GE 2007 Annual Report Download - page 81

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ge 2007 annual report 79
To determine the expected long-term rate of return on pension
plan assets, we consider the current and expected asset alloca-
tions, as well as historical and expected returns on various
categories of plan assets. For the principal pension plans, we
apply our expected rate of return to a market-related value of
assets, which stabilizes variability in the amounts to which we
apply that expected return.
We amortize experience gains and losses as well as the effects
of changes in actuarial assumptions and plan provisions over a
period no longer than the average future service of employees.
FUNDING POLICY for the GE Pension Plan is to contribute
amounts suffi cient to meet minimum funding requirements as
set forth in employee benefi t and tax laws plus such additional
amounts as we may determine to be appropriate. We have not
made contributions to the GE Pension Plan since 1987 and will
not make any such contributions in 2008. In 2008, we expect to
pay approximately $150 million for benefi t payments under our
GE Supplementary Pension Plan and administrative expenses of
our principal pension plans and expect to contribute approxi-
mately $505 million to other pension plans. In 2007, comparative
amounts were $136 million and $730 million, respectively.
BENEFIT OBLIGATIONS are described in the following tables.
Accumulated and projected benefi t obligations (ABO and PBO)
represent the obligations of a pension plan for past service as
of the measurement date. ABO is the present value of benefi ts
earned to date with benefi ts computed based on current com-
pensation levels. PBO is ABO increased to refl ect expected
future compensation.
PROJECTED BENEFIT OBLIGATION
Principal pension plans Other pension plans
(In millions) 2007 2006 2007 2006
Balance at January 1 $43,293 $43,331 $9,034 $8,097
Service cost for benefi ts
earned 1,355 1,402 372 317
Interest cost on benefi t
obligations 2,416 2,304 469 381
Participant contributions 173 162 43 37
Plan amendments 1,470 80 26 (18)
Actuarial loss (gain) (a) (3,205) (1,514) (665) 27
Benefi ts paid (2,555) (2,472) (370) (287)
Acquisitions
(dispositions) — net — — (311) (40)
Exchange rate adjustments — — 416 520
Balance at December 31 (b)
$42,947 $43,293 $9,014 $9,034
(a) Principally associated with discount rate changes.
(b) The PBO for the GE Supplementary Pension Plan was $3,437 million and
$3,554 million at year-end 2007 and 2006, respectively.
ACCUMULATED BENEFIT OBLIGATION
December 31 (In millions) 2007 2006
GE Pension Plan $38,155 $38,137
GE Supplementary Pension Plan 2,292 2,314
Other pension plans 8,175 8,053
PLANS WITH ASSETS LESS THAN ABO
December 31 (In millions) 2007 2006
Funded plans with assets less than ABO
Plan assets $3,639 $4,833
Accumulated benefi t obligations 3,974 5,828
Projected benefi t obligations 4,595 6,667
Unfunded plans (a)
Accumulated benefi t obligations 3,111 3,052
Projected benefi t obligations 4,283 4,310
(a) Primarily related to the GE Supplementary Pension Plan.
FAIR VALUE OF PLAN ASSETS
Principal pension plans Other pension plans
(In millions) 2007 2006 2007 2006
Balance at January 1 $54,758 $49,096 $6,435 $5,213
Actual gain on plan assets 7,188 7,851 614 679
Employer contributions 136 121 730 451
Participant contributions 173 162 43 37
Benefi ts paid (2,555) (2,472) (370) (287)
Acquisitions
(dispositions) — net — — (372) 2
Exchange rate adjustments — — 331 340
Balance at December 31
$59,700 $54,758 $7,411 $6,435
PLAN ASSET ALLOCATION
Principal pension plans
2007 2006
Target Actual Actual
December 31 allocation allocation allocation
U.S. equity securities 30 – 45% 32% 38%
Non-U.S. equity securities 15 – 25 20 21
Debt securities 15 – 32 24 22
Real estate 4 – 10 9 5
Private equities 5 – 11 9 7
Other 1 – 10 6 7
Plan fi duciaries of the GE Pension Plan set investment policies and
strategies for the GE Pension Trust and oversee its investment
allocation, which includes selecting investment managers, com-
missioning periodic asset-liability studies and setting long-term
strategic targets. Long-term strategic investment objectives include
preserving the funded status of the plan and balancing risk and
return. Target allocation ranges are guidelines, not limitations,
and occasionally plan fi duciaries will approve allocations above
or below a target range.
GE Pension Trust assets are invested subject to the following
additional guidelines:
• Short-term securities must generally be rated A1/P1 or better,
except for 15% of such securities that may be rated A2/P2.