Honeywell 2003 Annual Report Download - page 411

Other Matters
We are subject to a number of other lawsuits, investigations and claims (some of
which involve substantial amounts) arising out of the conduct of our business.
With respect to all these other matters, including those relating to commercial
transactions, government contracts, product liability and non-environmental
health and safety matters, while the ultimate results of these lawsuits,
investigations and claims cannot be determined, we do not expect that these
matters will have a material adverse effect on our consolidated results of
operations, operating cash flows or financial position.
NOTE 22--PENSION AND OTHER POSTRETIREMENT BENEFITS
We maintain qualified and non-qualified pension plans covering the majority of
our employees and retirees, and postretirement benefit plans for retirees that
include health care benefits and life insurance coverage.
Pension benefits for substantially all U.S. employees are provided through
non-contributory, defined benefit pension plans. Non U.S. employees, who are not
U.S. citizens, are covered by various retirement benefit arrangements, some of
which are considered to be defined benefit pension plans for accounting
purposes. Our general funding policy for qualified pension plans is to
contribute amounts at least sufficient to satisfy regulatory funding standards.
In 2003 and 2002, we made voluntary contributions of $670 and $830 million to
our U.S. defined benefit pension plans to improve the funded status of our
plans. The contributions in 2002 included $700 million of Honeywell common
stock. Assuming that actual plan asset returns are consistent with our expected
rate of 9 percent in 2004 and beyond, and that interest rates remain constant,
we would not be required to make any contributions to our U.S. pension plans for
the foreseeable future.
Our retiree medical plans mainly cover U.S. employees who retire with pension
eligibility for hospital, professional and other medical services. All non-union
hourly and salaried employees joining Honeywell after January 1, 2000 are not
eligible to participate in our retiree medical and life insurance plans. Most of
the U.S. retiree medical plans require deductibles and copayments, and virtually
all are integrated with Medicare. Retiree contributions are generally required
based on coverage type, plan and Medicare eligibility. Honeywell has limited its
subsidy of its retiree medical plans to a fixed-dollar amount for substantially
all future retirees and for almost half of its current retirees. This cap of
retiree medical benefits under our plans limits our exposure to the impact of
future health care cost increases. The retiree medical and life insurance plans
are not funded. Claims and expenses are paid from our general assets.
The following tables summarize the balance sheet impact, including the benefit
obligations, assets and funded status associated with our significant pension
and other postretirement benefit plans at December 31, 2003 and 2002.
Other
Postretirement
Pension Benefits Benefits
------------------ -----------------
(Dollars in Millions) 2003 2002 2003 2002
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Change in benefit obligation:
Benefit obligation at beginning of year ... $11,660 $10,952 $ 2,241 $ 2,149
Service cost .............................. 201 201 17 21
Interest cost ............................. 757 753 145 141
Plan amendments ........................... 30 25 (92) (32)
Actuarial losses .......................... 1,010 633 313 215
Acquisitions (divestitures) ............... 15 (105) -- --
Benefits paid ............................. (883) (868) (203) (199)
Settlements and curtailments .............. (2) (48) -- (34)
Other ..................................... 205 117 -- (20)
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Benefit obligation at end of year ......... 12,993 11,660 2,421 2,241
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Change in plan assets:
Fair value of plan assets at beginning of
year ................................... 10,178 11,051 -- --
Actual return on plan assets .............. 2,072 (912) -- --
Company contributions ..................... 725 885 -- --
Acquisitions (divestitures) ............... 15 (103) -- --
Benefits paid ............................. (883) (868) -- --
Other ..................................... 158 125 -- --
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Fair value of plan assets at end of year .. 12,265 10,178 -- --
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Funded status of plans .................... (728) (1,482) (2,421) (2,241)
Unrecognized net obligation at
transition ............................. 11 1 -- --
Unrecognized net loss ..................... 3,666 3,829 779 528
Unrecognized prior service cost (credit) .. 187 193 (215) (153)