JP Morgan Chase 2005 Annual Report Download - page 99

JPMorgan Chase & Co. /2005 Annual Report 97
Defined benefit pension plans
U.S. Non-U.S. Other postretirement benefit plans(c)(d)
December 31, (in millions) 2005 2004(b) 2005 2004(b) 2005 2004(b)
Change in benefit obligation
Benefit obligation at beginning of year $ (7,594) $ (4,633) $ (1,969) $ (1,659) $ (1,577) $ (1,252)
Merger with Bank One —(2,497) —(25) —(216)
Cazenove business partnership ——(291) ———
Benefits earned during the year (280) (251) (25) (17) (13) (15)
Interest cost on benefit obligations (431) (348) (104) (87) (81) (81)
Plan amendments —70 ——117 32
Employee contributions ————(44) (36)
Actuarial gain (loss) (122) (511) (310) (99) 21 (163)
Benefits paid 723 555 66 64 187 167
Curtailments 28 21 ——(9) (8)
Special termination benefits ———(12) (1) (2)
Foreign exchange impact and other ——255 (134) 5(3)
Benefit obligation at end of year $ (7,676) $ (7,594) $ (2,378) $ (1,969) $ (1,395) $ (1,577)
Change in plan assets
Fair value of plan assets at beginning of year $ 9,637 $ 4,866 $ 1,889 $ 1,603 $ 1,302 $ 1,149
Merger with Bank One —3,280 —20 —98
Cazenove business partnership ——252 ———
Actual return on plan assets 703 946 308 164 43 84
Firm contributions —1,100 78 40 32
Benefits paid (723) (555) (66) (64) (19) (31)
Foreign exchange impact and other ——(238) 126 ——
Fair value of plan assets at end of year $ 9,617(e) $ 9,637(e) $ 2,223 $ 1,889 $ 1,329 $ 1,302
Reconciliation of funded status
Funded status $ 1,941 $ 2,043 $ (155) $ (80) $ (66) $ (275)
Unrecognized amounts:(a)
Net transition asset ———(1) ——
Prior service cost 40 47 34(105) (23)
Net actuarial loss 1,078 997 599 590 335 321
Prepaid benefit cost reported in Other assets $ 3,059 $ 3,087 $ 447(f) $ 513(f) $ 164 $23
Accumulated benefit obligation $ (7,274) $ (7,167) $ (2,303) $ (1,931) NA NA
(a) For pension benefit plans, the unrecognized net loss is primarily the result of declines in interest rates in recent years, as offset by recent asset gains and amounts recognized through amortization in
expense. Other factors that contribute to this unrecognized amount include demographic experience, which differs from expected, and changes in other actuarial assumptions. For other postretirement
benefit plans, the primary drivers of the cumulative unrecognized loss was the decline in the discount rate in recent years and the medical trend, which was higher than expected.These losses have
been offset somewhat by the recognition of future savings attributable to Medicare Part D subsidy payments.
(b) Effective July 1, 2004, the Firm assumed the obligations of heritage Bank One’s pension and postretirement plans. These plans were similar to those of JPMorgan Chase and were merged into the
Firm’s plans effective December 31, 2004.
(c) The Medicare Prescription Drug, Improvement and Modernization Act of 2003 resulted in a $35 million reduction in the Accumulated other postretirement benefit obligation as of January 1, 2004.
During 2005, an additional $116 million reduction was reflected for recognition of the final Medicare Part D regulations issued on January 21, 2005.
(d) Includes postretirement benefit obligation of $44 million and $43 million and postretirement benefit liability (included in Accrued expenses) of $50 million and $57 million at December 31, 2005
and 2004, respectively, for the U.K. plan, which is unfunded.
(e) At December 31, 2005 and 2004, approximately $405 million and $358 million, respectively, of U.S. plan assets relate to surplus assets of group annuity contracts.
(f) At December 31, 2005 and 2004,Accrued expenses related to non-U.S. defined benefit pension plans that JPMorgan Chase elected not to prefund fully totaled $164 million and $124 million, respectively.
Defined benefit pension plans
U.S. Non-U.S. Other postretirement benefit plans
For the year ended December 31, (in millions) 2005 2004(a) 2003(b) 2005 2004(a) 2003(b) 2005(c) 2004(a)(c) 2003(b)
Components of net periodic benefit cost
Benefits earned during the period $ 280 $ 251 $ 180 $25 $17 $16 $13 $15 $15
Interest cost on benefit obligations 431 348 262 104 87 74 81 81 73
Expected return on plan assets (694) (556) (322) (109) (90) (83) (90) (86) (92)
Amortization of unrecognized amounts:
Prior service cost 513 6 11—(10) —1
Net actuarial loss 423 62 38 44 35 12 ——
Curtailment (gain) loss 272 ——8(17) 82
Settlement (gain) loss ——— —(1) — ———
Special termination benefits ——— —11 — 12—
Reported net periodic benefit costs $ 28 $ 86 $ 190 $59 $69 $50 $ (10) $ 20 $ (1)
(a) Effective July 1, 2004, the Firm assumed the obligations of heritage Bank One’s pension and postretirement plans.These plans were similar to those of JPMorgan Chase and were merged into the
Firm’s plans effective December 31, 2004.
(b) Heritage JPMorgan Chase results only for 2003.
(c) The Medicare Prescription Drug, Improvement and Modernization Act of 2003 resulted in a $15 million and $5 million reduction in 2005 and 2004, respectively, in net periodic benefit cost.
The impact on 2005 cost was higher as a result of the final Medicare Part D regulations issued on January 21, 2005.