Berkshire Hathaway 2005 Annual Report Download - page 46

45
(18) Pension plans (Continued)
Benefit obligations under qualified U.S. defined benefit plans 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, 2005, projected benefit obligations of non-qualified U.S. plans and non-U.S. plans which
are not funded through assets held in trusts totaled $327 million. Information concerning plan assets as of December 31, 2005 and
2004 is presented in the table that follows (in millions).
2005 2004
Plan assets at fair value, beginning of year...................................................................................... $3,039 $2,819
Employer contributions ................................................................................................................... 104 78
Benefits paid.................................................................................................................................... (171) (165)
Actual return on plan assets............................................................................................................. 119 302
Other and expenses.......................................................................................................................... 10 5
Plan assets at fair value, end of year................................................................................................ $3,101 $3,039
2005 2004
Cash and equivalents ................................................................................................................... $ 942 $ 999
U.S. Government obligations....................................................................................................... 1,103 837
Mortgage-backed securities ......................................................................................................... 259 394
Corporate obligations................................................................................................................... 382 414
Equity securities........................................................................................................................... 391 371
Other ............................................................................................................................................ 24 24
$3,101 $3,039
Pension plan assets are generally invested with the long-term objective of earning sufficient amounts to cover expected benefit
obligations, while assuming a prudent level of risk. There are no target investment allocation percentages with respect to individual or
categories of investments. Allocations may change rapidly as a result of changing market conditions and investment opportunities.
The expected rates of return on plan assets reflect Berkshire’ s subjective assessment of expected invested asset returns over a period
of several years. Berkshire does not give significant consideration to past investment returns when establishing assumptions for
expected long-term rates of returns on plan assets. Actual experience will differ from the assumed rates, in particular over quarterly
or annual periods as a result of market volatility and changes in the mix of assets.
The funded status of the plans as of December 31, 2005 and 2004 is as follows (in millions).
2005 2004
Excess of projected benefit obligations over plan assets ................................................................. $501 $254
Unrecognized net actuarial gains and other..................................................................................... 27 262
Accrued benefit cost liability........................................................................................................... $528 $516
The total net deficit status for plans (including unfunded plans) with accumulated benefit obligations in excess of plan assets
was $589 million and $425 million as of December 31, 2005 and 2004, respectively. Expected contributions to defined benefit
pension plans during 2006 are estimated to be $86 million.
Benefit payments over the next ten years, which reflect expected future service as appropriate, are expected to be paid as
follows (in millions): 2006 - $155; 2007 - $161; 2008 - $170; 2009 - $178; 2010 - $183; and 2011 to 2015 - $1,068.
Weighted average assumptions used in determining projected benefit obligations were as follows. These rates are substantially
the same as the weighted average rates used in determining the net periodic pension expense.
2005 2004
Discount rate ........................................................................................................................................... 5.7 5.9
Expected long-term rate of return on plan assets..................................................................................... 6.4 6.5
Rate of compensation increase ................................................................................................................ 4.4 4.4
Many Berkshire subsidiaries sponsor defined contribution retirement plans, such as 401(k) or profit sharing plans. Employee
contributions to the plans are subject to regulatory limitations and the specific plan provisions. Berkshire subsidiaries may match
these contributions up to levels specified in the plans, and may make additional discretionary contributions as determined by
management. The total expenses related to employer contributions for these plans were $395 million, $338 million and $242 million
for the years ended December 31, 2005, 2004 and 2003, respectively.