Aetna 2006 Annual Report Download - page 72

At December 31, 2006, we had approximately $835 million and $119 million of net actuarial losses for our pension
and OPEB plans, respectively, and approximately $21 million and $(56) million of prior service costs (credits) for
our pension and OPEB plans, respectively, that have not been recognized as components of net periodic benefit
costs. We expect to recognize approximately $28 million and $5 million in amortization of net actuarial losses for
our pension and OPEB plans, respectively, and approximately $5 million and $(4) million in amortization
(accretion) of prior service costs (credits) for our pension and OPEB plans, respectively, in 2007.
Components of the net periodic benefit cost (income) in 2006, 2005 and 2004 for the pension and OPEB plans were
as follows:
(Millions) 2006 2005 2004 2006 2005 2004
Service cost 97.8$ 92.7$ 75.9$ .3$ .4$ .4$
Interest cost 283.1 273.9 261.4 25.4 28.2 24.7
Expected return on plan assets (410.7) (370.2) (310.6) (4.0) (4.5) (4.4)
Amortization (accretion) of prior service cost 5.7 5.3 5.6 (2.1) (1.3) (1.3)
Recognized net actuarial loss 77.3 74.5 64.2 7.1 5.8 2.5
Net periodic benefit cost before curtailment
benefit 53.2 76.2 96.5 26.7 28.6 21.9
Curtailment benefit - (2.3)
(1)
- - - (31.8)
(2)
Net periodic benefit cost (income) 53.2$ 73.9$ 96.5$ 26.7$ 28.6$ (9.9)$
Pension Plans OPEB Plans
(1) Reflects a plan amendment eliminating the accrual of new benefits under the Supplemental Pension Plan, as discussed above.
(2) Reflects a plan amendment eliminating the dental subsidy for all retirees, as discussed above.
The weighted average assumptions used to determine net periodic benefit cost (income) in 2006, 2005 and 2004 for
the pension and OPEB plans were as follows:
2006 2005 2004 2006 2005 2004
Discount rate 5.77% 6.00% 6.25% 5.59% 6.00% 6.25%
Expected long-term return on plan assets 8.50 8.75 8.75 5.70 6.50 6.50
Rate of increase in future compensation levels 4.51 3.00 3.25 - - -
Pension Plans OPEB Plans
We assume different health care cost trend rates for medical costs and prescription drug costs in estimating the
expected costs of our OPEB plans. The assumed medical cost trend rate for 2007 is 8%, decreasing gradually to
5% by 2010. The assumed prescription drug cost trend rate for 2007 is 13%, decreasing gradually to 5% by 2015.
These assumptions reflect our historical as well as expected future trends for retirees. In addition, the trend
assumptions reflect factors specific to our retiree medical plan, such as plan design, cost-sharing provisions,
benefits covered and the presence of subsidy caps. An increase in the health care cost trend rate of one percentage
point would increase the post-retirement benefit obligation at December 31, 2006 by approximately $13 million and
would increase service and interest costs by approximately $1 million. Conversely, a decrease in the assumed
health care cost trend rate of one percentage point would decrease the postretirement benefit obligation at
December 31, 2006 by approximately $11 million and would decrease service and interest costs by approximately
$1 million.
The asset allocation of the pension and OPEB plans at the measurement date (September 30) and the target asset
allocation, presented as a percentage of the total plan assets, were as follows:
Target Targ
(Millions) 2006 2005 Allocation 2006 2005 Allocation
Equity securities 66% 68% 60-70% 11% 10% 5-15%
Debt securities 26 25 20-30 87 87 80-90
Real estate/other 8 7 5-15 2 3 2-10
Total 100% 100% 100% 100%
Pension Plans OPEB Plans
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