Intel 2005 Annual Report Download - page 76

Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Assumptions
Weighted-average actuarial assumptions used to determine benefit obligations for the plans were as follows:
For the postretirement medical benefit plan, an increase in the assumed healthcare cost trend rate of one percentage point each year would not have a
significant impact on the benefit obligation because the plan provides defined credits that the retiree can use to pay all or a portion of the cost to
purchase medical coverage.
Weighted-average actuarial assumptions used to determine costs for the plans were as follows:
For the U.S. plan, the discount rate was developed by calculating the benefit payment streams by year to determine when benefit payments will be due.
The benefit payment streams were then matched by year to U.S. Treasury zero coupon strips to match the timing and amount of the expected benefit
payments. The company adjusted the zero coupon rate by a historical credit risk spread, and discounted it back to the measurement date to determine
the appropriate discount rate. For the non-U.S. plans, the discount rate was developed by analyzing long-term bond rates and matching the bond
maturity with the average duration of the pension liabilities. Several factors are considered in developing the asset return assumptions for the U.S. and
non-U.S. plans. The company analyzed rates of return relevant to the country where each plan is in effect and the investments applicable to the plan.
Additional analysis was performed in order to reflect expectations of future returns. The company analyzed local actuarial projections as well as the
projected rates of return from investment managers. The expected long-term rate of return shown for the non-U.S. plan assets is weighted to reflect
each country’s relative portion of the non-U.S. plan assets.
Net Periodic Benefit Cost
The net periodic benefit cost for the plans included the following components:
72
U.S. Pension
Non
-
U.S. Pension
Postretirement
Benefits
Benefits
Medical Benefits
2005
2004
2005
2004
2005
2004
Discount rate
5.4
%
5.6
%
5.4
%
5.9
%
5.6
%
5.6
%
Expected return on plan assets
5.6
%
8.0
%
6.1
%
6.3
%
—
—
Rate of compensation increase
5.0
%
5.0
%
4.0
%
3.5
%
—
—
Future profit sharing contributions
8.0
%
8.0
%
—
—
—
—
U.S. Pension
Non
-
U.S. Pension
Postretirement
Benefits
Benefits
Medical Benefits
2005
2004
2005
2004
2005
2004
Discount rate
5.6
%
6.0
%
5.9
%
5.9
%
5.6
%
6.0
%
Expected return on plan assets
8.0
%
8.0
%
6.3
%
6.3
%
—
—
Rate of compensation increase
5.0
%
5.0
%
3.5
%
3.5
%
—
—
Future profit sharing contributions
8.0
%
8.0
%
—
—
—
—
Non
-
U.S. Pension
Postretirement
U.S. Pension Benefits
Benefits
Medical Benefits
(In Millions)
2005
2004
2003
2005
2004
2003
2005
2004
2003
Service cost
$
4
$
4
$
7
$
31
$
29
$
27
$
11
$
15
$
12
Interest cost
2
2
2
18
16
18
10
11
10
Expected return on plan assets
(3
)
(2
)
(2
)
(18
)
(14
)
(1
)
—
—
—
Amortization of prior service cost
—
1
1
—
—
—
4
4
4
Recognized net actuarial loss
—
—
1
—
—
1
—
1
—
Net periodic benefit cost
$
3
$
5
$
9
$
31
$
31
$
45
$
25
$
31
$
26