Citibank 2009 Annual Report Download - page 113

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PENSION AND POSTRETIREMENT PLANS
Citigroup has several non-contributory defined benefit pension plans
covering substantially all U.S. employees and has various defined benefit
pension and termination indemnity plans covering employees outside the
United States. The U.S. defined benefit plan provides benefits under a cash
balance formula. Employees satisfying certain age and service requirements
remain covered by a prior final pay formula. Citigroup also offers
postretirement health care and life insurance benefits to certain eligible U.S.
retired employees, as well as to certain eligible employees outside the United
States.
The following table shows the pension (benefit) expense and
contributions for Citigroup’s plans:
U.S. plans Non-U.S. plans
In millions of dollars 2009 2008 2007 2009 2008 2007
Pension (benefit)
expense (1) $(148) $(160) $179 $198 $205 $123
Company
contributions (2) —— — 382 286 223
(1) The 2008 expense includes a $23 million curtailment loss for the U.S. plans and $22 million for the
non-U.S. plans recognized in the fourth quarter of 2008 relating to Citigroup’s restructuring actions.
(2) In addition, Citigroup absorbed $11 million, $13 million and $15 million during 2009, 2008 and 2007,
respectively, relating to certain investment management fees and administration costs for the U.S.
plans, which are excluded from this table.
The following table shows the combined postretirement expense and
contributions for Citigroup’s U.S. and foreign plans:
U.S. and non-U.S. plans
In millions of dollars 2009 2008 2007
Postretirement expense (1) $109 $115 $69
Company contributions 91 103 72
(1) The 2008 expense includes a $6 million curtailment loss related to Citigroup’s fourth quarter of 2008
restructuring actions.
Expected Rate of Return
Citigroup determines its assumptions for the expected rate of return on plan
assets for its U.S. pension and postretirement plans using a “building block”
approach, which focuses on ranges of anticipated rates of return for each
asset class. A weighted range of nominal rates is then determined based on
target allocations to each asset class. Citigroup considers the expected rate
of return to be a long-term assessment of return expectations and does not
anticipate changing this assumption annually unless there are significant
changes in investment strategy or economic conditions. This contrasts with
the selection of the discount rate, future compensation increase rate, and
certain other assumptions, which are reconsidered annually in accordance
with generally accepted accounting principles.
The expected rate of return for the U.S. pension and post-retirement plans
was 7.75% at December 31, 2009, 7.75% at December 31, 2008 and 8% at
December 31, 2007, reflecting the performance of the global capital markets.
Actual returns in 2009 and 2008 were less than the expected returns, while
actual returns in 2007 were more than the expected returns. This expected
amount reflects the expected annual appreciation of the plan assets and
reduces the annual pension expense of Citigroup. It is deducted from the sum
of service cost, interest and other components of pension expense to arrive
at the net pension (benefit) expense. Net pension (benefit) expense for the
U.S. pension plans for 2009, 2008 and 2007 reflects deductions of $912
million and $889 million of expected returns, respectively.
$949
million,