Kraft 2006 Annual Report Download - page 95

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The following weighted-average assumptions were used to determine the Company's postretirement benefit obligations at December 31:
U.S. Plans
Canadian Plans
2006
2005
2006
2005
Discount rate 5.90% 5.60% 5.00% 5.00%
Health care cost trend rate assumed for next year 8.00 8.00 8.50 9.00
Ultimate trend rate 5.00 5.00 6.00 6.00
Year that the rate reaches the ultimate trend rate 2011 2009 2012 2012
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, 2006:
One-Percentage-Point
Increase
One-Percentage-Point
Decrease
Effect on total of service and interest cost 14.2% (11.6)%
Effect on postretirement benefit obligation 11.1 (9.3)
The Company's estimated future benefit payments for its postretirement health care plans at December 31, 2006, were as follows:
U.S. Plans
Canadian Plans
(in millions)
2007 $ 208 $ 8
2008 212 8
2009 215 8
2010 216 8
2011 218 9
2012-2016 1,097 48
Postemployment Benefit Plans:
Kraft and certain of its affiliates sponsor postemployment benefit plans covering substantially all salaried and certain hourly employees. The cost of these
plans is charged to expense over the working life of the covered employees. Net postemployment costs consisted of the following for the years ended
December 31, 2006, 2005 and 2004:
2006
2005
2004
(in millions)
Service cost $ 4 $ 7 $ 7
Interest cost 4
Amortization of unrecognized net gains (7) (7) (7)
Other expense 236 139 167
Net postemployment costs $ 237 $ 139 $ 167
As previously discussed in Note 3.Asset Impairment, Exit and Implementation Costs, the Company announced several workforce reduction programs during
2006, 2005 and 2004, as part of the overall restructuring program. The cost of these programs, $247 million, $139 million and $167 million in 2006, 2005 and
2004, respectively, is included in other expense, above.
The estimated net gain for the postemployment benefit plans that will be amortized from accumulated other comprehensive income into net postemployment
costs during 2007 is $7 million.
90
Source: KRAFT FOODS INC, 10-K, March 01, 2007