Sony 1999 Annual Report Download - page 64

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Sony Corporation Annual Report 1999
13. Pension and severance plans
Upon terminating employment, employees of Sony
Corporation 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, mini-
mum 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, Sony 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 Sony’s stockholders.
Sony Corporation 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 in-
demnities under the existing regulations to employees.
The remaining indemnities are covered by severance
payments by the companies. The pension benefits are
determined based on years of service and the compen-
sation 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 financial 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.
The components of net pension and severance costs
for the years ended March 31, 1997, 1998 and 1999
were as follows:
Japanese plans:
Yen in millions Dollars in thousands
Year ended March 31 Year ended
1997 1998 1999 March 31, 1999
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥28,699 ¥35,318 ¥41,743 $347,859
Interest cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,959 13,303 14,020 116,833
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . (6,336) (7,978) (9,618) (80,150)
Amortization of net transition asset . . . . . . . . . . . . . . . . (375) (375) (375) (3,125)
Recognized actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . 5,406 6,369 8,032 66,933
Amortization of prior service cost . . . . . . . . . . . . . . . . . . 985 1,178 1,234 10,283
Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . ¥40,338 ¥47,815 ¥55,036 $458,633
Foreign plans:
Yen in millions Dollars in thousands
Year ended March 31 Year ended
1997 1998 1999 March 31, 1999
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥15,988 ¥15,625 ¥15,842 $132,017
Interest cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,108 4,911 5,333 44,442
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . (3,095) (3,900) (4,475) (37,292)
Amortization of net transition asset . . . . . . . . . . . . . . . . (110) (122) (122) (1,017)
Recognized actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . 178 308 342 2,850
Amortization of prior service cost . . . . . . . . . . . . . . . . . . — (70) (274) (2,283)
Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . ¥17,069 ¥16,752 ¥16,646 $138,717