Sony 1997 Annual Report Download - page 56

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Upon terminating employment, employees of the parent company and subsidiaries in Japan are entitled,
under most circumstances, to lump-sum indemnities or pension payments as described below. For employees
voluntarily retiring, under normal circumstances, minimum payment is an amount based on current rates of
pay and lengths of service. In calculating the minimum payment for employees involuntarily retiring,
including employees retiring due to meeting mandatory retirement age requirements, the company may grant
additional benefits. With respect to directors’ resignations, lump-sum severance indemnities are calculated
using a similar formula and are normally paid subject to the approval of the company’s stockholders.
The parent company and most subsidiaries in Japan have contributory funded defined benefit pension
plans, which are pursuant to the Japanese Welfare Pension Insurance Law. The contributory pension plans
cover a portion of the governmental welfare pension program, under which the contributions are made by
the companies and their employees, and an additional portion representing the substituted noncontributory
pension plans. Under the contributory pension plans, the defined benefits representing the noncontributory
portion of the plans, in general, cover 60% of the indemnities under the existing regulations to employees.
The remaining indemnities are covered by severance payments by the companies. The company has a
recorded pension liability to cover the amount of the projected benefit obligation in excess of plan assets, net
of unrealized items. The pension benefits are determined based on years of service and the compensation
amounts, as stipulated in the aforementioned regulations, are payable at the option of the retiring employee
in a lump-sum amount or on a monthly pension. Contributions to the plans are funded through several finan-
cial institutions in accordance with the applicable laws and regulations.
Most foreign subsidiaries have defined benefit pension plans or severance indemnity plans which sub-
stantially cover all of their employees, under which the cost of benefits is currently funded or accrued.
Benefits awarded under these plans are based primarily on current rate of pay and lengths of service.
Net pension and severance costs and the related pension plans’ funded status including the employees’
contributory portion and rate assumptions are shown below:
Japanese plans:
Yen in millions Dollars in thousands
Year ended March 31 Year ended March 31,
1995 1996 1997 1997
Net pension and severance cost (credit):
Service cost—benefits earned during the year. . ¥23,987 ¥29,276 ¥32,772 $264,290
Interest cost on projected benefit obligation . . . 11,024 11,090 11,959 96,443
Actual return on plan assets . . . . . . . . . . . . . . . (3,672) (9,545) (14,373) (115,911)
Net amortization and deferral . . . . . . . . . . . . . . 2,828 7,245 14,053 113,331
Actuarial net pension and severance cost
for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,167 38,066 44,411 358,153
Employee contributions . . . . . . . . . . . . . . . . . . . . (3,614) (4,098) (4,073) (32,847)
Net pension and severance cost for the year . . . . ¥30,553 ¥33,968 ¥40,338 $325,306
Foreign plans:
Yen in millions Dollars in thousands
Year ended March 31 Year ended March 31,
1995 1996 1997 1997
Net pension and severance cost (credit):
Service cost—benefits earned during the year. . ¥10,198 ¥10,790 ¥15,988 $128,935
Interest cost on projected benefit obligation . . . 2,839 3,197 4,108 33,129
Actual return on plan assets . . . . . . . . . . . . . . . 68 (4,122) (3,897) (31,427)
Net amortization and deferral . . . . . . . . . . . . . . (1,016) 1,860 870 7,016
Net pension and severance cost for the year . . . . ¥12,089 ¥11,725 ¥17,069 $137,653
13. Pension and
severance
plans