HP 2009 Annual Report Download - page 142

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 16: Retirement and Post-Retirement Benefit Plans
Acquisition of EDS
On August 26, 2008, EDS became a wholly owned subsidiary of HP. EDS sponsors qualified and
non-qualified defined benefit pension plans covering substantially all of its employees. The majority of
the EDS defined benefit pension plans are noncontributory. In most plans, employees become fully
vested upon attaining two to five years of service, and benefits are based on many factors, which differ
by country, but the most significant is years of service and earnings. The projected unit credit cost
method is used for actuarial purposes. Plan assets and plan obligations associated with the EDS defined
benefit pension plans were included as of the acquisition date and through October 31, 2008. On a
global basis, EDS plan assets totaled $7.8 billion and plan obligations totaled $10.1 billion as of
August 26, 2008. The U.S. portion of global assets and obligations totaled $4.1 billion and $5.0 billion
respectively.
Defined Benefit Plans
HP sponsors a number of defined benefit pension plans worldwide, of which the most significant
are in the United States. Both the HP Retirement Plan (the ‘‘Retirement Plan’’), a traditional defined
benefit pension plan based on pay and years of service, and the HP Company Cash Account Pension
Plan (the ‘‘Cash Account Pension Plan’’), under which benefits are accrued pursuant to a cash
accumulation account formula based upon a percentage of pay plus interest, were frozen effective
January 1, 2008. The Cash Account Pension Plan and the Retirement Plan were merged in 2005 for
certain funding and investment purposes. The merged plan is referred to as the HP Pension Plan.
Following the acquisition of EDS, HP announced that it was modifying the EDS U.S. qualified and
non-qualified plans for employees accruing benefits under the programs. Effective January 1, 2009,
EDS employees in the U.S. ceased accruing pension benefits. The final pension benefit amount was
calculated based on pay and service through December 31, 2008.
Effective October 30, 2009, the EDS U.S. qualified pension plan was also merged into the HP
Pension Plan. The EDS U.S. qualified pension plan, like the Cash Account Pension Plan and the
Retirement Plan, remains a separate sub-plan within the HP Pension Plan for purposes of determining
benefit amounts. As a result, the merger had no impact on the separate benefit structures of the plans.
HP reduces the benefit payable to a U.S. employee under the Pension Plan for service before
1993, if any, by any amounts due to the employee under HP’s frozen defined contribution Deferred
Profit-Sharing Plan (the ‘‘DPSP’’). HP closed the DPSP to new participants in 1993. The DPSP plan
obligations are equal to the plan assets and are recognized as an offset to the Pension Plan when HP
calculates its defined benefit pension cost and obligations. The fair value of plan assets and projected
135