Berkshire Hathaway 2008 Annual Report Download - page 55

Notes to Consolidated Financial Statements (Continued)
(19) Pension plans (Continued)
The accumulated benefit obligation is the actuarial present value of benefits earned based on service and compensation
prior to the valuation date. As of December 31, 2008 and 2007, the accumulated benefit obligation was $6,693 million and
$6,990 million, respectively. The projected benefit obligation is the actuarial present value of benefits earned based upon service
and compensation prior to the valuation date and, if applicable, includes assumptions regarding future compensation levels.
Information regarding the projected benefit obligations is shown in the table that follows (in millions).
2008 2007
Projected benefit obligation, beginning of year .................................................. $7,683 $7,926
Service cost .............................................................................. 176 202
Interest cost .............................................................................. 452 439
Benefits paid ............................................................................. (455) (476)
Business acquisitions ....................................................................... 249 —
Actuarial (gain) or loss and other ............................................................. (518) (408)
Projected benefit obligation, end of year ....................................................... $7,587 $7,683
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, 2008, projected benefit obligations of non-qualified U.S. plans and non-U.S. plans
which are not funded through assets held in trusts were $604 million. A reconciliation of the changes in plan assets and a
summary of plan assets held as of December 31, 2008 and 2007 is presented in the table that follows (in millions).
2008 2007 2008 2007
Plan assets at beginning of year .......... $7,063 $6,792 Cash and equivalents ................. $ 517 $ 427
Employer contributions ................. 279 262 U.S. Government obligations .......... 121 186
Benefits paid ......................... (455) (476) Mortgage-backed securities ............ 282 390
Actual return on plan assets .............. (1,244) 447 Corporate obligations ................ 942 1,005
Business acquisitions ................... 188 — Equity securities .................... 2,864 4,169
Other and expenses .................... (509) 38 Other ............................. 596 886
Plan assets at end of year ................ $5,322 $7,063 $5,322 $7,063
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 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 generally 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.
The defined benefit plans expect to pay benefits to participants over the next ten years, reflecting expected future service as
appropriate, as follows (in millions): 2009 – $405; 2010 – $398; 2011 – $413; 2012 – $431; 2013 – $446; and 2014 to 2018 -
$2,460. Sponsoring subsidiaries expect to contribute $245 million to defined benefit pension plans in 2009.
As of December 31, 2008 and 2007, the net funded status of the plans is summarized in the table that follows (in millions).
2008 2007
Amounts recognized in the Consolidated Balance Sheets:
Other liabilities ........................................................................ $2,357 $ 981
Other assets ........................................................................... (92) (361)
$2,265 $ 620
53