Kraft 2004 Annual Report Download - page 80

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The following weighted-average assumptions were used to determine the Company’s net
postretirement cost for the years ended December 31:
U.S. Plans Canadian Plans
2004 2003 2002 2004 2003 2002
Discount rate .............. 6.25% 6.50% 7.00% 6.50% 6.75% 6.75%
Health care cost trend rate .... 10.00 8.00 6.20 8.00 7.00 8.00
In 2005, the discount rate used to determine the Company’s net postretirement cost will be 5.75%
and the health care cost trend rate will be 8.00% for its U.S. plans and 9.50% for its Canadian plans.
The Company’s postretirement health care plans are not funded. The changes in the accumulated
benefit obligation and net amount accrued at December 31, 2004 and 2003, were as follows:
2004 2003
(in millions)
Accumulated postretirement benefit obligation at January 1 ............... $2,955 $ 2,712
Service cost ................................................ 43 41
Interest cost ................................................ 173 173
Benefits paid ............................................... (239) (189)
Plan amendments ............................................ (28)
Medicare Prescription Drug, Improvement and Modernization Act of 2003 . . . (315)
Currency .................................................. 10 18
Assumption changes ......................................... 268 174
Actuarial losses ............................................. 36 54
Accumulated postretirement benefit obligation at December 31 ............. 2,931 2,955
Unrecognized actuarial losses ................................... (1,005) (1,064)
Unrecognized prior service cost .................................. 178 202
Accrued postretirement health care costs ............................ $2,104 $ 2,093
The current portion of the Company’s accrued postretirement health care costs of $217 million and
$199 million at December 31, 2004 and 2003, respectively, are included in other accrued liabilities on the
consolidated balance sheets.
The following weighted-average assumptions were used to determine the Company’s
postretirement benefit obligations at December 31:
U.S. Plans Canadian Plans
2004 2003 2004 2003
Discount rate .................................... 5.75% 6.25% 5.75% 6.50%
Health care cost trend rate assumed for next year ......... 8.00 10.00 9.50 8.00
Ultimate trend rate .............................. 5.00 5.00 6.00 5.00
Year that the rate reaches the ultimate trend rate ......... 2008 2006 2012 2010
Assumed health care cost trend rates have a significant effect on the amounts reported for the
health care plans. A one-percentage-point change in assumed health care cost trend rates would have
the following effects as of December 31, 2004:
One-Percentage-Point One-Percentage-Point
Increase Decrease
Effect on total of service and interest cost ............ 12.5% (10.2)%
Effect on postretirement benefit obligation ............ 9.6 (8.1)
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