Berkshire Hathaway 2004 Annual Report Download - page 50

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(19) Pension plans
Certain Berkshire subsidiaries individually sponsor defined benefit pension plans covering their employees.
Benefits under the plans are generally based on years of service and compensation, although benefits under certain plans
are based on years of service and fixed benefit rates. Funding policies are generally to contribute amounts required to
meet regulatory requirements plus additional amounts determined by management based on actuarial valuations. The
measurement date for the pension plans is predominantly December 31.
The components of net periodic pension expense for each of the three years ending December 31, 2004 are as
follows (in millions).
2004 2003 2002
Service cost....................................................................................................................... $ 109 $ 105 $ 91
Interest cost....................................................................................................................... 189 181 164
Expected return on plan assets.......................................................................................... (171) (159) (147)
Curtailment gain............................................................................................................... (70) — —
Net amortization, deferral and other................................................................................. 13 7 8
Net pension expense......................................................................................................... $ 70 $ 134 $ 116
During the third quarter of 2004 a Berkshire subsidiary amended its defined benefit plan to freeze benefits as of the
end of 2005. Such an event is considered a curtailment and the curtailment gain included in the table above represents
the elimination of projected plan benefits beyond the end of 2005 and the recognition of unamortized prior service costs
and actuarial losses as of the amendment date.
The increase (decrease) in minimum liabilities included in other comprehensive income were $41 million in 2004,
$(3) million in 2003, and $263 million in 2002. Such amounts include Berkshire’ s share of changes in minimum
liabilities of MidAmerican.
The accumulated benefit obligation is the actuarial present value of benefits earned based on service and
compensation prior to the valuation date. The projected benefit obligation is the actuarial present value of benefits
earned based upon service and compensation prior to the valuation date and includes assumptions regarding future
compensation levels when benefits are based on those amounts. Information regarding accumulated and projected
benefit obligations and plan assets are as follows (in millions).
2004 2003
Projected benefit obligation, beginning of year................................................................ $3,192 $2,862
Service cost....................................................................................................................... 109 105
Interest cost....................................................................................................................... 189 181
Benefits paid..................................................................................................................... (165) (150)
Actuarial loss and other.................................................................................................... (32) 194
Projected benefit obligation, end of year.......................................................................... $3,293 $3,192
Accumulated benefit obligation, end of year.................................................................... $2,908 $2,676
Plan assets at fair value, beginning of year....................................................................... $2,819 $2,548
Employer contributions .................................................................................................... 78 78
Benefits paid..................................................................................................................... (165) (150)
Actual return on plan assets.............................................................................................. 302 332
Other and expenses........................................................................................................... 5 11
Plan assets at fair value, end of year................................................................................. $3,039 $2,819
Defined benefit pension plan obligations to U.S. employees are funded through assets held in trusts and are not
included as assets in Berkshire’ s Consolidated Financial Statements. Pension obligations under certain non-U.S. plans
and non-qualified U.S. plans are unfunded. As of December 31, 2004 and 2003, total plan assets were invested as
follows:
2004 2003
Cash and equivalents..................................................................................................... $ 999 $ 813
U.S. Government obligations ........................................................................................ 837 152
Mortgage-backed securities........................................................................................... 394 597
Corporate obligations .................................................................................................... 414 451
Equity securities ............................................................................................................ 371 764
Other.............................................................................................................................. 24 42
$3,039 $2,819