HP 2005 Annual Report Download - page 118

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 15: Retirement and Post-Retirement Benefit Plans (Continued)
Pension and Post-Retirement Benefit Expense
HP’s net pension and post-retirement benefit costs were as follows for the following fiscal years
ended October 31:
U.S. Defined Non-U.S. Defined Post-Retirement
Benefit Plans Benefit Plans Benefit Plans
2005 2004 2003 2005 2004 2003 2005 2004 2003
In millions
Service cost .................. $338 $320 $284 $236 $213 $168 $ 63 $ 55 $ 46
Interest cost .................. 275 266 262 304 265 203 98 103 101
Expected return on plan assets ..... (290) (247) (215) (412) (346) (217) (32) (30) (25)
Amortization and deferrals:
Actuarial loss ............... 38 29 63 104 93 83 35 25 23
Prior service cost (benefit) ......232(1)(2)1(18)(9)(2)
Net periodic benefit cost ......... 363 371 396 231 223 238 146 144 143
Curtailment gain ............. (199) ————(6)———
Settlement loss (gain) .........——— 1(3)————
Special termination benefits ..... 352 — — 3 11 16 55 — —
Net benefit cost ............... $516 $371 $396 $235 $231 $248 $201 $144 $143
The weighted average assumptions used to calculate net benefit cost were as follows for the
following fiscal years ended October 31:
U.S. Defined Non-U.S. Defined Post-Retirement
Benefit Plans Benefit Plans Benefit Plans
2005 2004 2003 2005 2004 2003 2005 2004 2003
Discount rate ...................... 5.7% 6.5% 6.8% 4.9% 5.0% 5.2% 5.6% 6.5% 6.8%
Average increase in compensation levels . . 4.0% 4.0% 4.5% 3.7% 3.6% 4.0% — — —
Expected long-term return on assets ..... 8.3% 8.5% 8.5% 6.7% 6.9% 6.9% 8.5% 8.5% 8.5%
As a result of the plan design changes made to the U.S. retirement programs as well as the release
of final regulations by the Centers for Medicare and Medicaid Services covered under the ‘‘Medicare
Act,’’ HP remeasured its U.S. defined benefit plan and post-retirement benefit plan obligations. The
2005 discount rates outlined in the table above are those rates used by HP in conducting each of the
respective plan remeasurements and reflect the weighted average rate across all measurement periods.
The medical cost and related assumptions used to calculate the net post-retirement benefit cost for
the following fiscal years ended October 31 were as follows:
2005 2004 2003
Current medical cost trend rate ..................................... 10.5% 11.5% 12.5%
Ultimate medical cost trend rate .................................... 5.5% 5.5% 5.5%
Year the medical cost rate reaches ultimate trend rate .................... 2010 2010 2010
A 1.0 percentage point increase in the medical cost trend rate would have increased the fiscal 2005
service and interest components of the post-retirement benefit costs by $0.6 million, while a
1.0 percentage point decrease would have resulted in a decrease of $0.7 million in the same period.
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