Motorola 2007 Annual Report Download - page 112

Within the equity securities asset class, the investment policy provides for investments in a broad range of
publicly-traded securities including both domestic and international stocks. Within the fixed income securities asset
class, the investment policy provides for investments in a broad range of publicly-traded debt securities ranging
from U.S. Treasury issues, corporate debt securities, mortgages and asset-backed issues, as well as international
debt securities. In the cash asset class, investments may be in cash and cash equivalents.
The Company expects to make cash contributions of approximately $20 million to the retiree health care plan
in 2008. The following benefit payments, which reflect expected future service, as appropriate, are expected to be
paid:
Year
2008 $38
2009 36
2010 35
2011 34
2012 31
2013-2017 143
The health care trend rate used to determine the December 31, 2007 accumulated postretirement benefit
obligation is 9% for 2008. Beyond 2008, the rate is assumed to decrease by 1% per year until it reaches 5% by
2012 and then remains flat. The health care trend rate used to determine the December 31, 2006 accumulated
postretirement benefit obligation was 10%.
Changing the health care trend rate by one percentage point would change the accumulated postretirement
benefit obligation and the net retiree health care expense as follows:
1% Point
Increase 1% Point Decrease
Effect on:
Accumulated postretirement benefit obligation $14 $(13)
Net retiree health care expense 1 (1)
The Company maintains a lifetime cap on postretirement health care costs, which reduces the liability
duration of the plan. A result of this lower duration is a decreased sensitivity to a change in the discount rate trend
assumption with respect to the liability and related expense.
The Company has no significant postretirement health care benefit plans outside the United States.
Defined Contribution Plan
The Company and certain subsidiaries have various defined contribution plans, in which all eligible employees
participate. In the U.S., the 401(k) plan is a contributory plan. Matching contributions are based upon the amount
of the employees’ contributions. Effective January 1, 2005, newly hired employees have a higher maximum
matching contribution at 4% on the first 5% of employee contributions, compared to 3% on the first 6% of
employee contributions for employees hired prior to January 2005. The Company’s expenses, primarily relating to
the employer match, for all defined contribution plans, for the years ended December 31, 2007, 2006 and 2005
were $116 million, $105 million and $105 million, respectively.
8. Share-Based Compensation Plans and Other Incentive Plans
Stock Options and Employee Stock Purchase Plan
The Company grants options to acquire shares of common stock to certain employees, non-employee directors
and to existing option holders in connection with the merging of option plans following an acquisition. Each
option granted has an exercise price of 100% of the fair market value of the common stock on the date of the
grant. Most option awards have a contractual life of ten years and vest over four years. Upon the occurrence of a
change in control, each stock option outstanding on the date on which the change in control occurs will
immediately become exercisable in full.
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