Baker Hughes 2009 Annual Report Download - page 130

56 Baker Hughes Incorporated
NOTE 14. EMPLOYEE BENEFIT PLANS
Defined Benefit Plans
We have both funded and unfunded noncontributory
defined benefit pension plans (“Pension Benefits”) covering
employees primarily in the U.S., the U.K., Germany and several
other countries in the Middle East region. Under the provisions
of the U.S. qualified pension plan, a hypothetical cash balance
account is established for each participant. Such accounts
receive pay credits on a quarterly basis. The quarterly pay credit
is based on a percentage according to the employee’s age on
the last day of the quarter applied to quarterly eligible com-
pensation. In addition to quarterly pay credits, a cash balance
account receives interest credits based on the balance in the
account on the last day of the quarter. The U.S. qualified pen-
sion plan also includes frozen accrued benefits for participants
in legacy defined benefit plans. For the majority of the partici-
pants in the U.K. pension plans, we do not accrue benefits as
the plans are frozen; however, there are a limited number of
members who still accrue future benefits on a defined benefit
basis. The Germany pension plan is an unfunded plan where
benefits are based on creditable years of service, creditable pay
and accrual rates. We also provide certain postretirement health
care benefits (“other postretirement benefits”), through an
unfunded plan, to substantially all U.S. employees who retire
and have met certain age and service requirements.
ASC 715, Compensation – Retirement requires an employer
to measure the funded status of each of its plans as of the date
of its year end statement of financial position effective for 2008.
The impact of moving our funded status measurement date from
October 1 to December 31 was a reduction of $4 million to
our 2008 beginning retained earnings.
Funded Status
Below is the reconciliation of the beginning and ending balances of benefit obligations, fair value of plan assets and the funded
status of our plans. For our pension plans, the benefit obligation is the projected benefit obligation (“PBO”) and for our other post-
retirement benefit plan, the benefit obligation is the accumulated postretirement benefit obligation (“APBO”). The beginning of the
year balance was October 1, 2008. The end of year balances are as of December 31 for 2009 and 2008; therefore, for 2008 recon-
ciling items reflected below represent 15 months of activity as a result of the adoption of ASC 715.
U.S. Pension Benefits Non-U.S. Pension Benefits Other Postretirement Benefits
2009 2008 2009 2008 2009 2008
Change in benefit obligation:
Benefit obligation at beginning of year $ 303 $ 280 $ 227 $ 319 $ 158 $ 156
Service cost 29 38 3 3 8 10
Interest cost 20 21 15 21 10 11
Actuarial loss (gain) 51 (16) 49 (36) (1) (1)
Benefits paid (19) (16) (7) (8) (13) (18)
Curtailment (9) – (1) – (5) –
Other – (4) 18 (2) – –
Exchange rate adjustments – – 23 (70) – –
Benefit obligation at end of year 375 303 327 227 157 158
Change in plan assets:
Fair value of plan assets at beginning of year 290 459 197 306 – –
Actual return on plan assets 77 (152) 24 (45) – –
Employer contributions 2 3 13 17 13 18
Benefits paid (19) (16) (7) (8) (13) (18)
Other (4) (4) (1) – – –
Exchange rate adjustments – – 22 (73) – –
Fair value of plan assets at end of year 346 290 248 197 – –
Funded status – underfunded at end of year $ (29) $ (13) $ (79) $ (30) $ (157) $ (158)