General Dynamics 2010 Annual Report Download - page 76

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Thefollowing representamounts deferredinAOCIontheConsolidated
BalanceSheet onDecember31,2010, thatweexpecttorecognize in our
retirementbenefitcost in 2011:
Apension plan’sfundedstatusisthedifferencebetweentheplan’s
assets and its “projectedbenefitobligation” (PBO). ThePBO isthepresent
valueoffuturebenefits attributedto employee services renderedto date,
including assumptionsaboutfuturecompensationlevels. Apension
plan’s“accumulatedbenefitobligation” (ABO) isthepresentvalueof
futurebenefits attributedto employee services renderedto date, excluding
assumptionsaboutfuturecompensationlevels. TheABO for all defined-
benefitpension planswas$7.8 billionand$8.9 billiononDecember31,
2009 and 2010, respectively.OnDecember31,2009and 2010, some
ofour pensionplanshad an ABO thatexceededtheplans’assets.
Summary informationforthose plansfollows:
RetirementPlan Assumptions
We calculate theplan assets and liabilities foragivenyear and the
net periodic benefitcost forthesubsequentyear using assumptions
determinedasofDecember31oftheyear in question.
Thefollowing tablesummarizes theweightedaverageassumptions
usedto determineour benefitobligations:
Thefollowing tablesummarizes theweightedaverageassumptions
usedto determineour net periodic benefitcosts:
We determinetheinterest rate usedto discountprojectedbenefit
liabilities each year basedonyieldscurrently availableonhigh-quality
fixed-incomeinvestments withmaturities consistentwiththeprojected
benefitpayoutperiod.Webase thediscountrate onayield curve
developedfromaportfolioof high-qualitycorporate bondswith
aggregate cashflows atleast equal to theexpectedbenefitpayments
and withsimilar timing.
In determining our expectedlong-term asset return assumptions, we
rely onour currentand expectedasset allocationstrategy.Our investment
strategy considershistorical market returnsfromvariousasset allocation
scenarios.
These assumptionsarebasedonour best judgment, including
considerationof currentand futuremarket conditions. Changes in these
estimates impactfuturepensionandpost-retirementbenefitcosts. As
discussedabove, we deferrecognitionofthecumulativebenefitcost for
our governmentplansin excess ofcosts allocabletocontracts to provide
abettermatching ofrevenues and expenses. Therefore, theimpactof
annual changes in financial reporting assumptionsonthecost forthese
plansdoes not affectour futureearningseitherpositively orn
egatively.
Forour commercial pension plans, thefollowing hypothetical changes in
thediscountrate and expectedlong-term rate ofreturn onplanassets
would havehad thefollowing impactin 2010:
General Dynamics Annual Report • 201056
OtherPost-retirement
Benefits
Priorservice(credit) cost $(44)$6
Net actuarial loss 159 4
PensionBenefits
December31
Projectedbenefitobligation$(7,923) $(8,799)
Accumulatedbenefitobligation(7,637) (8,475)
Fair valueof plan assets 5,450 5,799
PensionBenefits
2009 2010
AssumptionsonDecember31
PensionBenefits
Discountrate 6.42% 5.73%
Rate ofincrease in
compensationlevels 2.00-9.00% 2.00-9.00%
OtherPost-retirement
Benefits
Discountrate 6.18% 5.54%
Healthcarecost trend rate:
Trend rate fornextyear 7.75% 7.75%
Ultimate trend rate 4.75% 4.75%
Year rate reaches ultimate
trend rate 20152016
2009 2010
PensionBenefits
Discountrate 6.46% 6.48% 6.42%
Expectedlong-term rate
ofreturn onassets 8.09% 8.08% 8.43%
Rate of increase in
compensationlevels 2.00-11.00% 2.00-9.00% 2.00-9.00%
OtherPost-retirement
Benefits
Discountrate 6.33% 6.79% 6.18%
Expectedlong-term rate
ofreturn onassets 8.00% 8.00% 8.03%
2008 2009 2010
AssumptionsforYear Ended
December31
Increase (decrease) to net pensioncost from:
Changein discountrate $(5) $5
Changein long-term rate ofreturn onplanassets (3) 3
Increase
25 bps
Decrease
25 bps