ADT 2006 Annual Report Download - page 205

TYCO INTERNATIONAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. Retirement Plans (Continued)
2006 2005
Change in plan assets:
Fair value of plan assets at beginning of period ............................. $ 4 $ 5
Employer contributions ............................................... 29 21
Benefits paid ...................................................... (29) (22)
Fair value of plan assets at end of period ................................ $ 4 $ 4
Funded status ...................................................... $(304) $(333)
Unrecognized net loss ................................................ 44 65
Unrecognized prior service benefit ....................................... (42) (41)
Contributions after the measurement date ................................. 2 2
Accrued postretirement benefit cost .................................... $(300) $(307)
Weighted-average assumptions used to determine postretirement benefit obligations at year
end:
Discount rate ...................................................... 5.7% 4.8%
Rate of compensation increase ......................................... 4.0% 4.0%
The Company expects to make contributions to its postretirement benefit plans of $26 million in
2007.
Benefit payments, including those amounts to be paid out of corporate assets and reflecting future
expected service as appropriate, are expected to be paid as follows ($ in millions):
2007 ............................................................ $ 26
2008 ............................................................ 25
2009 ............................................................ 24
2010 ............................................................ 23
2011 ............................................................ 23
2012–2016 ........................................................ 112
For measurement purposes, a 10.1% and 11.5% composite annual rate of increase in the per
capita cost of covered health care benefits was assumed at September 29, 2006 and September 30,
2005, respectively. At September 29, 2006 and September 30, 2005, the composite annual rate of
increase in health care benefit costs was assumed to decrease gradually to 5.0% by the year 2013 and
remain at that level thereafter. A one-percentage-point change in assumed healthcare cost trend rates
would have the following effects ($ in millions):
1-Percentage-Point 1-Percentage-Point
Increase Decrease
Effect on total of service and interest cost ................... $ 3 $ (2)
Effect on postretirement benefit obligation ................... 31 (25)
In December 2003, the US enacted into law the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the ‘‘Act’’). The Act introduces a prescription drug benefit under Medicare
(Medicare Part D), as well as a federal subsidy to sponsors of retiree health care benefit plans that
provide a benefit that is at least actuarially equivalent to Medicare Part D. Certain of the Company’s
2006 Financials 143