GE 2013 Annual Report Download - page 108

106 GE 2013 ANNUAL REPORT
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COST OF PENSION PLANS
Total Principal pension plans Other pension plans
(In millions) 2013 2012 2011 2013 2012 2011 2013 2012 2011
Service cost for benefits earned $ 1,970 $ 1,779 $ 1,498 $ 1,535 $ 1,387 $ 1,195 $ 435 $ 392 $ 303
Prior service cost amortization 253 287 207 246 279 194 7 8 13
Expected return on plan assets (4,163) (4,394) (4,543) (3,500) (3,768) (3,940) (663) (626) (603)
Interest cost on benefit obligations 2,983 2,993 3,176 2,460 2,479 2,662 523 514 514
Net actuarial loss amortization 4,007 3,701 2,486 3,664 3,421 2,335 343 280 151
Pension plans cost $ 5,050 $ 4,366 $ 2,824 $ 4,405 $ 3,798 $ 2,446 $ 645 $ 568 $ 378
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 2013 2012 2011 2010 2013 2012 2011 2010
Discount rate 4.85% 3.96% 4.21% 5.28% 4.39% 3.92% 4.42% 5.11%
Compensation increases 4.00 3.90 3.75 4.25 3.76 3.30 4.31 4.44
Expected return on assets 7.50 8.00 8.00 8.00 6.92 6.82 7.09 7.25
To determine the expected long-term rate of return on pension
plan assets, we consider current and target asset allocations,
as well as historical and expected returns on various categories
of plan assets. In developing future return expectations for our
principal pension plans’ assets, we formulate views on the future
economic environment, both in the U.S. and abroad. We evalu-
ate general market trends and historical relationships among
a number 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 target allocations. Based on our analysis of
future expectations of asset performance, past return results,
and our current and target asset allocations, we have assumed a
7.5% long-term expected return on those assets for cost recogni-
tion in 2014. This is a reduction from the 8.0% we had assumed
in 2013, 2012 and 2011. 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 provi-
sions, 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 contributed $433 mil-
lion to the GE Pension Plan in 2012. The ERISA minimum funding
requirements did not require a contribution in 2013. As such,
we did not contribute to the GE Pension Plan in 2013. We expect
to contribute $528 million to the GE Pension Plan in 2014. In
addition, we expect to pay approximately $244 million for benefi t
payments under our GE Supplementary Pension Plan and admin-
istrative expenses of our principal pension plans and expect to
contribute approximately $800 million to other pension plans
in 2014. In 2013, comparative amounts were $225 million and
$673 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 ben-
efi 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) 2013 2012 2013 2012
Balance at January 1 $ 63,502 $ 60,510 $ 13,584 $ 11,637
Service cost for benefits
earned 1,535 1,387 435 392
Interest cost on benefit
obligations 2,460 2,479 523 514
Participant contributions 156 157 14 16
Plan amendments — — 11 (6)
Actuarial loss (gain) (a) (6,406) 2,021 (575) 890
Benefits paid (3,134) (3,052) (477) (425)
Acquisitions (dispositions)/
other—net — — 46 230
Exchange rate adjustments — — (26) 336
Balance at December 31 (b) $ 58,113 $ 63,502 $ 13,535 $ 13,584
(a) Principally associated with discount rate changes.
(b) The PBO for the GE Supplementary Pension Plan, which is an unfunded plan, was
$5,162 million and $5,494 million at year-end 2013 and 2012, respectively.