JP Morgan Chase 2009 Annual Report Download - page 189

JPMorgan Chase & Co./2009 Annual Report
187
The following table presents the components of net periodic benefit costs reported in the Consolidated Statements of Income and other com-
prehensive income for the Firm’s U.S. and non-U.S. defined benefit pension and OPEB plans.
Defined benefit pension plans
U.S. Non-U.S.
OPEB plans
Year ended December 31, (in millions) 2009 2008 2007 2009 2008 2007 2009 2008 2007
Components of net periodic benefit cost
Benefits earned during the year $ 313 $ 278 $ 270 $ 28 $ 29 $ 36 $ 3 $ 5 $ 7
Interest cost on benefit obligations 514 488 468 122 142 144 65 74 74
Expected return on plan assets (585) (719) (714) (115) (152) (153) (97) (98) (93)
Amortization:
Net loss 304 — — 44 25 55 — — 14
Prior service cost/(credit) 4 4 5 — — — (14) (16) (16)
Curtailment (gain)/loss 1 1 — — — — 5 4 2
Settlement (gain)/loss — — — 1 — (1) — — —
Special termination benefits — — — 1 3 1 — — 1
Net periodic benefit cost 551 52 29 81 47 82 (38) (31) (11)
Other defined benefit pension plans(a) 15 11 4 12 14 27 NA NA NA
Total defined benefit plans 566 63 33 93 61 109 (38) (31) (11)
Total defined contribution plans 359 263 268 226 286 219 NA NA NA
Total pension and OPEB cost included
in compensation expense
$ 925 $ 326 $ 301 $ 319 $ 347 $ 328 $ (38) $ (31) $ (11)
Changes in plan assets and benefit
obligations recognized in other
comprehensive income
Net (gain)/loss arising during the year $ (168) $ 3,243 $ (533) $ 183 $ 235 $ (176) $ (176) $ 248 $ (223)
Prior service credit arising during the year (384) — — (1) — (2) — — —
Amortization of net loss (304) — — (44) (27) (55) — — (14)
Amortization of prior service (cost)/credit (6) (5) (5) — — — 15 15 16
Curtailment (gain)/loss — — — — — (5) 2 3 3
Settlement loss/(gain) — — — (1) — 1 — — —
Foreign exchange impact and other 18 — — 36 (150) — (1) 3 —
Total recognized in other comprehensive
income (844) 3,238 (538) 173 58 (237) (160) 269 (218)
Total recognized in net periodic benefit
cost and other comprehensive income
$ (293) $ 3,290 $ (509) $ 254 $ 105 $ (155) $ (198) $ 238 $ (229)
(a) Includes various defined benefit pension plans, which are individually immaterial.
The estimated pretax amounts that will be amortized from AOCI into net periodic benefit cost in 2010 are as follows.
Defined benefit pension plans OPEB plans
Year ended December 31, 2010 (in millions) U.S. Non-U.S. U.S. Non-U.S.
Net loss $ 226 $ 58 $ — $ (1)
Prior service cost/(credit) (43) — (13) —
Total $ 183 $ 58 $ (13) $ (1)
The following table presents the actual rate of return on plan assets for the U.S. and non-U.S. defined benefit pension and OPEB plans.
U.S. Non-U.S.
December 31, 2009 2008 2007 2009 2008 2007
Actual rate of return:
Defined benefit pension plans 13.78% (25.17)% 7.96% 3.17-22.43% (21.58)-5.06% 0.06-7.51%
OPEB plans 15.93 (17.89) 6.51 NA NA NA
Plan assumptions
JPMorgan Chase’s expected long-term rate of return for U.S. de-
fined benefit pension and OPEB plan assets is a blended average of
the investment advisor’s projected long-term (10 years or more)
returns for the various asset classes, weighted by the asset alloca-
tion. Returns on asset classes are developed using a forward-
looking building-block approach and are not strictly based on
historical returns. Equity returns are generally developed as the sum
of inflation, expected real earnings growth and expected long-term
dividend yield. Bond returns are generally developed as the sum of
inflation, real bond yield and risk spread (as appropriate), adjusted
for the expected effect on returns from changing yields. Other
asset-class returns are derived from their relationship to the equity
and bond markets. Consideration is also given to current market
conditions and the short-term portfolio mix of each plan; as a