Starwood 2009 Annual Report Download - page 158

The net underfunded status of the plans at December 31, 2009 was $54 million, of which $57 million is in other
liabilities and $3 million is in accrued expenses and $6 million is in other assets in the accompanying balance sheet.
All domestic pension plans are frozen plans, where employees do not accrue additional benefits. Therefore, at
December 31, 2009 and 2008, the projected benefit obligation is equal to the accumulated benefit obligation. In
2009, the Company elected to freeze its foreign service pension plan and settled its defined benefit pension plans in
Canada, resulting in a $50 million reduction in the projected benefit obligation.
The following table presents the components of net periodic benefit cost and the impact of the plan
curtailments and settlements for the years ended December 31, 2009, 2008 and 2007 (in millions):
2009 2008 2007 2009 2008 2007 2009 2008 2007
Pension Benefits Foreign Pension Benefits Postretirement Benefits
Domestic
Service cost ........................ $— $— $— $ 5 $ 4 $ 5 $— $— $—
Interest cost ........................ 1 1 1 13 11 12 1 1 1
Expected return on plan assets .......... — — — (10) (10) (11) — — (1)
Amortization of actuarial loss ........... — — — 5 2 2 — — —
Other ............................. — — — — 1 ————
ASC 715 Compensation ............... 1 1 1 13 8 8 1 1 —
Settlement and curtailment (gain) loss..... — — — (4) 1 ————
Net periodic benefit cost............... $ 1 $ 1 $ 1 $ 9 $ 9 $ 8 $ 1 $ 1 $—
For measurement purposes, an 8% annual rate of increase in the per capita cost of covered health care benefits
was assumed for 2010, gradually decreasing to 5% in 2016. A one-percentage-point change in assumed health care
cost trend rates would have approximately a $0.5 million effect on the postretirement obligation and a nominal
impact on the total of service and interest cost components of net periodic benefit cost. The majority of participants
in the Foreign Pension Plans are employees of managed hotels, for which the Company is reimbursed for costs
related to their benefits. The impact of these reimbursements is not reflected above.
The weighted average assumptions used to determine benefit obligations at December 31 were as follows:
2009 2008 2009 2008 2009 2008
Pension Benefits
Foreign Pension
Benefits
Postretirement
Benefits
Discount rate ...................................... 5.51% 5.99% 5.93% 6.19% 5.50% 6.00%
Rate of compensation increase. . . ....................... n/a n/a 3.50% 3.93% n/a n/a
The weighted average assumptions used to determine net periodic benefit cost for the years ended December
31 were as follows:
2009 2008 2007 2009 2008 2007 2009 2008 2007
Pension Benefits Foreign Pension Benefits Postretirement Benefits
Discount rate ..................... 5.99% 5.75% 5.75% 6.19% 5.88% 5.46% 6.00% 5.74% 5.74%
Rate of compensation increase ........ n/a n/a n/a 3.93% 3.89% 3.90% n/a n/a n/a
Expected return on plan assets ........ n/a n/a n/a 6.25% 6.38% 6.40% 7.50% 7.50% 7.50%
A number of factors were considered in the determination of the expected return on plan assets. These factors
included current and expected allocation of plan assets, the investment strategy, historical rates of return and
Company and investment expert expectations for investment performance over approximately a ten year period.
F-35
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)