GE 2013 Annual Report Download - page 112

110 GE 2013 ANNUAL REPORT
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allocations as well as a shorter time horizon for retiree life plan
assets, we have assumed a 7.0% long-term expected return on
those assets for cost recognition in 2014. 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. We fund retiree health benefi ts on a pay-as-
you-go basis. We expect to contribute approximately $545 million
in 2014 to fund such benefi ts. We fund the retiree life insurance
trust at our discretion.
Changes in the accumulated postretirement benefi t obligation
for retiree benefi t plans follow.
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION (APBO)
(In millions) 2013 2012
Balance at January 1 $ 11,804 $ 13,056
Service cost for benefits earned 229 219
Interest cost on benefit obligations 410 491
Participant contributions 52 54
Plan amendments — (832)
Actuarial gain (1,836) (a) (60)
Benefits paid (746) (758)
Net curtailment/settlement — (366)
Balance at December 31 (b) $ 9,913 $ 11,804
(a) Primarily associated with discount rate change and lower costs from new
healthcare supplier contracts.
(b) The APBO for the retiree health plans was $7,626 million and $9,218 million at
year-end 2013 and 2012, 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, 2013 $ 788 $ (671)
Service and interest cost in 2013 63 (52)
PLAN ASSETS. The fair value of the classes of retiree benefi t plans’
investments is presented below. The inputs and valuation tech-
niques used to measure the fair value of assets are consistently
applied and described in Note 1.
FAIR VALUE OF PLAN ASSETS
(In millions) 2013 2012
Balance at January 1 $ 946 $ 1,004
Actual gain on plan assets 118 98
Employer contributions 533 548
Participant contributions 52 54
Benefits paid (746) (758)
Balance at December 31 $ 903 $ 946
ASSET ALLOCATION
2013 Target
allocation
2013 Actual
allocation
Equity securities 35–75 %(a) 39% (b)
Debt securities (including cash equivalents) 11–46 38
Private equities 0–25 14
Real estate 0–12 7
Other 0–10 2
(a) Target allocations were 18–38% for U.S. equity securities and 17–37% for
non-U.S. equity securities.
(b) Actual allocations were 23% for U.S. equity securities and 16% for non-U.S.
equity securities.
Plan fi duciaries set investment policies and strategies for the
trust and oversee its investment allocation, which includes
selecting investment managers and setting long-term strategic
targets. The primary strategic investment objectives are balanc-
ing investment risk and return and monitoring the plan’s liquidity
position in order to meet the near-term benefi t payment and
other cash needs. Target allocation percentages are established
at an asset class level by plan fi duciaries. Target allocation ranges
are guidelines, not limitations, and occasionally plan fi duciaries
will approve allocations above or below a target range.
Trust assets invested in short-term securities must generally
be invested in securities rated A-1/P-1 or better, except for 15%
of such securities that may be rated A-2/P-2 and other short-term
securities as may be approved by the plan fi duciaries. According
to statute, the aggregate holdings of all qualifying employer
securities (e.g., GE common stock) and qualifying employer real
property may not exceed 10% of the fair value of trust assets at
the time of purchase. GE securities represented 4.0% and 5.8% of
trust assets at year-end 2013 and 2012, respectively.
Retiree life plan assets were $903 million and $946 million
at December 31, 2013 and 2012, respectively. Equity and debt
securities amounting to $727 million and $741 million repre-
sented approximately 77% and 75% of total investments at
December 31, 2013 and 2012, respectively. The plans’ invest-
ments were classifi ed as 33% Level 1, 43% Level 2 and 24%
Level 3 at December 31, 2013. The plans’ investments were
classifi ed as 28% Level 1, 47% Level 2 and 25% Level 3 at
December 31, 2012. The changes in Level 3 investments were
insignifi cant for the years ended December 31, 2013 and 2012.
RETIREE BENEFIT ASSET (LIABILITY)
December 31 (In millions) 2013 2012
Funded status(a) $ (9,010) $ (10,858)
Liability recorded in the Statement
of Financial Position
Retiree health plans
Due within one year $ (531) $ (589)
Due after one year (7,095) (8,629)
Retiree life plans (1,384) (1,640)
Net liability recognized $ (9,010) $ (10,858)
Amounts recorded in shareowners’
equity (unamortized)
Prior service cost $ 963 $ 1,356
Net actuarial loss (gain) (1,667) 182
Total $ (704) $ 1,538
(a) Fair value of assets less APBO, as shown in the preceding tables.