GE 2012 Annual Report Download - page 107

GE 2012 ANNUAL REPORT 105
notes to consolidated financial statements
Other pension plans’ assets were $9,702 million and $8,381 mil-
lion at December 31, 2012 and December 31, 2011, respectively.
Equity and debt securities amounting to $8,497 million and
$7,284 million represented approximately 89% of total invest-
ments at both December 31, 2012 and December 31, 2011. The
plans’ investments were classified as 14% Level 1, 75% Level 2
and 11% Level 3 at December 31, 2012. The plans’ investments
were classified as 13% Level 1, 76% Level 2 and 11% Level 3 at
December 31, 2011. The changes in Level 3 investments were
insignificant for the years ended December 31, 2012 and 2011.
PENSION ASSET (LIABILITY)
Principal pension plans Other pension plans
December 31 (In millions) 2012 2011 2012 2011
Funded status (a) (b) $(18,764) $(18,373) $(3,882) $(3,256)
Pension asset (liability)
recorded in the Statement
of Financial Position
Pension asset $ — $ — $ 141 $ 158
Pension liabilities
Due within one year (c) (159) (148) (62) (52)
Due after one year (18,605) (18,225) (3,961) (3,362)
Net amount recognized $(18,764) $(18,373) $(3,882) $(3,256)
Amounts recorded in
shareowners’ equity
(unamortized)
Prior service cost $ 1,406 $ 1,685 $ (4) $ 4
Net actuarial loss 24,437 26,923 3,962 3,294
Total $ 25,843 $ 28,608 $ 3,958 $3,298
(a) Fair value of assets less PBO, as shown in the preceding tables.
(b) The GE Pension Plan was underfunded by $13.3 billion and $13.2 billion at
December 31, 2012 and December 31, 2011, respectively.
(c) For principal pension plans, represents the GE Supplementary Pension Plan liability.
In 2013, we estimate that we will amortize $245 million of prior
service cost and $3,650 million of net actuarial loss for the prin-
cipal pension plans from shareowners’ equity into pension cost.
For other pension plans, the estimated prior service cost and
net actuarial loss to be amortized in 2013 will be $10 million and
$350 million, respectively. Comparable amortized amounts in
2012, respectively, were $279 million and $3,421 million for the
principal pension plans and $8 million and $280 million for other
pension plans.
ESTIMATED FUTURE BENEFIT PAYMENTS
(In millions) 2013 2014 2015 2016 2017
2018–
2022
Principal
pension plans $3,040 $3,100 $3,170 $3,230 $3,275 $17,680
Other pension
plans 455 465 475 485 495 2,670
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 eligible participants and these
participants share in the cost of healthcare benefits. In 2012, we
amended our principal retiree benefit plans such that, effective
January 1, 2015, our post-65 retiree medical plans will be
closed to salaried and retired salaried employees who are not
enrolled in the plans as of that date, and we will no longer
offer company-provided life insurance in retirement for certain
salaried employees who retire after that date. These plans cover
approximately 205,000 retirees and dependents.
COST OF PRINCIPAL RETIREE BENEFIT PLANS
(In millions) 2012 2011 2010
Service cost for benefits earned $ 219 $ 216 $ 241
Prior service cost amortization 518 647 631
Expected return on plan assets (73) (97) (116)
Interest cost on benefit obligations 491 604 699
Net actuarial loss (gain)
amortization 32 (110) (22)
Net curtailment/settlement gain (101) ——
Retiree benefit plans cost $1,086 $1,260 $1,433
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 2012 2011 2010 2009
Discount rate 3.74% 4.09% (b) 5.15% 5.67%
Compensation increases 3.90 3.75 4.25 4.20
Expected return on assets 7.00 7.00 8.00 8.50
Initial healthcare trend rate (a) 6.50 7.00 7.00 7.40
(a) For 2012, ultimately declining to 5% for 2030 and thereafter.
(b) Weighted average discount rate of 3.94% was used for determination of costs
in 2012.
To determine the expected long-term rate of return on retiree life
plan assets, we consider current and target asset allocations, his-
torical and expected returns on various categories of plan assets,
as well as expected benefit payments and resulting asset levels.
In developing future return expectations for retiree benefit plan
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 number of key variables that
impact asset class returns such as expected earnings growth,
inflation, valuations, yields and spreads, using both internal and
external sources. We also take into account expected volatility