KeyBank 2006 Annual Report Download - page 94

94
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES
The investment objectives of the pension funds are developed to reflect
the characteristics of the plans, such as the plans’ pension formulas and
cash lump sum distribution features, and the liability profiles created by
the plans’ participants. An executive oversight committee reviews the
plans’ investment performance at least quarterly, and compares
performance against appropriate market indices. The pension funds’
investment allocation policies specify that fund assets are to be invested
within the following ranges:
Key’s weighted-average asset allocations for its pension funds are
summarized as follows:
Although the investment policies conditionally permit the use of
derivative contracts, no such contracts have been entered into, and
management does not expect to employ such contracts in the future.
OTHER POSTRETIREMENT BENEFIT PLANS
Key sponsors a contributory postretirement healthcare plan that covers
substantially all active and retired employees hired before 2001 who meet
certain eligibility criteria. Retirees’ contributions are adjusted annually
to reflect certain cost-sharing provisions and benefit limitations. Key also
sponsors life insurance plans covering certain grandfathered employees.
These plans are principally noncontributory. Separate Voluntary
Employee Beneficiary Association (“VEBA”) trusts are used to fund the
healthcare plan and one of the life insurance plans.
The components of pre-tax accumulated other comprehensive loss not
yet recognized as net postretirement benefit cost are shown below:
During 2007, Key expects to recognize $4 million of pre-tax accumulated
other comprehensive loss, relating entirely to amortization of the
transition obligation, as net postretirement benefit cost.
Net postretirement benefit cost for all funded and unfunded plans
includes the following components:
Key determines the expected return on plan assets using the plans’ FVA.
The information related to Key’s postretirement benefit plans presented
in the following tables as of or for the years ended December 31 is based
on current actuarial reports using a September 30 measurement date.
Changes in the accumulated postretirement benefit obligation (“APBO”)
are summarized as follows:
Changes in the fair value of postretirement plan assets are summarized
as follows:
The funded status of the postretirement plans, reconciled to the amounts
recognized in the consolidated balance sheets at December 31, 2006 and
2005, is as follows:
Asset Class Investment Range
Equity securities 65% — 80%
Fixed income securities 15 — 25
Convertible securities 0 — 10
Cash equivalents and other assets 0 — 5
December 31, 2006 2005
Equity securities 73% 72%
Fixed income securities 17 17
Convertible securities 89
Cash equivalents and other assets 22
Total 100% 100%
Year ended December 31,
in millions 2006 2005 2004
Service cost of benefits earned $6 $4 $4
Interest cost on accumulated
postretirement benefit obligation 887
Expected return on plan assets (4) (3) (3)
Amortization of unrecognized
transition obligation 444
Amortization of losses 221
Net postretirement benefit cost $16 $15 $13
Year ended December 31,
in millions 2006 2005
APBO at beginning of year $148 $141
Service cost 64
Interest cost 88
Plan participants’ contributions 98
Actuarial (gains) losses (13) 4
Benefit payments (19) (17)
APBO at end of year $139 $148
Year ended December 31,
in millions 2006 2005
FVA at beginning of year $ 74 $ 64
Employer contributions 10 11
Plan participants’ contributions 98
Benefit payments (19) (17)
Actual return on plan assets 88
FVA at end of year $ 82 $ 74
December 31,
in millions 2006 2005
Funded status
a
$(57) $(74)
Unrecognized net loss —33
Unrecognized prior service cost —2
Unrecognized transition obligation —27
Contributions/benefits paid subsequent
to measurement date 24
Accrued postretirement
benefit cost recognized $(55) $ (8)
a
The excess of the accumulated postretirement benefit obligation over the fair value
of plan assets.
December 31,
in millions 2006
Transition obligation $24
Net unrecognized losses 15
Net unrecognized prior service cost 1
Total unrecognized accumulated other comprehensive loss $40
Previous Page
Search
Next Page
Contents