Prudential 2011 Annual Report Download - page 217

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
18. EMPLOYEE BENEFIT PLANS (continued)
In addition to the plan assets above, the Company in 2007 established an irrevocable trust, commonly referred to as a “rabbi trust,” for
the purpose of holding assets of the Company to be used to satisfy its obligations with respect to certain non-qualified retirement plans
($834 million and $860 million benefit obligation at December 31, 2011 and 2010, respectively). Assets held in the rabbi trust are available
to the general creditors of the Company in the event of insolvency or bankruptcy. The Company may from time to time in its discretion
make contributions to the trust to fund accrued benefits payable to participants in one or more of the plans, and, in the case of a change in
control of the Company, as defined in the trust agreement, the Company will be required to make contributions to the trust to fund the
accrued benefits, vested and unvested, payable on a pretax basis to participants in the plans. The Company made a discretionary payment of
$95 million to the trust in 2010. As of December 31, 2011 and 2010, the assets in the trust had a carrying value of $404 million and $390
million, respectively.
The Company also maintains a separate rabbi trust established at the time of the combination of its retail securities brokerage and
clearing operations with those of Wachovia for the purpose of holding assets of the Company to be used to satisfy its obligations with
respect to certain non-qualified retirement plans ($78 million and $74 million benefit obligation at December 31, 2011 and 2010,
respectively), as well as certain cash-based deferred compensation arrangements. As of December 31, 2011 and 2010, the assets in the trust
had a carrying value of $134 million and $124 million, respectively.
Pension benefits for foreign plans comprised 19% and 13% of the ending benefit obligation for 2011 and 2010, respectively. Foreign
pension plans comprised 3% and 2% of the ending fair value of plan assets for 2011 and 2010. There are no material foreign postretirement
plans.
Information for pension plans with a projected benefit obligation in excess of plan assets
2011 2010
(in millions)
Projected benefit obligation ........................................................................... $2,785 $2,096
Fair value of plan assets .............................................................................. 95 212
Information for pension plans with an accumulated benefit obligation in excess of plan assets
2011 2010
(in millions)
Accumulated benefit obligation ........................................................................ $2,582 $1,951
Fair value of plan assets .............................................................................. 77 196
There were no purchases of annuity contracts in 2011 and 2010 from Prudential Insurance. The approximate future annual benefit
payment payable by Prudential Insurance for all annuity contracts was $18 million and $20 million as of December 31, 2011 and 2010,
respectively.
There were pension plan amendments in 2011. The benefit obligation for pension benefits decreased by $72 million for changes in
benefit structures for certain Japanese plans. There were no pension plan amendments in 2010. There were no postretirement plan
amendments in 2011 and 2010.
Components of Net Periodic Benefit Cost
Net periodic (benefit) cost included in “General and administrative expenses” in the Company’s Consolidated Statements of
Operations for the years ended December 31, includes the following components:
Pension Benefits
Other Postretirement
Benefits
2011 2010 2009 2011 2010 2009
(in millions)
Service cost ........................................................ $218 $178 $163 $ 11 $ 11 $ 10
Interest cost ........................................................ 486 469 462 110 113 116
Expected return on plan assets ......................................... (719) (744) (728) (98) (107) (106)
Amortization of transition obligation .................................... 0 0 0 1 1 1
Amortization of prior service cost ....................................... 23 24 26 (12) (12) (11)
Amortization of actuarial (gain) loss, net ................................. 40 41 31 36 39 41
Settlements ........................................................ 5 0 0 0 0 0
Curtailments ....................................................... (18) (6) 0 0 0 0
Special termination benefits ........................................... 4 2 2 0 0 0
Net periodic (benefit) cost(1) .......................................... $ 39 $ (36) $ (44) $ 48 $ 45 $ 51
Prudential Financial, Inc. 2011 Annual Report 215