Sony 2005 Annual Report Download - page 106

Sony Corporation 103
15. Pension and severance plans
Upon terminating employment, employees of Sony Corporation
and its subsidiaries in Japan are entitled, under most circum-
stances, to lump-sum indemnities or pension payments as
described below. For employees voluntarily retiring, payments
are determined based on current rates of pay and lengths of
service. In calculating the payments for employees involuntarily
retiring, including employees retiring due to meeting mandatory
retirement age requirements, Sony may grant additional benefits.
In July, 2004, Sony Corporation and certain of its subsidiaries
amended their pension plans and introduced a point-based plan
under which a point is added every year reflecting the individual
employee’s performance over that year. Under the point-based
plan the amount of payment is determined based on sum of
cumulative points from past services and interest points earned
on the cumulative points regardless of whether or not the em-
ployee is voluntarily retiring. As a result of the plan amendment,
the projected benefit obligation was decreased by ¥120,873
million ($1,130 million).
Sony Corporation and most of its 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 substitutional portion of the
governmental welfare pension program, under which the contri-
butions are made by the companies and their employees, and
an additional portion representing the substituted noncontribu-
tory pension plans. Under the contributory pension plans, the
defined benefits representing the noncontributory portion of the
plans, in general, cover 65% of the indemnities under existing
regulations to employees. The remaining indemnities are cov-
ered by severance payments by the companies. The pension
benefits are payable at the option of the retiring employee either
in a lump-sum amount or monthly pension payments. Contribu-
tions to the plans are funded through several financial institutions
in accordance with the applicable laws and regulations.
In June 2001, the Japanese Government issued the Defined
Benefit Corporate Pension Plan Act which permits each
employer and employees’ pension fund plan to separate the
substitutional portion from its employees’ pension fund and
transfer the obligation and related assets to the government. In
July, 2004, in accordance with the law, the Japanese Govern-
ment approved applications submitted by Sony Corporation and
most of its subsidiaries in Japan for an exemption from the
obligation to pay benefits for future employee services related
to the substitutional portion of the governmental welfare pension
program. In January 2005, the government also approved
applications for an exemption from the obligation to pay benefits
for past employee services related to the substitutional portion.
As of March 31, 2005 the benefit obligation for past employee
services related to the substitutional portion and the related
government-specified portion of the plan assets have not been
transferred to the government.
EITF Issue No. 03-2, “Accounting for the Transfer to the
Japanese Government of the Substitutional Portion of Employee
Pension Fund Liabilities”, requires employers to account for the
entire separation process of a substitutional portion from an
entire plan upon completion of the transfer of the substitutional
portion of the benefit obligation and related plan assets to the
government as the culmination of a series of steps in a single
settlement transaction. In accordance with EITF Issue No. 03-2,
no accounting for the transfer was recorded for the year ended
March 31, 2005.
Many of foreign subsidiaries have defined benefit pension
plans or severance indemnity plans, which substantially cover all
of their employees. Under such plans, the related cost of ben-
efits is currently funded or accrued. Benefits awarded under
these plans are based primarily on the current rate of pay and
length of service.
Sony uses a measurement date of March 31 for substantially
all of its pension and severance plans.
The components of net pension and severance costs, which
exclude employee termination benefits paid in restructuring
activities, for the years ended March 31, 2003, 2004 and 2005
were as follows:
Japanese plans:
Dollars in
Yen in millions millions
Years ended March 31 2003 2004 2005 2005
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥(47,884 ¥(54,501 ¥(31,971 $(299
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,857 19,489 21,364 200
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,726) (22,812) (16,120) (151)
Amortization of net transition asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (375) (375) (375) (4)
Recognized actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,655 31,019 20,236 189
Amortization of prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (939) (939) (7,216) (67)
Gains on curtailments and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,380) — (876) (8)
Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥(60,976 ¥(80,883 ¥(48,984 $(458
BH6/30 Adobe PageMaker 6.0J /PPC