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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
71
Net Periodic Cost
The following table summarizes the benefit (income) cost related to our
pension and postretirement health care and life insurance plans:
(dollars in millions)
Pension Health Care and Life
Years Ended December 31, 2012 2011 2010 2012 2011 2010
Service cost $ 358 $ 307 $ 353 $ 359 $ 299 $ 305
Amortization of prior service cost (credit) (1) 72 109 (89) (57) 375
Subtotal 357 379 462 270 242 680
Expected return on plan assets (1,795) (1,976) (2,176) (171) (163) (252)
Interest cost 1,449 1,590 1,797 1,284 1,421 1,639
Subtotal 11 (7) 83 1,383 1,500 2,067
Remeasurement (gain) loss, net 5,542 4,146 (166) 1,262 1,787 758
Net periodic benefit (income) cost 5,553 4,139 (83) 2,645 3,287 2,825
Curtailment and termination benefits – – 860 – – 386
Total $ 5,553 $ 4,139 $ 777 $ 2,645 $ 3,287 $ 3,211
Other pre-tax changes in plan assets and benefit obligations recognized
in other comprehensive (income) loss are as follows:
(dollars in millions)
Pension Health Care and Life
At December 31, 2012 2011 2012 2011
Prior service cost $ 183 $ (485) $ (1,826) $ –
Reversal of amortization items
Prior service cost 1 (72) 89 57
Total recognized in other comprehensive (income) loss (pretax) $ 184 $ (557) $ (1,737) $ 57
The estimated prior service cost for the defined benefit pension plan that
will be amortized from Accumulated other comprehensive income (loss)
into net periodic benefit cost over the next fiscal year is not significant.
The estimated prior service cost for the defined benefit postretirement
plans that will be amortized from Accumulated other comprehensive
income (loss) into net periodic benefit (income) cost over the next fiscal
year is $(0.2 billion).
Assumptions
The weighted-average assumptions used in determining benefit obliga-
tions follow:
Pension Health Care and Life
At December 31, 2012 2011 2012 2011
Discount Rate 4.20 % 5.00 % 4.20 % 5.00 %
Rate of compensation increases 3.00 3.00 N/A N/A
The weighted-average assumptions used in determining net periodic
cost follow:
Pension Health Care and Life
At December 31, 2012 2011 2010 2012 2011 2010
Discount Rate 5.00 % 5.75 % 6.25 % 5.00 % 5.75 % 6.25 %
Expected return on plan assets 7.50 8.00 8.50 7.00 6.00 8.25
Rate of compensation increases 3.00 3.00 4.00 N/A N/A N/A
In order to project the long-term target investment return for the total
portfolio, estimates are prepared for the total return of each major asset
class over the subsequent 10-year period. Those estimates are based on
a combination of factors including the current market interest rates and
valuation levels, consensus earnings expectations and historical long-
term risk premiums. To determine the aggregate return for the pension
trust, the projected return of each individual asset class is then weighted
according to the allocation to that investment area in the trust’s long-
term asset allocation policy.