GE 2009 Annual Report Download - page 91

Download and view the complete annual report

Please find page 91 of the 2009 GE annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 124

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124

GE 2009 ANNUAL REPORT 89
    
COST OF PRINCIPAL RETIREE BENEFIT PLANS
(In millions) 2009 2008 2007
Expected return on plan assets $ (129) $ (131) $ (125)
Service cost for benefits earned 442 326 286
Interest cost on benefit obligation 709 750 577
Prior service cost amortization (a) 836 673 603
Net actuarial gain amortization (a) (225) (49) (17)
Retiree benefit plans cost (a) $1,633 $1,569 $ 1,324
(a) In 2009, we recognized a $45 million loss as a result of our agreement with
Comcast Corporation to transfer the assets of the NBCU business to a newly
formed entity in which we will own a 49% interest. Prior service cost amortization
increased by $164 million and net actuarial gain amortization increased by
$119 million as a result of this agreement.
ACTUARIAL ASSUMPTIONS are described below. The discount rates
at December 31 measured the year-end benefit obligations and
the earnings effects for the subsequent year.
December 31 2009 2008 2007 2006
Discount rate 5.67% 6.15% 6.31% (a) 5.75%
Compensation increases 4.20 4.20 5.00 5.00
Expected return on assets 8.50 8.50 8.50 8.50
Initial healthcare trend rate (b) 7.40 7.00 (c) 9.10 9.20
(a) Weighted average discount rate of 6.34% was used for determination of costs in 2008.
(b) For 2009, ultimately declining to 6% for 2025 and thereafter.
(c) Includes benefits from new healthcare supplier contracts.
To determine the expected long-term rate of return on retiree life
plan assets, we consider current and expected asset allocations,
as well as historical and expected returns on various categories
of plan assets. In developing future return expectations for retiree
benefit plan assets, we evaluate general market trends as well as
key elements of asset class returns such as expected earnings
growth, yields and spreads across a number of potential scenarios.
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. We fund retiree health benefits on a pay-as-you-
go basis. We expect to contribute approximately $710 million in
2010 to fund such benefits. We fund retiree life insurance benefits
at our discretion.
Changes in the accumulated postretirement benefit obligation
for retiree benefit plans follow.
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION (APBO)
(In millions) 2009 2008
Balance at January 1 $11,949 $12,983
Service cost for benefits earned 442 326
Interest cost on benefit obligation 709 750
Participant contributions 50 51
Plan amendments (37) —
Actuarial loss (gain) (a) (b) 504 (1,351)
Benefits paid (c) (842) (811)
Other —1
Balance at December 31 (d) $12,775 $11,949
(a) For 2009, included a $152 million reduction in APBO as a result of our agreement
with Comcast Corporation to transfer the assets of the NBCU business to a newly
formed entity in which we will own a 49% interest.
(b) For 2008, primarily related to benefits from new healthcare supplier contracts.
(c) Net of Medicare Part D subsidy of $83 million in 2009 and 2008.
(d) The APBO for the retiree health plans was $10,481 million and $9,749 million at
year-end 2009 and 2008, respectively.
A one percentage point change in the assumed healthcare cost
trend rate would have the following effects.
(In millions) 1% increase 1% decrease
APBO at December 31, 2009 $1,081 $(921)
Service and interest cost in 2009 89 (76)
PLAN ASSETS
The fair value of the major categories of retiree benefit plans’
investments are presented below. The inputs and valuation
techniques used to measure the fair value of assets are consis-
tently applied and described in Note 1.
FAIR VALUE OF PLAN ASSETS
(In millions) 2009 2008
Balance at January 1 $1,175 $1,804
Actual gain (loss) on plan assets 111 (486)
Employer contributions 644 617
Participant contributions 50 51
Benefits paid (a) (842) (811)
Balance at December 31 $1,138 $1,175
(a) Net of Medicare Part D subsidy.
ASSET ALLOCATION
December 31
2009
Target
allocation
Equity securities 37–77% (a)
Debt securities (including cash equivalents) 11–41
Private equities 3–13
Real estate 2–12
Other 0–10
(a) Target allocations were 19–39% for U.S. equity securities and 18–38% for non-U.S.
equity securities.