PNC Bank 2007 Annual Report Download - page 105

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The guidelines also indicate which investments and strategies
the manager is permitted to use to achieve its performance
objectives, and which investments and strategies it is
prohibited from using.
Where public market investment strategies may include the
use of derivatives and/or currency management, language is
incorporated in the managers’ guidelines to define allowable
and prohibited transactions and/or strategies. Derivatives are
typically employed by investment managers to modify risk/
return characteristics of their portfolio(s), implement asset
allocation changes in a cost-effective manner, or reduce
transaction costs. Under the managers’ investment guidelines,
derivatives may not be used solely for speculation or leverage.
Derivatives are used only in circumstances where they offer
the most efficient economic means of improving the risk/
reward profile of the portfolio.
BlackRock, PFPC and our Retail Banking business segments
receive compensation for providing investment management,
trustee and custodial services for the majority of the Trust
portfolio. Compensation for such services is paid by PNC.
Non-affiliate service providers for the Trust are compensated
from plan assets.
The following table provides information regarding our
estimated future cash flows related to our various plans:
Estimated Cash Flows
Postretirement Benefits
In millions
Qualified
Pension
Nonqualified
Pension
Gross
PNC
Benefit
Payments
Reduction
in PNC
Benefit
Payments
Due to
Medicare
Part D
Subsidy
Estimated 2008
employer
contributions — $12 $ 22 $2
Estimated future
benefit
payments
2008 $130 $12 $ 22 $2
2009 132 12 23 2
2010 130 13 23 2
2011 129 12 23 1
2012 122 11 22 1
2013 – 2017 579 48 107 6
The qualified pension plan contributions are deposited into the
Trust, and the qualified pension plan benefit payments are
paid from the Trust. For the other plans, total contributions
and the benefit payments are the same and represent expected
benefit amounts, which are paid from general assets.
Postretirement benefits are net of participant contributions.
The components of net periodic benefit cost/(income) and other amounts recognized in other comprehensive income were as
follows:
Qualified Pension Plan Nonqualified Pension Plan Postretirement Benefits
Year ended December 31 – in millions 2007 2006 2005 2007 2006 2005 2007 2006 2005
Net periodic cost consists of:
Service cost $42 $34 $33 $2 $1 $1 $3 $2 $2
Interest cost 82 68 65 64414 13 14
Expected return on plan assets (156) (129) (128)
Amortization of prior service cost (1) (1) (7) (6) (7)
Amortization of actuarial losses (gains) 216 23 233 14
Net periodic cost $ (30) $ (12) $ (8) $10 $8 $8 $10 $10 $13
Other changes in plan assets and benefit obligations
recognized in other comprehensive income:
Current year prior service cost/(credit) $ (5)
Amortization of prior service (cost)/credit 7
Current year actuarial loss/(gain) $ 16 $ 4 (2)
Amortization of actuarial (loss)/gain (2) (2)
Total recognized in OCI 14 2
Total recognized in net periodic cost and OCI $ (16) $12 $10
100