Kraft 2008 Annual Report Download - page 71

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Included in the tables above are our U.S. and non-U.S. plans with accumulated benefit obligations in excess of plan assets. The majority of these U.S. plans are
for salaried employees that cannot be funded under IRS regulations. The projected benefit obligations, accumulated benefit obligations and the fair value of plan
assets at December 31, 2007 and 2006 were:
U.S. Plans Non-U.S. Plans
2007 2006 2007 2006
(in millions)
Projected benefit obligation $ 203 $ 247 $ 1,470 $ 1,364
Accumulated benefit obligation 180 196 1,378 1,281
Fair value of plan assets - 11 771 646
The following weighted-average assumptions were used to determine our benefit obligations under the plans at December 31:
U.S. Plans Non-U.S. Plans
2007 2006 2007 2006
Discount rate 6.30% 5.90% 5.44% 4.67%
Rate of compensation increase 4.00% 4.00% 3.13% 3.00%
Our 2007 year-end U.S. and Canadian plans discount rates were developed from a model portfolio of high quality, fixed-income debt instruments with
durations that match the expected future cash flows of the benefit obligations. The 2007 year-end discount rates for our non-U.S. plans (other than Canadian
pension plans) were developed from local bond indices that match local benefit obligations as closely as possible.
Components of Net Periodic Pension Cost:
Net periodic pension cost consisted of the following for the years ended December 31, 2007, 2006 and 2005:
U.S. Plans Non-U.S. Plans
2007 2006 2005 2007 2006 2005
(in millions)
Service cost $ 159 $ 170 $ 165 $ 101 $ 95 $ 80
Interest cost 365 354 345 194 169 170
Expected return on plan assets (523) (504) (507) (251) (203) (190)
Amortization:
Net loss from experience
differences 138 198 166 66 73 47
Prior service cost 5 5 4 9 8 8
Other expense 68 66 83 4 13 25
Net pension cost $ 212 $ 289 $ 256 $ 123 $ 155 $ 140
Employees left Kraft under workforce reduction programs, resulting in settlement losses for the U.S. plans of $21 million in 2007, $17 million in 2006 and
$10 million in 2005. In addition, retiring employees elected lump-sum payments, resulting in settlement losses of $47 million in 2007, $49 million in 2006 and
$73 million in 2005. Non-U.S. plant closures and early retirement benefits resulted in curtailment and settlement losses of $4 million in 2007, $13 million in
2006 and $25 million in 2005. These costs are included in other expense, above.
The estimated net loss for the combined U.S. and non-U.S. pension plans that is expected to be amortized from accumulated other comprehensive losses into net
periodic pension cost during 2008 is $115 million. The estimated prior service cost for the combined U.S. and non-U.S. pension plans that is expected to be
amortized from accumulated other comprehensive losses into net periodic pension cost during 2008 is $14 million.
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Source: KRAFT FOODS INC, 10-K, February 25, 2008 Powered by Morningstar® Document Research℠