Honeywell 2008 Annual Report Download - page 136

HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)
The estimated net loss and prior service cost for pension benefits that will be amortized from accumulated
other comprehensive income (loss) into net periodic benefit cost in 2009 are expected to be $145 and $29
million, respectively. The estimated net loss and prior service credit for other postretirement benefits that will be
amortized from accumulated other comprehensive income (loss) into net periodic benefit cost in 2009 are
expected to be $11 and $(46) million, respectively.
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
2008 2007 2006 2008 2007
Actuarial assumptions used to determine
benefit obligations as of December 31:
Discount rate 6.95% 6.50% 6.00% 6.00% 5.90%
Expected annual rate of compensation increase 4.50% 4.50% 4.00% — —
Actuarial assumptions used to determine
net periodic benefit cost for years ended
December 31:
Discount rate 6.50% 6.00% 5.75% 5.90% 5.70%
Expected rate of return on plan assets 9.00% 9.00% 9.00% — —
Expected annual rate of compensation increase 4.50% 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 principally
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.
Pension Benefits
Included in the aggregate data in the tables above are the amounts applicable to our pension plans with
accumulated benefit obligations exceeding the fair value of plan assets. Amounts related to such plans were as
follows:
December 31,
2008 2007
Projected benefit obligations $ 14,713 $ 2,910
Accumulated benefit obligations $ 14,012 $ 2,766
Fair value of plan assets $ 11,125 $ 2,140
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