Kraft 2009 Annual Report Download - page 88

Certain of our U.S. and non-U.S. plans are under funded and have accumulated benefit obligations in excess of plan assets. For these plans,
the projected benefit obligations, accumulated benefit obligations and the fair value of plan assets at December 31, 2009 and 2008 were:
U.S. Plans Non-U.S. Plans
2009 2008 2009 2008
(in millions)
Projected benefit obligation $ 4,666 $ 6,133 $ 3,703 $ 1,740
Accumulated benefit
obligation 4,166 5,464 3,478 1,664
Fair value of plan assets 3,932 4,386 2,629 1,144
We used the following weighted-average assumptions to determine our benefit obligations under the pension plans at December 31:
U.S. Plans Non-U.S. Plans
2009 2008 2009 2008
Discount rate 5.93% 6.10% 5.21% 6.41%
Expected rate of return on
plan assets 8.00% 8.00% 7.26% 7.25%
Rate of compensation
increase 4.00% 4.00% 3.08% 3.09%
Year-end discount rates for our U.S. and Canadian plans 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. Year-end discount rates for our non-U.S.
plans (other than Canadian plans) were developed from local bond indices that match local benefit obligations as closely as possible.
Changes in our discount rates were primarily the result of changes in bond yields year-over-year. We determine our expected rate of return
on plan assets from the plan assets’ historical long-term investment performance, current asset allocation and estimates of future long-term
returns by asset class.
Components of Net Pension Cost:
Net pension cost consisted of the following for the years ended December 31, 2009, 2008 and 2007:
U.S. Plans Non-U.S. Plans
2009 2008 2007 2009 2008 2007
(in millions)
Service cost $ 152 $ 149 $ 159 $ 67 $ 91 $ 101
Interest cost 369 371 365 215 222 194
Expected return on plan
assets (486) (526) (523) (242) (285) (251)
Amortization:
Net loss from experience
differences 160 85 138 23 31 66
Prior service cost 6 7 5 6 7 9
Other expenses 112 74 68 8 16 4
Net pension cost $ 313 $ 160 $ 212 $ 77 $ 82 $ 123
The following costs are included within other expenses above. Severance payments related to our Cost Savings Initiatives and Restructuring
Program, and retired employees who elected lump-sum payments resulted in settlement losses for our U.S. plans of $107 million in 2009,
$74 million in 2008 and $68 million in 2007. In addition, we incurred a $5 million curtailment charge in 2009 related to the freeze of certain of our
U.S. pension plans. Non-U.S. plant closures and early retirement benefits resulted in curtailment and settlement losses of $8 million in 2009,
$16 million in 2008 and $4 million in 2007.
For the U.S. plans, we determine the expected return on plan assets component of net periodic benefit cost using a calculated market return value
that recognizes the cost over a four year period. For our non-U.S. plans, we utilize a similar approach with varying cost recognition periods for
some plans, and with others, we determine the expected return on plan assets based on asset fair values as of the measurement date.
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Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Research℠