Pfizer 2008 Annual Report Download - page 74

Notes to Consolidated Financial Statements
Pfizer Inc and Subsidiary Companies
The decrease in the 2007 international plans’ net periodic benefit cost compared to 2006 was largely driven by a settlement gain at
our Japanese affiliate. Japanese pension regulations permit employers with certain pension obligations to separate the social
security benefits portion of those obligations and transfer it, along with related plan assets, to the Japanese government. During
2007, our Japanese affiliate completed this transfer and effectively received a subsidy from the Japanese government of
approximately $168 million. This subsidy was the result of the transfer of pension obligations of approximately $309 million
(excluding the effect of any future salary increases of approximately $9 million) along with related plan assets of approximately $141
million. This transfer resulted in a settlement gain of approximately $106 million.
The following table presents the amount in Accumulated other comprehensive income/(expense) expected to be amortized into
2009 net periodic benefit costs:
PENSION PLANS
(MILLIONS OF DOLLARS) U.S. QUALIFIED
U.S. SUPPLEMENTAL
(NON-QUALIFIED) INTERNATIONAL
POSTRETIREMENT
PLANS
Actuarial losses $(228) $(32) $(24) $(18)
Prior service (costs)/credits and other (3) 2 3 4
Total $(231) $(30) $(21) $(14)
C. Actuarial Assumptions
The following table provides the weighted-average actuarial assumptions:
(PERCENTAGES) 2008 2007 2006
Weighted-average assumptions used to determine benefit obligations:
Discount rate:
U.S. qualified pension plans/non-qualified pension plans 6.4% 6.5% 5.9%
International pension plans 5.6 5.3 4.4
Postretirement plans 6.4 6.5 5.9
Rate of compensation increase:
U.S. qualified pension plans/non-qualified pension plans 4.3 4.5 4.5
International pension plans 3.2 3.3 3.6
Weighted-average assumptions used to determine net periodic benefit cost:
Discount rate:
U.S. qualified pension plans/non-qualified pension plans 6.5 5.9 5.8
International pension plans 5.3 4.4 4.3
Postretirement plans 6.5 5.9 5.8
Expected return on plan assets:
U.S. qualified pension plans 8.5 9.0 9.0
International pension plans 7.2 6.6 6.9
Postretirement plans 8.5 9.0 9.0
Rate of compensation increase:
U.S. qualified pension plans/non-qualified pension plans 4.5 4.5 4.5
International pension plans 3.3 3.6 3.6
The assumptions above are used to develop the benefit obligations at fiscal year-end and to develop the net periodic benefit cost for
the subsequent fiscal year. Therefore, the assumptions used to determine net periodic benefit cost for each year are established at
the end of each previous year, while the assumptions used to determine benefit obligations were established at each year-end.
The net periodic benefit cost and the benefit obligations are based on actuarial assumptions that are reviewed on an annual basis.
We revise these assumptions based on an annual evaluation of long-term trends, as well as market conditions that may have an
impact on the cost of providing retirement benefits.
The expected rates of return on plan assets for our U.S. qualified, international and postretirement plans represent our long-term
assessment of return expectations, which we may change based on shifts in economic and financial market conditions. The 2008
expected rates of return for these plans reflect our long-term outlook for a globally diversified portfolio, which is influenced by a
combination of return expectations for individual asset classes, actual historical experience and our diversified investment strategy.
The historical returns are one of the inputs used to provide context for the development of our expectations for future returns. Using
this information, we develop ranges of returns for each asset class and a weighted-average expected return for our targeted
portfolio, which includes the impact of portfolio diversification and active portfolio management.
72 2008 Financial Report