PNC Bank 2007 Annual Report Download - page 103

deferred fees currently recorded by us on these facilities and
the liability established on these facilities related to their
creditworthiness.
F INANCIAL D ERIVATIVES
For exchange-traded contracts, fair value is based on quoted
market prices. For nonexchange-traded contracts, fair value is
based on dealer quotes, pricing models or quoted prices for
instruments with similar characteristics.
N OTE 17 E MPLOYEE B ENEFIT P LANS
P ENSION A ND P OSTRETIREMENT P LANS
We have a noncontributory, qualified defined benefit pension
plan covering eligible employees. Benefits are derived from a
cash balance formula based on compensation levels, age and
length of service. Pension contributions are based on an
actuarially determined amount necessary to fund total benefits
payable to plan participants.
We also maintain nonqualified supplemental retirement plans
for certain employees. We also provide certain health care and
life insurance benefits for qualifying retired employees
(“postretirement benefits”) through various plans. The
nonqualified pension and postretirement benefit plans are
unfunded.
During the first quarter of 2007, we added a defined benefit
pension plan as a result of our Mercantile acquisition. Plan
assets and benefit obligations of the Mercantile plan were
approximately $242 million and $247 million, respectively, at
acquisition date. The $5 million funding deficit was
recognized as part of the Mercantile acquisition purchase price
allocation. We integrated the Mercantile plan into the PNC
plan effective December 31, 2007. The table below also
reflects the integration of other benefit plans for both the
Mercantile and Yardville acquisitions.
We use a measurement date of December 31 for plan assets and benefit obligations. A reconciliation of the changes in the
projected benefit obligation for qualified pension, nonqualified pension and postretirement benefit plans as well as the change in
plan assets for the qualified pension plan follows:
Qualified
Pension
Nonqualified
Pension
Postretirement
Benefits
December 31 (Measurement Date) – in millions 2007 2006 2007 2006 2007 2006
Accumulated benefit obligation at end of year $1,436 $1,186 $ 109 $73
Projected benefit obligation at beginning of year $1,245 $1,290 $76 $73 $ 235 $ 270
Acquisitions 247 34 18
Service cost 42 34 2132
Interest cost 82 68 6414 13
Amendments 2 (5)
Actuarial loss (gain) (including changes in assumptions) (11) (47) 43(2) (30)
Participant contributions 87
Federal Medicare subsidy on benefits paid 22
Benefits paid (98) (102) (9) (5) (30) (29)
Projected benefit obligation at end of year $1,507 $1,245 $ 113 $76 $ 243 $ 235
Fair value of plan assets at beginning of year $1,746 $1,627
Acquisitions 242
Actual return on plan assets 129 221
Employer contribution $9 $5 $20 $20
Participant contributions 87
Federal Medicare subsidy on benefits paid 22
Benefits paid (98) (102) (9) (5) (30) (29)
Fair value of plan assets at end of year $2,019 $1,746
Funded status $ 512 $ 501 $(113) $(76) $(243) $(235)
Net amount recognized on the balance sheet $ 512 $ 501 $(113) $(76) $(243) $(235)
Amounts recognized in accumulated other comprehensive income consist of:
Prior service cost (credit) 22(29) (31)
Net actuarial loss 198 184 30 28 31 33
Amount recognized in AOCI $ 200 $ 186 $30 $28 $2 $2
The fair value of the qualified pension plan assets exceeds both the accumulated benefit obligation and the projected benefit
obligation. The nonqualified pension plan, which contains several individual plans that are accounted for together, is unfunded.
Contributions from us and, in the case of postretirement benefit plans, participant contributions cover all benefits paid under the
nonqualified pension plan and postretirement benefit plans. The benefit obligations, asset values, funded status and balance sheet
impacts are shown in the above table.
98