Sara Lee 2008 Annual Report Download - page 71

The funded status of defined benefit pension plans at the
respective year-ends was as follows:
2008 2007
Projected benefit obligation
Beginning of year $4,926 $4,904
Service cost 91 97
Interest cost 267 253
Plan amendments 6 (10)
Benefits paid (241) (201)
Participant contributions 33
Actuarial (gain) loss (476) (367)
Settlement/curtailment (87) (13)
Foreign exchange 255 260
End of year 4,744 4,926
Fair value of plan assets
Beginning of year 4,346 4,094
Actual return on plan assets (27) 143
Employer contributions 175 191
Participant contributions 33
Benefits paid (241) (201)
Settlement (88) (8)
Acquisitions/(dispositions) – (24)
Hanesbrands spin off adjustment (3) (70)
Foreign exchange 258 218
End of year 4,423 4,346
Funded status $÷(321) $÷(580)
Amounts recognized on the
consolidated balance sheets
Noncurrent asset $93 $84
Accrued liabilities (9) (2)
Pension obligation (405) (662)
Prepaid benefit cost (liability) recognized $÷(321) ÷÷$÷(580)
Amounts recognized in accumulated
other comprehensive income
Unamortized prior service cost $÷÷«93 $÷÷«84
Unamortized actuarial loss, net 570 746
Total $÷«663 $÷«830
The underfunded status of the plans declined from $580 in
2007 to $321 in 2008, due to actuarial gains resulting from, in
part, an increase in the discount rate; and employer contributions
made during the year.
In 2007, an actuarial analysis under ERISA guidelines was
completed to determine the plan assets that related to the pension
plans that were transferred to Hanesbrands Inc. Based on this analy-
sis, the corporation determined that $70 of plan assets in excess of
the amount originally estimated would be transferred to Hanesbrands
Inc. This additional asset transfer is reflected in 2007 above as a
reduction to the plan assets.
The accumulated benefit obligation is the present value of
pension benefits (whether vested or unvested) attributed to employee
service rendered before the measurement date and based on
employee service and compensation prior to that date. The accumu-
lated benefit obligation differs from the projected benefit obligation
in that it includes no assumption about future compensation levels.
The accumulated benefit obligations of the corporation’s pension
plans as of the measurement dates in 2008 and 2007 were
$4,543 and $4,716, respectively. The projected benefit obligation,
accumulated benefit obligation and fair value of plan assets for
pension plans with accumulated benefit obligations in excess of
plan assets were:
2008 2007
Projected benefit obligation $3,009 $3,261
Accumulated benefit obligation 2,945 3,188
Fair value of plan assets 2,603 2,598
Plan Assets, Expected Benefit Payments and Funding The allocation
of pension plan assets as of the respective year-end measurement
dates is as follows:
2008 2007
Asset category
Equity securities 40% 43%
Debt securities 46 32
Real estate 23
Cash and other 12 22
Total 100% 100%
The investment strategies for the pension plan assets are
designed to generate returns that will enable the pension plans to
meet their future obligations. The actual amount for which these
obligations will be settled depends on future events, including the
life expectancy of the plan participants and salary inflation. The
obligations are estimated using actuarial assumptions based on the
current economic environment. The investment strategy balances
the requirements to generate returns, using higher-returning assets
such as equity securities with the need to control risk in the pen-
sion plan with less volatile assets, such as fixed-income securities.
Risks include, among others, the likelihood of the pension plans
becoming underfunded, thereby increasing their dependence on
contributions from the corporation. The assets are managed by pro-
fessional investment firms and performance is evaluated against
specific benchmarks. In the U.S., assets are primarily invested in
broadly diversified passive vehicles.
Sara Lee Corporation and Subsidiaries 69