Prudential 2015 Annual Report Download - page 170

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
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
($1,175 million and $1,168 million benefit obligation at December 31, 2015 and 2014, 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 2015 and 2014. As of December 31, 2015 and 2014, the assets in the trust had a carrying value of
$722 million and $656 million, respectively.
The Company also maintains a separate rabbi trust for the purpose of holding assets of the Company to be used to satisfy its
obligations with respect to certain other non-qualified retirement plans ($78 million and $83 million benefit obligation at December 31,
2015 and 2014, respectively), as well as certain cash-based deferred compensation arrangements. As of December 31, 2015 and 2014, the
assets in the trust had a carrying value of $118 million and $123 million, respectively.
Pension benefits for foreign plans comprised 13% of the ending benefit obligation for both 2015 and 2014. Foreign pension plans
comprised 5% of the ending fair value of plan assets for both 2015 and 2014. There are no material foreign postretirement plans.
Information for pension plans with a projected benefit obligation in excess of plan assets
2015 2014
(in millions)
Projected benefit obligation ....................................................................................... $2,403 $2,379
Fair value of plan assets .......................................................................................... $ 36 $ 34
Information for pension plans with an accumulated benefit obligation in excess of plan assets
2015 2014
(in millions)
Accumulated benefit obligation .................................................................................... $2,154 $2,164
Fair value of plan assets .......................................................................................... $ 5 $ 33
There were no purchases of annuity contracts in 2015 and 2014 from Prudential Insurance. The approximate future annual benefit
payment payable by Prudential Insurance for all annuity contracts was $20 million and $21 million as of December 31, 2015 and 2014,
respectively.
Components of Net Periodic Benefit Cost
The Company uses market related value to determine components of net periodic (benefit) cost. Market related value recognizes
certain changes in fair value of plan assets over a period of five years. Changes in the fair value of U.S Equities, International Equities,
Real Estate and Other Assets are recognized over a five year period. However, the fair value for Fixed Maturity assets (including short-
term investments) are recognized immediately for the purposes of market related value.
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
2015 2014 2013 2015 2014 2013
(in millions)
Service cost ......................................................................... $244 $234 $252 $ 20 $ 17 $17
Interest cost .......................................................................... 469 481 437 86 96 89
Expected return on plan assets ........................................................... (775) (712) (769) (115) (116) (87)
Amortization of transition obligation ...................................................... 0 0 0 0 0 0
Amortization of prior service cost ........................................................ (8) (10) (10) (5) (10) (12)
Amortization of actuarial (gain) loss, net ................................................... 168 86 91 38 25 56
Settlements .......................................................................... 5 10 0 0 0 0
Special termination benefits(1) .......................................................... 4 4 2 0 0 0
Net periodic (benefit) cost .............................................................. $107 $ 93 $ 3 $ 24 $ 12 $63
(1) Certain employees were provided special termination benefits under non-qualified plans in the form of unreduced early retirement benefits as a result of
their involuntary termination.
168 Prudential Financial, Inc. 2015 Annual Report