Aetna 2012 Annual Report Download - page 114

Annual Report- Page 108
We also sponsor a non-qualified 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 non-qualified 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 care 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.
The information set forth in the following tables is based upon current actuarial reports using the annual
measurement dates (December 31, for each year presented) for our pension and OPEB plans; however, certain
components of the net periodic cost for the Aetna Pension Plan in 2010 also include adjustments from the re-
measurement that occurred as of August 31, 2010.
The following table shows the changes in the benefit obligations during 2012 and 2011 for our pension and OPEB
plans.
Pension Plans OPEB Plans
(Millions) 2012 2011 2012 2011
Benefit obligation, beginning of year $ 6,130.3 $ 5,821.2 $ 312.7 $ 333.3
Service cost ——.1 .2
Interest cost 298.4 312.3 14.4 16.6
Actuarial loss (gain) 550.2 293.6 (11.4) (12.5)
Benefits paid (313.1) (296.8) (23.4) (24.9)
Benefit obligation, end of year $ 6,665.8 $ 6,130.3 $ 292.4 $ 312.7
The Aetna Pension Plan comprises approximately 96% of the pension plans' total benefit obligation at December 31,
2012. The discount rates used to determine the benefit obligation of our pension and OPEB plans were calculated
using a yield curve as of our annual measurement date. 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 plans was 4.17% and 4.98% for 2012 and 2011, respectively. The discount rate
for our OPEB plans was 3.94% and 4.78% for 2012 and 2011, respectively. The discount rates differ for our pension
and OPEB plans due to the duration 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 2012 and
2011 for the pension and OPEB plans:
Pension Plans OPEB Plans
(Millions) 2012 2011 2012 2011
Fair value of plan assets, beginning of year $ 5,296.8 $ 5,243.8 $ 64.2 $ 66.6
Actual return on plan assets 736.8 265.8 2.1 1.2
Employer contributions 84.5 84.0 19.2 21.3
Benefits paid (313.1) (296.8) (23.4) (24.9)
Fair value of plan assets, end of year $ 5,805.0 $ 5,296.8 $ 62.1 $ 64.2
The difference between the fair value of plan assets and the plan's benefit obligation is referred to as the plan's
funded status. This funded status is an accounting-based calculation and is not indicative of our mandatory funding
requirements, which are described on page 111.