Mercedes 2004 Annual Report Download - page 149

Impact of the Medicare Act. In the U.S., the Medicare Pre-
scription Drug, Improvement and Modernization Act of 2003
(“Medicare Act”) resulted in an overall reduction of the accumu-
lated postretirement benefit obligation for postretirement health
and life insurance benefits to €997 million as of January 1, 2004.
The impact of the remeasurement of the accumulated postretire-
ment benefit obligation is being amortized over the average
service period of employees eligible for postretirement benefits
beginning January 1, 2004. Consequently, the net periodic postre-
tirement benefit cost for 2004 has been reduced by €148 million.
Estimated Future Subsidies due to Medicare Act. The total
estimated future subsidies due to Medicare Act for the next 10
years approximate €460 million and are expected to be received
as follows:
Contributions. DaimlerChrysler did not make any contributions
to its other postretirement plans in 2004 or 2003 and does not
plan to make any contributions in 2005.
Assumptions. Assumed discount rates and rates of increase in
remuneration used in calculating the accumulated postretirement
benefit obligations together with long-term rates of return on
plan assets vary according to the economic conditions of the
country in which the plans are situated.
The weighted average assumptions used to determine the
benefit obligations of the Group’s postretirement benefit plans at
December 31 were as follows (in %):
The weighted average assumptions used to determine the net
periodic postretirement benefit cost of the Group’s postretire-
ment benefit plans were as follows (in %):
U.S. postretirement benefit plan assets utilize an asset allocation
substantially similar to that of the pension assets so the expect-
ed rate of return is the same for both pension and postretirement
benefit plan asset portfolios. Accordingly, the information about
the expected rate of return on pension plan assets described
above also applies to postretirement plan assets.
The assumptions have a significant effect on the amounts report-
ed for the Group’s health care plans. The following schedule pre-
sents the effects of a one-percentage-point change in assumed
ultimate health care cost inflation rates as from 2011:
For 2005 the expected rate of return on plan assets is the same
as the rate applied in 2004.
145
(in billions of €)
2010-
2014
20092008200720062005
40 43 45 48 284–Medicare Act
200220032004
6.0
8.0
5.0
6.3
8.0
5.0
6.8
10.0
5.0
Average assumptions:
Discount rate
Health care inflation rate in following
(or “base”) year
Ultimate health care inflation rate
(2011/2008/2008)
200220032004
6.3
8.5
8.0
5.0
6.8
8.5
10.0
5.0
7.4
10.5
6.9
5.0
Average assumptions:
Discount rate
Expected return on plan assets
(at the beginning of the year)
Health care inflation rate in following
(or “base”) year
Ultimate health care inflation rate (2008)
(in millions of €)
1-Percentage-
Point Increase
156
1,720
(126)
(1,422)
1-Percentage-
Point Decrease
Effect on total of service and interest
cost components
Effect on accumulated postretirement benefit
obligations