American Express 2012 Annual Report Download - page 103

AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accumulated Other Comprehensive Loss
The following table provides the amounts comprising
accumulated other comprehensive loss, which are not yet
recognized as components of net periodic pension benefit cost as
of December 31:
(Millions) 2012 2011
Net actuarial loss $ 712 $ 690
Net prior service credit (11) (2)
Total, pretax effect 701 688
Tax impact (233) (229)
Total, net of taxes $ 468 $ 459
The estimated portion of the net actuarial loss and net prior
service credit that is expected to be recognized as a component of
net periodic pension benefit cost in 2013 is $73 million and $1
million, respectively.
The following table lists the amounts recognized in other
comprehensive loss in 2012:
(Millions) 2012
Net actuarial loss:
Reclassified to earnings from equity(a) $ (80)
Losses in current year(b) 102
Net actuarial loss, pretax 22
Net prior service credit:
Reclassified to earnings from equity 1
Gains in current year (10)
Net prior service credit, pretax (9)
Total, pretax $13
(a) Amortization of actuarial losses and recognition of losses related to lump
sum settlements.
(b) Deferral of actuarial losses.
Benefit Obligations
The accumulated benefit obligation in a defined benefit pension
plan is the present value of benefits earned to date by plan
participants computed based on current compensation levels as
contrasted to the projected benefit obligation, which is the
present value of benefits earned to date by plan participants
based on their expected future compensation at their projected
retirement date.
The accumulated and projected benefit obligations for all
defined benefit pension plans as of December 31 were as follows:
(Millions) 2012 2011
Accumulated benefit obligation $ 2,718 $ 2,459
Projected benefit obligation $ 2,795 $ 2,512
The accumulated benefit obligation and fair value of plan assets
for pension plans with an accumulated benefit obligation that
exceeds the fair value of plan assets were as follows:
(Millions) 2012 2011
Accumulated benefit obligation $ 2,635 $ 2,418
Fair value of plan assets $ 2,222 $ 2,028
The amounts disclosed in the table above will vary year to year
based on whether plans meet the disclosure requirement.
The projected benefit obligation and fair value of plan assets for
pension plans with projected benefit obligation that exceeds the
fair value of plan assets as of December 31 were as follows:
(Millions) 2012 2011
Projected benefit obligation $ 2,795 $ 2,512
Fair value of plan assets $ 2,309 $ 2,069
Net Periodic Pension Benefit Cost
The components of the net periodic pension benefit cost for all
defined benefit pension plans for the years ended December 31
were as follows:
(Millions) 2012 2011 2010
Service cost $19$22$19
Interest cost 115 126 126
Expected return on plan assets (139) (148) (145)
Amortization of prior service credit (1) —(1)
Recognized net actuarial loss 66 36 23
Settlements losses 14 15 18
Net periodic pension benefit cost $74$51$40
Assumptions
The weighted-average assumptions used to determine defined
benefit pension obligations as of December 31 were as follows:
2012 2011
Discount rates 3.8% 4.7%
Rates of increase in compensation levels 3.6% 3.7%
The weighted-average assumptions used to determine net
periodic pension benefit costs as of December 31 were as follows:
2012 2011 2010
Discount rates 4.6% 5.0% 5.3%
Rates of increase in compensation levels 3.7% 4.0% 3.6%
Expected long-term rates of return on
assets 6.7% 6.9% 6.9%
The Company assumes a long-term rate of return on assets on a
weighted-average basis. In developing this assumption,
management considers expected and historical returns over 5 to
15 years based on the mix of assets in its plans.
101