Delta Airlines 2004 Annual Report Download - page 99

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Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Net periodic benefit cost for the years ended December 31, 2004, 2003 and 2002, included the following components:
Other
Pension Postretirement
Benefits Benefits
(in millions) 2004 2003 2002 2004 2003 2002
Service cost $ 233 $ 238 $ 282 $ 28 $ 33 $ 30
Interest cost 757 768 825 121 161 160
Expected return on plan assets (657) (753) (984) — — —
Amortization of prior service cost 15 13 24 (79) (47) (50)
Recognized net actuarial loss (gain) 194 97 (8) 6 7 2
Amortization of net transition obligation 7 7 8 — — —
Settlement charge 257 219 1 — — —
Curtailment loss (gain) — 47 — (527) (4) —
Special termination benefits 10 — 7 142 — 44
Net periodic benefit cost $ 816 $ 636 $ 155 $ (309) $ 150 $ 186
During 2004 and 2003, we recorded non-cash settlement charges totaling $257 million and $219 million, respectively, in our Consolidated Statements of
Operations. These charges primarily relate to the Pilot Plan and result from lump sum distributions to pilots who retired. We recorded these charges in
accordance with SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits"
("SFAS 88"). SFAS 88 requires settlement accounting if the cost of all settlements, including lump sum retirement benefits paid, in a year exceeds, or is
expected to exceed, the total of the service and interest cost components of pension expense for the same period.
Additionally, in the December 2004 quarter we recorded a $527 million curtailment gain related to the elimination of company subsidized retiree medical
benefits for eligible employees who retire after January 1, 2006.
Assumptions
We used the following actuarial assumptions to determine our benefit obligations at September 30, 2004 and 2003, and our net periodic benefit cost for
the years ended December 31, 2004, 2003 and 2002, as measured at September 30:
Benefit Obligations 2004 2003
Weighted average discount rate 6.00% 6.125%
Rate of increase in future compensation levels (1.28)% 1.89%
Assumed healthcare cost trend rate(1) 9.50% 9.00%
Net Periodic Benefit Cost 2004(2) 2003(2) 2002
Weighted average discount rate — pension benefits 6.09% 6.83% 7.75%
Weighted average discount rate — other benefits 6.05% 6.91% 7.75%
Rate of increase in future compensation levels 1.89% 2.47% 4.67%
Expected long-term rate of return on plan assets 9.00% 9.00% 10.00%
Assumed healthcare cost trend rate(1) 9.00% 10.00% 6.25%
(1) We have implemented a limit on the amount we will pay for postretirement medical benefits for employees eligible for such benefits who retire after
November 1, 1993. The assumed healthcare cost trend rate is assumed to decline gradually to 5.00% by 2010 for health plan costs not subject to this
limit and to zero by 2007 for health plan costs subject to the limit (2008 for participants covered under the collectively-bargained healthcare plan), and
remain level thereafter. F-42