Boeing 2009 Annual Report Download - page 59
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Pension expense is also sensitive to changes in the expected long-term rate of asset return. A
decrease or increase of 25 basis points in the expected long-term rate of asset return would have
increased or decreased 2009 net periodic pension expense by $117 million.
Differences between actual and expected returns can affect future year’s pension cost. The asset
balance used to calculate the expected return on pension plan assets is a calculated value that
recognizes changes in the fair value of assets over a five year period. Despite investment gains during
2009, the significant losses incurred during 2008 will cause net periodic pension cost for 2010 to
increase by approximately $100 million due to amortization of actuarial losses. Absent a recovery of
asset values or higher interest rates or higher contributions, net periodic pension expense will increase
further in future years.
The assumed medical trend rates have a significant effect on the following year’s expense, recorded
liabilities and Shareholders’ Equity. In the following table, we show the sensitivity of our other
postretirement benefit plan liabilities and net periodic cost to a 100 basis point change as of
December 31, 2009.
(dollars in millions)
Change in medical trend rate
Increase 100 bps
Change in medical trend rate
Decrease 100 bps
Other postretirement benefit plans
Accumulated postretirement benefit
obligation $617 $(541)
Net periodic postretirement benefit
cost 119 (104)
47