Kodak 2005 Annual Report Download - page 112

110
During the quarter ended June 30, 2004, the Company adopted the provisions of FSP 106-2 with respect to its U.S. Other Postretirement Plan, which
resulted in a remeasurement of the Plan’s accumulated projected benefi t obligation (APBO) as of April 1, 2004. This remeasurement takes into
account the impact of the subsidy the Company will receive under the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the
Act) and certain actuarial assumption changes including: (1) changes in participation rates, (2) a decrease in the Company’s Medicare plan premiums,
and (3) a decrease in the discount rate from 6.00% to 5.75%. The actuarially determined impact of the subsidy reduced the APBO by approximately
$228 million. The effect of the subsidy on the measurement of the net periodic other postretirement benefi t cost in 2004 was to reduce the cost by
approximately $52 million as follows:
12 months ended December 31, 2004
(in millions) Effect of Subsidy Effect of Assumption Changes Total
Service cost $ — $ 1 $ 1
Interest cost 13 13 26
Amortization of actuarial gain 17 8 25
$ 30 $ 22 $ 52
The effect of the subsidy has been included in the measurement of the net periodic other postretirement cost for the year-ended December 31, 2005
and will be included in the measurement of the net periodic other postretirement cost for all annual periods subsequent to 2004 as well.
The U.S. plan represents approximately 97% of the total other postretirement net benefi t obligation as of both December 31, 2005 and 2004 and,
therefore, the weighted-average assumptions used to compute the other postretirement benefi t amounts approximate the U.S. assumptions.
The weighted-average assumptions used to determine the net benefi t obligations were as follows:
2005 2004
Discount rate 5.50% 5.75%
Salary increase rate 4.60% 4.25%
The weighted-average assumptions used to determine the net postretirement benefi t cost were as follows:
2005 2004
Discount rate 5.50% 6.00%
Salary increase rate 4.34% 4.25%
The weighted-average assumed healthcare cost trend rates used to compute the other postretirement amounts were as follows:
2005 2004
Healthcare cost trend 10.00% 10.00%
Rate to which the cost trend rate is assumed
to decline (the ultimate trend rate) 5.00% 5.00%
Year that the rate reaches the ultimate trend rate 2011 2010
Assumed healthcare cost trend rates have a signifi cant effect on the amounts reported for the healthcare plans. A one-percentage point change in
assumed healthcare cost trend rates would have the following effects:
1% increase 1% decrease
Effect on total service and interest cost $ 2 $ (2)
Effect on postretirement benefi t obligation 37 (32)