecognized net transition
obligation 11
Fourth quarter contributions 57
Net amount recognized at
December 31, $ 350 $ 376
The following table provides the amounts recognized
on the Consolidated Balance Sheets as of December 31:
(Millions) 2004 2003
Accrued benefit liability $ (236) $ (218)
Prepaid benefit cost 562 570
Intangible asset —1
Minimum pension liability
adjustment 24 23
Net amount recognized at
December 31, $ 350 $ 376
The accumulated benefit obligation for all retirement
plans as of December 31, 2004 and 2003 was $2.3 bil-
lion and $2.0 billion, respectively.
The projected benefit obligation and fair value of
plan assets for pension plans with projected benefit
obligations that exceed the fair value of plan assets are
as follows:
(Millions) 2004 2003
Projected benefit obligation $ 1,522 $ 1,480
Fair value of plan assets $ 1,240 $ 1,205
The accumulated benefit obligation and fair value of
plan assets for pension plans, primarily unfunded
plans, with accumulated benefit obligations that
exceed the fair value of plan assets are as follows:
(Millions) 2004 2003
Accumulated benefit obligation $ 243 $ 222
Fair value of plan assets $15 $12
The weighted average assumptions used to determine
benefit obligations were:
2004 2003
Discount rates 5.6% 5.7%
Rates of increase in compensation
levels 4.1% 4.0%
AXP
AR.04
113
Notes to Consolidated Financial Statements