GE 2006 Annual Report Download - page 84

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COST OF PENSION PLANS
(In millions) 2006
Total Principal pension plans Other pension plans
2005 2004 2006 2005 2004 2006 2005 2004
Expected return on plan assets $(4,211) $(4,242) $(4,256) $(3,811) $(3,885) $(3,958) $(400) $(357) $(298)
Service cost for benefi ts earned 1,719 1,618 1,436 1,402 1,359 1,178 317 259 258
Interest cost on benefi t obligation 2,685 2,609 2,511 2,304 2,248 2,199 381 361 312
Prior service cost 258 262 316 253 256 311 5 6 5
Net actuarial loss recognized 893 480 242 729 351 146 164 129 96
Total cost (income) $ 1,344 $ 727 $ 249 $ 877 $ 329 $ (124) $ 467 $ 398 $ 373
ACTUARIAL ASSUMPTIONS are described below. The discount rates
at December 31 were used to measure the year-end benefi t
obligations and the earnings effects for the subsequent year.
ACTUARIAL ASSUMPTIONS
December 31 2006
Principal pension plans Other pension plans (weighted average)
2005 2004 2003 2006 2005 2004 2003
Discount rate 5.75% 5.50% 5.75% 6.00% 4.97% 4.74% 5.28% 5.53%
Compensation increases 5.00 5.00 5.00 5.00 4.26 4.20 4.03 3.87
Expected return on assets 8.50 8.50 8.50 8.50 7.44 7.47 7.67 7.56
To determine the expected long-term rate of return on pension
plan assets, we consider the current and expected asset alloca-
tions, as well as historical and expected returns on various
categories of plan assets. For the principal pension plans, we
apply our expected rate of return to a market-related value of
assets, which stabilizes variability in assets to which we apply
that expected return.
We amortize experience gains and losses, as well as the
effects of changes in actuarial assumptions and plan provisions
over a period no longer than the average future service of
employees.
FUNDING POLICY for the GE Pension Plan is to contribute amounts
sufficient to meet minimum funding requirements as set forth in
employee benefit and tax laws plus such additional amounts as
we may determine to be appropriate. We have not made contri-
butions to the GE Pension Plan since 1987. We will not make any
contributions to the GE Pension Plan in 2007. In 2007, we expect
to pay approximately $140 million for benefi t payments under
our GE Supplementary Pension Plan and administrative expenses
of our principal pension plans ($121 million in 2006), and expect
to contribute approximately $570 million to other pension plans
($451 million in 2006).
BENEFIT OBLIGATIONS are described in the following tables.
Accumulated and projected benefit obligations (ABO and PBO)
represent the obligations of a pension plan for past service as
of the measurement date. ABO is the present value of benefi ts
earned to date with benefits computed based on current
compensation levels. PBO is ABO increased to refl ect expected
future compensation.
PROJECTED BENEFIT OBLIGATION
Principal pension plans Other pension plans
(In millions) 2006 2005 2006 2005
Balance at January 1 $43,331 $39,969 $8,097 $7,122
Service cost for benefi ts
earned 1,402 1,359 317 259
Interest cost on benefi t
obligations 2,304 2,248 381 361
Participant contributions 162 174 37 36
Plan amendments 80 — (18) 3
Actuarial (gain) loss(a) (1,514) 1,988 27 909
Benefi ts paid (2,472) (2,407) (287) (256)
Exchange rate adjustments — — 520 (402)
Acquired plans and other — — (40) 65
Balance at December 31(b) $43,293 $43,331 $9,034 $8,097
(a) Principally associated with discount rate changes.
(b) The PBO for the GE Supplementary Pension Plan was $3,554 million and
$3,534 million at year-end 2006 and 2005, respectively.
82 ge 2006 annual report