Baker Hughes 2014 Annual Report Download - page 98

Download and view the complete annual report

Please find page 98 of the 2014 Baker Hughes annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 122

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122

Baker Hughes Incorporated
Notes to Consolidated Financial Statements
73
Net Periodic Cost
The components of net periodic cost are as follows for the years ended December 31:
U.S. Pension Benefits Non-U.S.
Pension Benefits Other Postretirement
Benefits
2014 2013 2012 2014 2013 2012 2014 2013 2012
Service cost $70 $ 65 $ 63 $ 11 $ 12 $ 8 $ 6 $ 6 $ 13
Interest cost 28 21 21 34 31 32 5 5 7
Expected return on plan assets (44) (39) (35) (41) (37) (36) — — —
Amortization of prior service credit — — — — — — (11) (7) (2)
Amortization of net actuarial loss 813 15 5 8 6 1 2 1
Other — — — — 2 4 (3) — —
Net periodic cost $62 $ 60 $ 64 $ 9 $ 16 $ 14 $ (2) $ 6 $ 19
Weighted average assumptions used to determine net periodic cost for these plans are as follows for the years
ended December 31:
U.S. Pension Benefits Non-U.S.
Pension Benefits Other Postretirement
Benefits
2014 2013 2012 2014 2013 2012 2014 2013 2012
Discount rate 4.5% 3.6% 4.2% 4.4% 4.4% 5.0% 4.0% 3.2% 3.8%
Expected long-term return on plan assets 7.3% 7.4% 7.4% 6.1% 6.5% 6.7% n/a n/a n/a
Rate of compensation increase 5.6% 5.6% 5.4% 4.4% 4.4% 4.4% n/a n/a n/a
Social security increase 2.8% 2.8% 2.8% 2.4% 2.1% 2.1% n/a n/a n/a
In selecting the expected rate of return on plan assets, we consider the average rate of earnings expected on
the funds invested or to be invested to provide for the benefits of these plans. This includes considering the trusts’
asset allocation and the expected returns likely to be earned over the life of the plans.
Health Care Cost Trend Rates
Assumed health care cost trend rates have a significant effect on the amounts reported for other postretirement
benefits. As of December 31, 2014, the health care cost trend rate was 7.3% for employees under age 65,
declining gradually each successive year until it reaches 4.5%. A one percentage point change in assumed health
care cost trend rates would have had the following effects on 2014:
One Percentage
Point Increase One Percentage
Point Decrease
Effect on total of service and interest cost components $ 0.2 $ (0.2)
Effect on postretirement welfare benefit obligation $ 1.1 $ (1.5)
Plan Assets
We have investment committees that meet regularly to review the portfolio returns and to determine asset-mix
targets based on asset/liability studies. Third-party investment consultants assist such committees in developing
asset allocation strategies to determine our expected rates of return and expected risk for various investment
portfolios. The investment committees considered these strategies in the formal establishment of the current asset-
mix targets based on the projected risk and return levels for all major asset classes.