GE 2010 Annual Report Download - page 101

GE 2010 ANNUAL REPORT 99
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COST OF PRINCIPAL RETIREE BENEFIT PLANS
(In millions) 2010 2009 2008
Service cost for benefits earned $ 241 $ 442 $ 326
Prior service cost amortization
(a) 631 836 673
Expected return on plan assets (116) (129) (131)
Interest cost on benefit obligations 699 709 750
Net actuarial gain amortization
(a) (22) (225) (49)
Retiree benefit plans cost
(a) $1,433 $1,633 $1,569
(a) In 2009, we recognized a $45 million loss as a result of our agreement with
Comcast Corporation to transfer 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 actuarial
assumptions at December 31 are used to measure the year-end
benefit obligations and the retiree benefit plan costs for the
subsequent year.
December 31 2010 2009 2008 2007
Discount rate 5.15 % 5.67 % 6.15 % 6.31
Compensation increases 4.25 4.20 4.20 5.00
Expected return on assets 8.00 8.50 8.50 8.50
Initial healthcare trend rate
(b) 7.00 7.40 7.00 (c) 9.10
(a) Weighted average discount rate of 6.34% was used for determination of costs
in 2008.
(b) For 2010, 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. Based on our analysis of future
expectations of asset performance, past return results, and our
current and expected asset allocations, we have assumed an
8.0% long-term expected return on those assets for cost recogni-
tion in 2011. This is a reduction from the 8.5% we had assumed in
2010, 2009 and 2008. 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 $660 million
in 2011 to fund such benefits. We fund retiree life insurance
benefits at our discretion.
% (a)
PENSION ASSET (LIABILITY)
Principal pension plans Other pension plans
December 31 (In millions) 2010 2009 2010 2009
Funded status
(a)(b) $ (7,198) $ (6,020) $(2,104) $(2,678)
Pension asset (liability)
recorded in the Statement
of Financial Position
Pension asset $ — $ — $ 202 $ 98
Pension liabilities
Due within one year
(c) (141) (133) (52) (54)
Due after one year (7,057) (5,887) (2,254) (2,722)
Net amount recognized $ (7,198) $ (6,020) $(2,104) $(2,678)
Amounts recorded in
shareowners’ equity
(unamortized)
Prior service cost $ 1,075 $ 1,313 $ 72 $ 61
Net actuarial loss 18,603 18,076 1,772 2,230
Total $19,678 $19,389 $ 1,844 $ 2,291
(a) Fair value of assets less PBO, as shown in the preceding tables.
(b) The GE Pension Plan was underfunded by $2.8 billion and $2.2 billion at
December 31, 2010 and 2009, respectively.
(c) For principal pension plans, represents the GE Supplementary Pension Plan liability.
In 2011, we estimate that we will amortize $195 million of prior
service cost and $2,285 million of net actuarial loss for the principal
pension plans from shareowners’ equity into pension cost. For
other pension plans, the estimated prior service cost and net actu-
arial loss to be amortized in 2011 will be $15 million and $135 million,
respectively. Comparable amortized amounts in 2010, respectively,
were $238 million and $1,336 million for the principal pension plans
and $14 million and $210 million for other pension plans.
ESTIMATED FUTURE BENEFIT PAYMENTS
2016–
(In millions) 2011 2012 2013 2014 2015 2020
Principal pension
plans $2,960 $2,990 $3,025 $3,075 $3,075 $16,800
Other pension
plans $ 395 $ 410 $ 415 $ 425 $ 435 $ 2,340
Retiree Health and Life Benefits
We sponsor a number of retiree health and life insurance benefit
plans (retiree benefit plans). Principal retiree benefit plans are
discussed below; other such plans are not significant individually
or in the aggregate. We use a December 31 measurement date for
our plans.
PRINCIPAL RETIREE BENEFIT PLANS provide health and life insurance
benefits to certain employees who retire under the GE Pension Plan
with 10 or more years of service. Eligible retirees share in the cost
of healthcare benefits. These plans cover approximately 216,000
retirees and dependents.