Honeywell 2007 Annual Report Download - page 134
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HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
Major actuarial assumptions used in determining the benefit obligations and net periodic benefit cost for our
U.S. benefit plans are presented in the following table. For non-U.S. benefit plans, no one of which was
individually material, assumptions reflect economic assumptions applicable to each country.
Pension Benefits Other Postretirement
Benefits
2007 2006 2005 2007 2006
Actuarial assumptions used to determine
benefit obligations as of December 31:
Discount rate 6.50% 6.00% 5.75% 5.90% 5.70%
Expected annual rate of compensation increase 4.50% 4.00% 4.00% — —
Actuarial assumptions used to determine
net periodic benefit cost for years ended
December 31:
Discount rate 6.00% 5.75% 5.875% 5.70% 5.50%
Expected rate of return on plan assets 9.00% 9.00% 9.00% — —
Expected annual rate of compensation increase 4.00% 4.00% 4.00% — —
To select a discount rate for our retirement benefit plans, we use a modeling process that involves matching
the expected cash outflows of our benefit plans to a yield curve constructed from a portfolio of double A rated
fixed-income debt instruments. We use the average yield of this hypothetical portfolio as a discount rate
benchmark. The discount rate used to determine the other postretirement benefit obligation is lower due to a
shorter expected duration of other postretirement plan obligations as compared to pension plan obligations.
Our expected rate of return on plan assets of 9 percent is a long-term rate based on historic plan asset
returns over varying long-term periods combined with current market conditions and broad asset mix
considerations. The expected rate of return is a long-term assumption and generally does not change annually.
Mortality assumptions for our U.S. benefit plans were updated as of December 31, 2005 using the RP2000
Mortality table for all participants.
Pension Benefits
Included in the aggregate data in the tables below are the amounts applicable to our pension plans with
accumulated benefit obligations exceeding the fair value of plan assets, as well as plans with projected benefit
obligations exceeding the fair value of plan assets. Amounts related to such plans were as follows:
December 31,
2007 2006
Plans with accumulated benefit obligations in excess of plan assets
Accumulated benefit obligations $ 2,766 $ 3,493
Fair value of plan assets $ 2,140 $ 2,692
Plans with projected benefit obligations in excess of plan assets
Projected benefit obligations $ 4,329 $ 5,042
Fair value of plan assets $ 3,522 $ 3,927
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