American Express 2007 Annual Report Download - page 107

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN EXPRESS COMPANY
the Company amended the RSP effective July 1, 2007. These
amendments include an expanded definition of pay which
includes more elements of employee compensation (total pay)
as well as an increase in the Company’s matching of employees’
contributions to the plan from a maximum of 3 percent of base
pay to a maximum of 5 percent of total pay. Additional annual
conversion contributions of up to 8 percent of total pay will be
provided into the RSP in the future for eligible employees who
were hired before April 1, 2007. The Company also sponsors
an unfunded non-qualified Supplemental Retirement Plan (the
SRP-RSP) which was also amended during 2007, and its terms
generally parallel those of the RSP.
In 2006, as part of the amendment to the U.K. pension plan,
the Company established a defined contribution plan. As a
result, expense and contributions related to defined contribution
plans have increased in the current year as compared to previous
periods.
The total expense for all defined contribution plans globally
was $173 million, $106 million, and $109 million in 2007,
2006, and 2005, respectively.
OTHER POSTRETIREMENT BENEFITS PLANS
The Company sponsors unfunded defined postretirement
benefit plans that provide health care and life insurance to
certain retired U.S. employees.
Accumulated Other Comprehensive Loss
Upon implementation of SFAS No. 158 at December 31, 2006,
the Company recorded additional liabilities of $140 million in
other liabilities and an $86 million charge to shareholders’ equity,
net of a deferred income tax benefit of $54 million, related to
its other postretirement benefit plans which resulted in the net
funded status of the Company’s plan being recorded.
The following table provides the items comprising the
amount in accumulated other comprehensive loss which are
not yet recognized as a component of net periodic benefit cost
as of December 31:
(Millions) 2007 2006 (a)
Net actuarial loss $ 66 $146
Net prior service cost (4) (6)
Total, pretax effect 62 140
Tax impact (25) (54)
Total, net of taxes $ 37 $ 86
(a) 2006 includes the $86 million charge to shareholders’ equity as a result of the
adoption of SFAS No. 158.
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 2008 is $4 million
and $(2) million, respectively.
The following table details the amounts recognized in other
comprehensive loss in 2007:
(Millions) 2007
Net actuarial loss:
Reclassified to earnings from equity $ (8)
Gains in current year (72)
Net actuarial loss (80)
Net prior service cost:
Reclassified to earnings from equity 2
Net prior service cost 2
Total, pretax $(78)
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) 2007 2006
Projected benefit obligation, October 1
prior year $376 $388
Service cost 67
Interest cost 19 20
Benefits paid (23) (22)
Actuarial gain (66) (17)
Projected benefit obligation at
September 30, $312 $376
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:
Reconciliation of Accrued Benefit Cost and Total Amount
Recognized
(Millions) 2007 2006
Funded status of the plan $(312) $(376)
Fourth quarter payments 57
Net amount recognized at
December 31, $(307) $(369)
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).
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