GE 2011 Annual Report Download - page 104

102 GE 2011 ANNUAL REPORT
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COST OF PENSION PLANS
Total Principal pension plans Other pension plans
(In millions) 2011 2010 2009 2011 2010 2009 2011 2010 2009
Service cost for benefits earned $ 1,498 $ 1,426 $ 1,906 $ 1,195 $ 1,149 $ 1,609 $ 303 $ 277 $ 297
Prior service cost amortization 207 252 437 194 238 426 (a) 13 14 11
Expected return on plan assets (4,543) (4,857) (4,943) (3,940) (4,344) (4,505) (603) (513) (438)
Interest cost on benefit obligations 3,176 3,179 3,129 2,662 2,693 2,669 514 486 460
Net actuarial loss amortization 2,486 1,546 482 2,335 1,336 348 151 210 134
Pension plans cost $ 2,824 $ 1,546 $ 1,011 $ 2,446 $ 1,072 $ 547 $ 378 $ 474 $ 464
(a) In 2009, included a $103 million loss as a result of our agreement with Comcast Corporation to transfer the NBCU business to a newly formed entity in which we own a
49% interest.
ACTUARIAL ASSUMPTIONS are described below. The actuarial assumptions at December 31 are used to measure the year-end benefi t
obligations and the pension costs for the subsequent year.
Principal pension plans Other pension plans (weighted average)
December 31 2011 2010 2009 2008 2011 2010 2009 2008
Discount rate 4.21% 5.28% 5.78% 6.11% 4.42% 5.11% 5.31% 6.03%
Compensation increases 3.75 4.25 4.20 4.20 4.31 4.44 4.56 4.47
Expected return on assets 8.00 8.00 8.50 8.50 7.09 7.25 7.29 7.41
To determine the expected long-term rate of return on pension
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 our prin-
cipal benefi t plans’ assets, we formulate views on the future
economic environment, both in the U.S. and abroad. We evaluate
general market trends and historical relationships among a num-
ber of key variables that impact asset class returns such as
expected earnings growth, infl ation, valuations, yields and spreads,
using both internal and external sources. We also take into account
expected volatility by asset class and diversifi cation across classes
to determine expected overall portfolio results given current and
expected allocations. 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 recognition in 2012. 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 will contribute approximately
$1,040 million to the GE Pension Plan in 2012. In addition, we expect
to pay approximately $210 million for benefi t payments under our
GE Supplementary Pension Plan and administrative expenses of
our principal pension plans and expect to contribute approximately
$710 million to other pension plans in 2012. In 2011, comparative
amounts were $201 million and $713 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
compensation levels. PBO is ABO increased to refl ect expected
future compensation.
PROJECTED BENEFIT OBLIGATION
Principal pension plans Other pension plans
(In millions) 2011 2010 2011 2010
Balance at January 1 $51,999 $48,117 $ 9,907 $9,597
Service cost for benefits
earned 1,195 1,149 303 277
Interest cost on benefit
obligations 2,662 2,693 514 486
Participant contributions 167 166 37 33
Plan amendments 804 —(58) 23
Actuarial loss (gain) 6,803(a) 2,799 (a) 1,344 (a) (12)
Benefits paid (3,120) (2,925) (424) (421)
Acquisitions (dispositions)/
other—net ——122 50
Exchange rate adjustments ——(108) (126)
Balance at December 31 (b) $60,510 $51,999 $11,637 $9,907
(a) Principally associated with discount rate changes.
(b) The PBO for the GE Supplementary Pension Plan, which is an unfunded plan, was
$5,203 million and $4,430 million at year-end 2011 and 2010, respectively.
ACCUMULATED BENEFIT OBLIGATION
December 31 (In millions) 2011 2010
GE Pension Plan $53,040 $46,046
GE Supplementary Pension Plan 3,643 3,296
Other pension plans 10,722 9,134
PLANS WITH ASSETS LESS THAN ABO
December 31 (In millions) 2011 2010
Funded plans with assets less than ABO
Plan assets $49,284 $51,286
Accumulated benefit obligations 61,852 53,350
Projected benefit obligations 64,879 55,502
Unfunded plans (a)
Accumulated benefit obligations $ 4,563 $ 4,086
Projected benefit obligations 6,161 5,247
(a) Primarily related to the GE Supplementary Pension Plan.