ADT 2001 Annual Report Download - page 77

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75
The projected benefit obligation, accumulated benefit
obligation, and fair value of plan assets for U.S. pension plans
with accumulated benefit obligations in excess of plan assets
were $1,986.3 million, $1,921.6 million and $1,550.8 million,
respectively, at September 30, 2001 and $30.3 million, $29.3 mil-
lion and $9.3 million, respectively, at September 30, 2000.
The projected benefit obligation, accumulated benefit oblig-
ation, and fair value of plan assets for non-U.S. pension plans
with accumulated benefit obligations in excess of plan assets
were $1,078.8 million, $938.7 million and $603.9 million, respec-
tively, at September 30, 2001 and $543.8 million, $464.0 million
and $256.1 million, respectively, at September 30, 2000.
The Company also participates in a number of
multi-employer defined benefit plans on behalf of certain
employees. Pension expense related to multi-employer plans
was $6.4 million, $8.2 million and $7.5 million for Fiscal 2001,
Fiscal 2000 and Fiscal 1999, respectively.
DEFINED CONTRIBUTION RETIREMENT PLANS
The Company maintains several defined contribution retirement
plans, which include 401(k) matching programs, as well as qual-
ified and nonqualified profit sharing and share bonus retirement
plans. Pension expense for the defined contribution plans is com-
puted as a percentage of participants’ compensation and was
$157.4 million, $132.7 million and $73.2 million for Fiscal 2001,
Fiscal 2000 and Fiscal 1999, respectively. The Company also main-
tains an unfunded Supplemental Executive Retirement Plan
(“SERP”). This plan is nonqualified and restores the employer
match that certain employees lose due to IRS limits on eligible
compensation under the defined contribution plans. Expense
related to the SERP was $9.0 million, $10.8 million and $6.9 mil-
lion in Fiscal 2001, Fiscal 2000 and Fiscal 1999, respectively.
POSTRETIREMENT BENEFIT PLANS
The Company generally does not provide postretirement bene-
fits other than pensions for its employees. Certain of the Com-
pany’s acquired operations provide these benefits to employees
who were eligible at the date of acquisition.
AMP provides postretirement health care coverage to qual-
ifying U.S. retirees. As a result of the merger with the Company,
a $13.7 million adjustment was recorded to conform AMP’s
accounting method for postretirement benefits to the Com-
pany’s method regarding the initial recognition of such benefits
upon adoption of SFAS No. 106 “Employers’ Accounting for
Postretirement Benefits Other Than Pensions.”
In the second quarter of Fiscal 1999, AMP offered enhanced
postretirement benefits to terminated employees totaling
$16.0 million, which was recorded as part of AMP’s second quar-
ter restructuring charge. This amount has not been included in
the determination of net periodic benefit cost presented below.
Net periodic postretirement benefit cost reflects the follow-
ing components:
($ IN MILLIONS) 2001 2000 1999
Service cost (with interest) $ 3.7 $ 1.1 $ 3.5
Interest cost 23.6 12.7 12.0
Expected return on assets (0.3)
——
Amortization of prior service cost (2.5) (1.9) (2.2)
Amortization of net gain (1.6) (1.6) (0.7)
Curtailment loss (gain) 0.4 (3.2) (5.8)
Net periodic postretirement
benefit cost $23.3 $ 7.1 $ 6.8
The components of the accrued postretirement benefit
obligation, all of which are generally unfunded, are as follows:
SEPTEMBER 30,
($ IN MILLIONS) 2001 2000
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 167.6 $ 168.2
Service cost 3.7 1.1
Interest cost 23.6 12.7
Amendments (19.5) (3.1)
Actuarial loss (gain) 42.4 (1.7)
Acquisition 184.7 8.4
Curtailment loss 0.4 1.7
Expected net benefits paid (30.4) (19.6)
Currency fluctuation gain (0.3) (0.1)
Benefit obligation at end of year $ 372.2 $ 167.6
CHANGE IN PLAN ASSETS
Actual return on plan assets $ 0.3 $
—
Acquisition 4.9
—
Fair value of plan assets at end of year $ 5.2 $
—
Funded status $(367.0) $(167.6)
Unrecognized net loss (gain) 14.3 (29.6)
Unrecognized prior service cost (28.2) (11.1)
Accrued postretirement benefit cost $(380.9) $(208.3)
For measurement purposes, in Fiscal 2001, a 9.0% compos-
ite annual rate of increase in the per capita cost of covered health
care benefits was assumed. The rate was assumed to decrease
gradually to 5.0% by the year 2008 and remain at that level
thereafter. The health care cost trend rate assumption may have
a significant effect on the amounts reported. A one-percent-
age-point change in assumed healthcare cost trend rates would
have the following effects:
1-PERCENTAGE- 1-PERCENTAGE-
($ IN MILLIONS) POINT INCREASE POINT DECREASE
Effect on total of service and interest
cost components $ 1.6 $ (1.4)
Effect on postretirement benefit obligation 16.2 (14.0)
The combined weighted average discount rate used in
determining the accumulated postretirement benefit obligation
was 7.5% at September 30, 2001 (8.0% at September 30, 2000).