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66 Seiko Epson Annual Report 2005
10. Pension and severance costs
The Company and its Japanese subsidiaries maintain defined benefit pension plans and defined contribution
pension plans covering substantially all of their employees. The Company and some of its Japanese subsidiaries
had maintained the welfare pension plan which was funded in conformity with the funding requirement of the
Japanese Welfare Pension Insurance Law. The welfare pension plan covered the substitutional portion of the
governmental welfare pension program and non-substitutional portion under which contributions are made by
companies and their employees.
On June 15, 2001, the Defined Benefit Pension Plan Law was enacted, which allows a company to return the
substitutional portion of the pension to the government, thereby eliminating the company’s responsibility for future
benefits. On January 17, 2003, the Company obtained approval from the Ministry of Health, Labor and Welfare for
exemption from the payment of future benefit obligations with respect to the substitutional portion that the Company
operates on behalf of the Japanese government. The Company accounted for the return of the substitutional
portion at the date of approval, which is allowed as an alternative accounting method in accordance with “Practical
Guidance for Accounting for Pensions” issued by the Japanese Institute of Certified Public Accountants. A gain on
exemption from the payment of benefit obligations totaling ¥17,577 million was recorded in income for the
year ended March 31, 2003.
On February 1, 2004, the Company obtained approval from the Ministry of Health, Labor and Welfare for exemp-
tion from the substitutional portion with respect to the benefit obligation related past service that the Company
operates on behalf of the Japanese government. A gain on exemption from the payment of benefit obligations
related past service was recorded in income for the year ended March 31, 2003. Upon approval for exemption from
the substitutional portion with respect to the benefit obligation related past service, welfare pension plan transferred
to the corporate defined benefit pension plan.
To supplement the corporate defined benefit pension plan, the Company and some of its Japanese subsidiaries
maintain tax qualified pension plans which are non-contributory defined benefit pension plans. These companies
contribute amounts required to maintain sufficient plan assets to provide for accrued benefits, subject to limitations
on expense deductibility under Japanese income tax laws.
The funded status of retirement benefit obligations at March 31, 2004 and 2005 were as follows:
Thousands of
Millions of yen U.S. dollars
March 31 March 31,
2004 2005 2005
Projected benefit obligations ¥202,361 ¥176,371 $1,642,341
Plan assets at fair value 183,915 159,769 1,487,746
Unfunded status 18,446 16,602 154,595
Unrecognized items:
Prior service cost reduction from plan amendment 8,133 10,173 94,729
Actuarial losses (34,564) (19,401) (180,659)
Accrued pension and severance costs – net (7,985) 7,374 68,665
Prepaid pension cost 16,040 7,461 69,476
Accrued pension and severance costs ¥ 8,055 ¥ 14,835 $ 138,141