Prudential 2015 Annual Report Download - page 171

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
Changes in Accumulated Other Comprehensive Income
The benefit obligation is based upon actuarial assumptions such as discount, termination, retirement, mortality and salary growth rates.
Changes at year-end in these actuarial assumptions, along with experience changes based on updated participant census data are deferred in
AOCI. Plan assets generate actuarial gains and losses when actual returns on plan assets differ from expected returns on plan assets, and
these differences are also deferred in AOCI. The cumulative deferred gain (loss) within AOCI is amortized into earnings if it exceeds 10%
of the greater of the benefit obligation or plan assets at the beginning of the year, and the amortization period is based upon the actuarially
calculated expected future years of service for a given plan.
The amounts recorded in AOCI as of the end of the period, which have not yet been recognized as a component of net periodic
(benefit) cost, and the related changes in these items during the period that are recognized in “Other comprehensive income (loss)” are as
follows:
Pension Benefits
Other Postretirement
Benefits
Transition
Obligation
Prior
Service
Cost
Net
Actuarial
(Gain) Loss
Transition
Obligation
Prior
Service
Cost
Net
Actuarial
(Gain) Loss
(in millions)
Balance, December 31, 2012 ..................................... $0 $(81) $2,548 $0 $(30) $ 893
Amortization for the period .................................. 0 10 (91) 0 12 (56)
Deferrals for the period ..................................... 0 2 (341) 0 0 (377)
Impact of foreign currency changes and other .................... 0 13 (51) 0 (1) 3
Balance, December 31, 2013 ..................................... 0 (56) 2,065 0 (19) 463
Amortization for the period .................................. 0 10 (86) 0 10 (25)
Deferrals for the period ..................................... 0 (1) 1,001 0 0 165
Impact of foreign currency changes and other .................... 0 5 (34) 0 1 (3)
Balance, December 31, 2014 ..................................... 0 (42) 2,946 0 (8) 600
Amortization for the period .................................. 0 8 (168) 0 5 (38)
Deferrals for the period ..................................... 0 0 405 0 2 63
Impact of foreign currency changes and other .................... 0 1 (10) 0 0 (4)
Balance, December 31, 2015 ..................................... $0 $(33) $3,173 $0 $ (1) $ 621
The amounts included in AOCI expected to be recognized as components of net periodic (benefit) cost in 2016 are as follows:
Pension Benefits
Other
Postretirement
Benefits
(in millions)
Amortization of prior service cost ................................................................... $ (6) $(2)
Amortization of actuarial (gain) loss, net ............................................................. 180 41
Total ...................................................................................... $174 $39
The Company’s assumptions related to the calculation of the domestic benefit obligation (end of period) and the determination of net
periodic (benefit) cost (beginning of period) are presented in the table below:
Pension Benefits Other Postretirement Benefits
2015 2014 2013 2015 2014 2013
Weighted average assumptions
Discount rate (beginning of period) ............................................... 4.10% 4.95% 4.05% 3.95% 4.75% 3.85%
Discount rate (end of period) .................................................... 4.50% 4.10% 4.95% 4.35% 3.95% 4.75%
Rate of increase in compensation levels (beginning of period) .......................... 4.50% 4.50% 4.50% N/A N/A N/A
Rate of increase in compensation levels (end of period) ............................... 4.50% 4.50% 4.50% N/A N/A N/A
Expected return on plan assets (beginning of period) .................................. 6.25% 6.25% 6.25% 7.00% 7.00% 7.00%
Health care cost trend rates (beginning of period) .................................... N/A N/A N/A 5.00-6.66% 5.00-7.08% 5.00-7.50%
Health care cost trend rates (end of period) ......................................... N/A N/A N/A 5.00-7.00% 5.00-6.66% 5.00-7.08%
For 2015, 2014 and 2013, the ultimate health care cost trend rate after gradual decrease until:
2019, 2019, 2019, (beginning of period) ......................................... N/A N/A N/A 5.00% 5.00% 5.00%
For 2015, 2014 and 2013, the ultimate health care cost trend rate after gradual decrease until:
2021, 2019, 2019 (end of period) ............................................... N/A N/A N/A 5.00% 5.00% 5.00%
The domestic discount rate used to value the pension and postretirement obligations at December 31, 2015 and December 31, 2014 is
based upon the value of a portfolio of Aa investments whose cash flows would be available to pay the benefit obligation’s cash flows when
due. The December 31, 2015 portfolio is selected from a compilation of approximately 720 Aa-rated bonds across the full range of
Prudential Financial, Inc. 2015 Annual Report 169