HP 2005 Annual Report Download - page 115

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 14: Comprehensive Income (Continued)
The components of accumulated other comprehensive loss, net of taxes, were as follows for the
following fiscal years ended October 31:
2005 2004
In millions
Net unrealized gains on available-for-sale securities .................... $22 $ 23
Net unrealized losses on cash flow hedges .......................... (46) (115)
Cumulative translation adjustment ................................ 13 30
Additional minimum pension liability .............................. (10) (181)
Accumulated other comprehensive loss ............................. $(21) $(243)
Note 15: Retirement and Post-Retirement Benefit Plans
Plan Design Changes
During fiscal 2005 substantially all of HP’s employees were covered under various defined benefit
pension plans, defined contribution plans, or both, when they met the eligibility requirements of the
plans. In addition, HP sponsors medical and life insurance plans that provide benefits to retired U.S.
employees who meet plan eligibility requirements. In conjunction with management’s plan to
restructure certain of its operations, as discussed in Note 7 to the Consolidated Financial Statements,
HP modified its U.S. retirement programs to more closely align to industry practice. Effective
January 1, 2006, HP will not offer U.S. defined benefit pension plans and subsidized retiree medical
programs to new U.S. hires. In addition, HP will cease pension accruals and eliminate eligibility for the
subsidized retiree medical program for current employees who do not meet defined criteria based on
age and years of service (calculated as of December 31, 2005). Additionally, the HP subsidy for the
retiree medical program will be capped upon reaching two times the 2003 subsidy levels. These actions
resulted in reductions to the U.S. defined benefit and post-retirement plan obligations of $526 million
and $556 million respectively. HP recognized the reduction in the defined benefit obligation as a
curtailment event and resulted in a gain of $199 million in the fourth quarter of fiscal 2005. HP
recognized the reduction in the post-retirement plan obligation as a negative plan amendment.
In addition, HP recognized a special termination benefit of $352 million in the fourth quarter of
fiscal 2005, which reflects aggregate additional lump-sum benefits that have been paid or that HP
expects to pay to those individuals participating in the 2005 U.S. Enhanced Early Retirement program.
HP will distribute this amount from the plan assets. HP recognized the special termination benefit of
$55 million for the HP retiree medical plans for those employees participating in the U.S. Enhanced
Early Retirement program. This expense amount reflects the present value of approximately two years
of added medical coverage that HP expects to pay and will be distributed from both plan assets and
HP assets as these benefits are paid. HP expects to pay the majority of these added retiree medical
benefits over the next two years.
Defined Benefit Plans
HP sponsors a number of defined benefit pension plans worldwide, of which the most significant
are in the United States. The HP Retirement Plan (the ‘‘Retirement Plan’’) is a defined benefit pension
plan for U.S. employees hired on or before December 31, 2002. Benefits under the Retirement Plan
generally are based on pay and years of service, except for eligible pre-acquisition Compaq employees,
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