Avon 2000 Annual Report Download - page 34

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At December 31, 2000 and 1999, the weighted-
average discount rate used in determining the pension
benefit obligation was 7.1%. At December 31, 2000 and
1999, the weighted-average discount rates used in deter-
mining the postretirement benefit obligation were 7.8%
and 8.0%, respectively.
The projected benefit obligation, accumulated ben-
efit obligation and fair value of plan assets for pension and
64
Pension Benefits Postretirement Benefits
2000 1999 1998 2000 1999 1998
Service cost $ 36.5 $ 38.1 $ 35.4 $1.9 $3.6 $3.3
Interest cost 65.6 67.6 64.5 11.2 13.4 13.0
Expected return on plan assets (66.6) (69.6) (64.0) ———
Amortization of transition liability (.7) (.7) (6.8) ———
Amortization of prior service cost 1.0 .8 (.4) ———
Amortization of actuarial losses (gains) 5.6 10.2 12.3 (3.8) (.4) —
Settlements or curtailments (1.2) 2.0 — ———
Special termination benefits 2.5 1.5 — ———
Other (.9) —.3 ———
Net periodic benefit cost $ 41.8 $ 49.9 $ 41.3 $9.3 $16.6 $16.3
The weighted-average assumptions used to determine the data for the years ended December 31 are as follows:
Pension Benefits Postretirement Benefits
2000 1999 1998 2000 1999 1998
Discount rate 7.2% 6.8% 7.1% 8.0% 7.0% 7.2%
Rate of compensation increase 4.0 4.0 4.0 4.5 4.5 4.5
Rate of return on assets 8.8 8.8 9.2 n/a n/a n/a
postretirement benefit plans with accumulated bene-
fit obligations in excess of plan assets were $390.3,
$349.0, and $40.1, respectively, as of December 31,
2000, and $428.8, $381.4, and $39.4, respectively, as
of December 31, 1999.
Net periodic benefit cost for the years ended
December 31 was determined as follows:
For 2000, the assumed rate of future increases in
the per capita cost of health care benefits (the health care
cost trend rate) was 6.8% for pre-65 claims (6.4% for
post-65 claims) and will gradually decrease each year
thereafter to 5.0% in 2005 and beyond. The healthcare
cost trend rate assumption has a significant effect on the
amounts reported. A one-percentage point change in the
assumed health care cost trend rates would have the fol-
lowing effects:
1Percentage 1Percentage
(In millions) Point Increase Point Decrease
Effect on total of service
and interest cost
components $1.8 $1.4
Effect on postretirement
benefit obligation 17.6 14.5