Northrop Grumman 2010 Annual Report Download - page 108
Download and view the complete annual report
Please find page 108 of the 2010 Northrop Grumman annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.-
1 -
2
-
3
-
4
-
5
-
6
-
7
-
8
-
9
-
10
-
11
-
12
-
13
-
14
-
15
-
16
-
17
-
18
-
19
-
20
-
21
-
22
-
23
-
24
-
25
-
26
-
27
-
28
-
29
-
30
-
31
-
32
-
33
-
34
-
35
-
36
-
37
-
38
-
39
-
40
-
41
-
42
-
43
-
44
-
45
-
46
-
47
-
48
-
49
-
50
-
51
-
52
-
53
-
54
-
55
-
56
-
57
-
58
-
59
-
60
-
61
-
62
-
63
-
64
-
65
-
66
-
67
-
68
-
69
-
70
-
71
-
72
-
73
-
74
-
75
-
76
-
77
-
78
-
79
-
80
-
81
-
82
-
83
-
84
-
85
-
86
-
87
-
88
-
89
-
90
-
91
-
92
-
93
-
94
-
95
-
96
-
97
-
98 -
99 -
100 -
101 -
102 -
103 -
104 -
105 -
106 -
107 -
108 -
109 -
110 -
111 -
112 -
113 -
114 -
115 -
116 -
117 -
118 -
119
-
120
-
121
-
122
-
123
-
124
-
125
-
126
-
127
-
128
-
129
-
130
-
131
-
132
 |
 |
The accumulated benefit obligation for all defined benefit pension plans was $23.6 billion and $22.1 billion at
December 31, 2010, and 2009, respectively.
Amounts for pension plans with accumulated benefit obligations in excess of fair value of plan assets are as
follows:
$ in millions 2010 2009
December 31
Projected benefit obligation $8,667 $20,687
Accumulated benefit obligation 7,845 19,162
Fair value of plan assets 6,829 17,739
Plan Assumptions
On a weighted-average basis, the following assumptions were used to determine the benefit obligations and the
net periodic benefit cost:
2010 2009 2010 2009
Medical and
Life Benefits
Pension
Benefits
Assumptions Used to Determine Benefit Obligation at December 31
Discount rate 5.76% 6.03% 5.62% 5.80%
Rate of compensation increase 3.50% 3.75%
Initial health care cost trend rate assumed for the next year 8.00% 7.00%
Rate to which the cost trend rate is assumed to decline (the ultimate
trend rate) 5.00% 5.00%
Year that the rate reaches the ultimate trend rate 2017 2014
Assumptions Used to Determine Benefit Cost for the Year Ended
December 31
Discount rate 6.00% 6.25% 5.79% 6.25%
Expected long-term return on plan assets 8.50% 8.50% 6.90% 6.95%
Rate of compensation increase 3.75% 4.00%
Initial health care cost trend rate assumed for the next year 7.00% 7.50%
Rate to which the cost trend rate is assumed to decline (the ultimate
trend rate) 5.00% 5.00%
Year that the rate reaches the ultimate trend rate 2014 2014
The discount rate is generally based on the yield on high-quality corporate fixed-income investments. At the end
of each year, the discount rate is primarily determined using the results of bond yield curve models based on a
portfolio of high quality bonds matching the notional cash inflows with the expected benefit payments for each
significant benefit plan.
The assumptions used for pension benefits are consistent with those used for retiree medical and life insurance
benefits. The long-term rate of return on plan assets used for the medical and life benefits are reduced to allow
for the impact of tax on expected returns as, unlike the pension trust, the earnings of certain Voluntary
Employee Beneficiary Association (VEBA) trusts are taxable.
Through consultation with investment advisors, expected long-term returns for each of the plans’ strategic asset
classes were developed. Several factors were considered, including survey of investment managers’ expectations,
current market data such as yields/price-earnings ratios, and historical market returns over long periods. Using
policy target allocation percentages and the asset class expected returns, a weighted-average expected return was
calculated.
-98-
NORTHROP GRUMMAN CORPORATION