Aetna 2009 Annual Report Download - page 73

11. Pension and Other Postretirement Plans
Defined Benefit Retirement Plans
We sponsor various noncontributory defined benefit plans, including two pension plans and other postretirement benefit
plans (“OPEB”) that provide certain health care and life insurance benefits for retired employees, including those of our
former parent company.
For certain of our employees, we provide a noncontributory, defined benefit pension plan, the Aetna Pension Plan,
which is a tax-qualified pension plan. All pension plan participants accrue future benefits under a cash balance formula.
We also sponsor a supplemental pension plan that, prior to January 1, 2007, had been used to provide benefits for wages
above the Internal Revenue Code wage limits applicable to tax qualified pension plans (such as the Aetna Pension Plan).
Effective January 1, 2007, no new benefits accrue under the supplemental pension plan, but interest will continue to be
credited on outstanding supplemental cash balance accounts and the plan may continue to be used to credit special
pension arrangements.
In addition, we currently provide certain medical and life insurance benefits for retired employees, including those of
our former parent company. We provide subsidized health benefits to certain eligible employees who terminated
employment prior to December 31, 2006. There is a cap on our portion of the cost of providing medical and dental
benefits to our retirees. All current and future retirees and employees who terminate employment at age 45 or later with
at least five years of service are eligible to participate in our group health plans at their own cost.
Our measurement date for determining benefit obligations and the fair value of plan assets of our pension and OPEB
plans is December 31 (the end of our fiscal year).
The following table shows the changes in the benefit obligations during 2009 and 2008 for our pension and OPEB
plans.
(Millions) 2009 2008 2009 2008
Benefit obligation, beginning of year 4,742.8$ 4,906.2$ 329.6$ 332.1$
Service cost 48.3 45.3 .2 .3
Interest cost 316.5 312.2 21.7 20.0
Actuarial loss (gain) 528.6 (232.6) 12.7 11.4
Benefits paid (290.1) (288.3) (33.7) (34.2)
Benefit obligation, end of yea
r
5,346.1$ 4,742.8$ 330.5$ 329.6$
Pension Plans OPEB Plans
The discount rates used to determine the benefit obligation of our pension and OPEB plans were calculated using a yield
curve. The yield curve consisted of a series of individual discount rates, with each discount rate corresponding to a
single point in time, based on high-quality bonds. Projected benefit payments are discounted to the measurement date
using the corresponding rate from the yield curve. The weighted average discount rate for our pension plan was 5.89%
and 6.89% for 2009 and 2008, respectively. The discount rate for our OPEB plan was 5.64% and 6.92% for 2009 and
2008, respectively. The discount rates differ for our pension and OPEB plans due to the nature of the projected benefit
payments for each plan.
The following table reconciles the beginning and ending balances of the fair value of plan assets during 2009 and 2008
for the pension and OPEB plans:
(Millions) 2009 2008 2009 2008
Fair value of plan assets, beginning of year 3,877.2$ 5,819.2$ 67.3$ 70.7$
Actual return (loss) on plan assets 736.2 (1,727.1) 4.6 (.5)
Employer contributions 71.6 73.4 29.7 31.3
Benefits paid (290.1) (288.3) (33.7) (34.2)
Fair value of plan assets, end of yea
r
4,394.9$ 3,877.2$ 67.9$ 67.3$
Pension Plans OPEB Plans
Annual Report – Page 67