American Express 2006 Annual Report Download - page 106

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[ 104 ]
notes to consolidated fi nancial statements
american express company
Accumulated Other Comprehensive Loss
The following table provides the items comprising the
amount in accumulated other comprehensive loss as of
December 31:
(Millions) 2006
Net actuarial loss $ 146
Net prior service credit (6)
Tota l , preta x effect 140
Tax impact (54)
Total, net of taxes $86
The estimated portion of the net actuarial loss and
net prior service credit above that is expected to be
recognized as a component of net periodic benefit cost
in 2007 is $13 million and $(2) million, respectively.
Plan Obligations
The following table provides a reconciliation of the
changes in the plans’ projected benefit obligation for all
plans accounted for under SFAS No. 106, “Employers’
Accounting for Postretirement Benefits Other Than
Pensions” (SFAS No. 106):
Reconciliation of Change in Projected
Benefit Obligation
(Millions) 2006 2005
Projected benefit obligation,
October 1 prior year $ 388 $ 357
Service cost 76
Interest cost 21 20
Benefits paid (28) (25)
Actuarial (gain) loss (12) 30
Projected benefit obligation at
September 30, $ 376 $ 388
The liabilities for the Company’s defined postretirement
benefit plans recognized in the Consolidated Balance
Sheets as of December 31 are included in the table below.
As noted previously, due to the adoption of SFAS No.
158 as of December 31, 2006, the funded status of $376
million, less fourth quarter contributions of $7 million,
is reflected in the December 31, 2006 Consolidated
Balance Sheet.
Reconciliation of Accrued Benefit Cost and Total
Amount Recognized
(Millions) 2006 2005
Funded status of the plan $(376) $(388)
Unrecognized prior service cost —(8)
Unrecognized net actuarial loss —172
Fourth quarter payments 76
Net amount recognized at December 31, $(369) $(218)
Net Periodic Benefit Cost
SFAS No. 106 provides for the delayed recognition of
the net actuarial loss and the net prior service credit
remaining in accumulated other comprehensive income
(loss).
The components of the net periodic benefit cost for
all defined postretirement benefit plans accounted for
under SFAS No. 106, are as follows:
(Millions) 2006 2005 2004
Service cost $7 $6 $6
Interest cost 21 20 20
Amortization of:
Prior service costs (2) (2) (2)
Recognized net actuarial loss 14 12 11
Net periodic benefit cost $40 $36 $35
Assumptions
The weighted average assumptions used to determine
benefit obligations were:
2006 2005
Discount rates 5.7% 5.4%
Health care cost increase rate:
Following year 9.5% 10.0%
Decreasing to the year 2016 5% 5%
A one percentage-point change in assumed health care
cost trend rates would have the following effects:
One
percentage-
point
increase
One
percentage-
point
decrease
(Millions) 2006 2005 2006 2005
Increase (Decrease) on benefits
earned and interest cost for
U.S. plans $1 $1 $ (1) $ (1 )
Increase (Decrease) on
postretirement benefit
obligation for U.S. plans $19 $20 $(17) $(18)
Benefit Payments
The Company’s other postretirement benefit plans
expect to make benefit payments as follows:
(Millions) 2007 2008 2009 2010 2011
2012-
2016
Expected payments $28 $28 $29 $29 $29 $157
In addition, the Company expects to contribute $28
million to its other postretirement benefit plans
in 2007.