Prudential 2002 Annual Report Download - page 135
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Please find page 135 of the 2002 Prudential 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.PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
17. EMPLOYEE BENEFIT PLANS (continued)
The assumptions at September 30, used by the Company to calculate the benefit obligations as of that date
and to determine the benefit cost in the year are as follows:
Pension Benefits Other Postretirement Benefits
2002 2001 2000 2002 2001 2000
Weighted-average assumptions
Discount rate (beginning of period) ............................ 7.25% 7.75% 7.75% 7.25% 7.75% 7.75%
Discount rate (end of period) ................................. 6.50% 7.25% 7.75% 6.50% 7.25% 7.75%
Rate of increase in compensation levels (beginning of period) ....... 4.50% 4.50% 4.50% 4.50% 4.50% 4.50%
Rate of increase in compensation levels (end of period) ............ 4.50% 4.50% 4.50% 4.50% 4.50% 4.50%
Expected return on plan assets (beginning of period) ............... 9.50% 9.50% 9.50% 9.00% 9.00% 9.00%
Health care cost trend rates ................................... — — — 6.40–10.00% 6.76–8.76% 7.10–9.50%
Ultimate health care cost trend rate after gradual decrease until 2006 . . — — — 5.00% 5.00% 5.00%
The Company, with respect to pension benefits, uses market related value to determine the components of
net periodic benefit cost. Market related value is a measure of asset value that reflects the difference between
actual and expected return on assets over a 5 year period.
The expected rates of return for 2003 for pension benefits and other postretirement benefits are 8.75% and
7.75%, respectively.
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care
plan. A one-percentage point increase and decrease in assumed health care cost trend rates would have the
following effects:
Other
Postretirement Benefits
2002
(in millions)
One percentage point increase
Increase in total service and interest costs ........................................................... $ 12
Increase in postretirement benefit obligation ........................................................ 178
One percentage point decrease
Decrease in total service and interest costs .......................................................... $ 10
Decrease in postretirement benefit obligation ........................................................ 154
Postemployment Benefits
The Company accrues postemployment benefits primarily for life and health benefits provided to former or
inactive employees who are not retirees. The net accumulated liability for these benefits at December 31, 2002
and 2001, was $91 million and $189 million, respectively, and is included in “Other liabilities.”
Other Employee Benefits
The Company sponsors voluntary savings plans for employees (401(k) plans). The plans provide for salary
reduction contributions by employees and matching contributions by the Company of up to 4%, 4% and 3% of
annual salary for 2002, 2001 and 2000, respectively. The matching contributions by the Company included in
“General and administrative expenses” were $55 million, $72 million and $62 million for the years ended
December 31, 2002, 2001 and 2000, respectively.
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