Lockheed Martin 1999 Annual Report Download - page 51

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999
The following provides a reconciliation of benefit obli-
gations, plan assets and funded status of the plans:
Retiree Medical
Defined Benefit and Life
Pension Plans Insurance Plans
(In millions) 1999 1998 1999 1998
Change in Benefit Obligations
Benefit obligations
at beginning of year $18,146 $16,326 $ 2,685 $ 2,526
Service cost 564 491 43 40
Interest cost 1,245 1,197 177 178
Benefits paid (1,110) (1,117) (208) (210)
Amendments 77 259 3(72)
Divestitures —(9) —(11)
Actuarial (gains) losses (852) 995 (23) 205
Participants’ contributions 3429 29
Benefit obligations
at end of year $18,073 $18,146 $ 2,706 $ 2,685
Change in Plan Assets
Fair value of plan assets
at beginning of year $22,811 $20,642 $ 1,002 $ 895
Actual return on
plan assets 3,211 3,140 116 86
Corporation’s contributions 149 152 118 120
Benefits paid (1,110) (1,117) (124) (128)
Participants’ contributions 3429 29
Divestitures —(10) ——
Fair value of plan assets
at end of year $25,064 $22,811 $ 1,141 $ 1,002
Funded (unfunded) status
of the plans $ 6,991 $ 4,665 $(1,565) $(1,683)
Unrecognized net
actuarial gain (6,240) (4,142) (191) (156)
Unrecognized prior
service cost 659 651 (49) (64)
Unrecognized
transition asset (13) (17) ——
Prepaid (accrued)
benefit cost $ 1,397 $ 1,157 $(1,805) $(1,903)
The net pension cost and the net post-retirement benefit
cost related to the Corporation’s plans include the following
components:
(In millions) 1999 1998 1997
Defined Benefit Pension Plans
Service cost $ 564 $ 491 $ 444
Interest cost 1,245 1,197 1,163
Expected return on plan assets (1,920) (1,715) (1,542)
Amortization of prior service cost 69 58 54
Recognized net actuarial
(gains) losses (43) (22) —
Amortization of transition asset (4) (89) (90)
Net pension (income) cost $ (89) $ (80) $ 29
Retiree Medical and Life Insurance Plans
Service cost $ 43 $ 40 $ 39
Interest cost 177 178 191
Expected return on plan assets (90) (79) (64)
Amortization of prior service cost (12) (6) (6)
Recognized net actuarial gains (8) (15) (9)
Net post-retirement cost $ 110 $ 118 $ 151
The following actuarial assumptions were used to deter-
mine the benefit obligations and the net costs related to the
Corporation’s defined benefit pension and post-retirement
benefit plans, as appropriate:
1999 1998 1997
Discount rates 7.75% 7.0% 7.5%
Expected long-term rates of
return on assets 9.5 9.5 9.5
Rates of increase in future
compensation levels 5.5 5.5 6.0
The medical trend rates used in measuring the post-
retirement benefit obligation were 6.0 percent in 1999
and 6.7 percent in 1998, and were assumed to gradually
decrease to 4.5 percent by the year 2004. An increase
or decrease of one percentage point in the assumed med-
ical trend rates would result in a change in the benefit
obligation of approximately 4.6 percent and (3.6) percent,
respectively, at December 31, 1999, and a change in
the 1999 post-retirement service cost plus interest cost of
approximately 7.2 percent and (5.8) percent, respectively.
The medical trend rate for 2000 is 7.8 percent.