SunTrust 2003 Annual Report Download - page 79

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Supplemental Other
(Weighted-average assumptions used to determine Retirement Benefits Retirement Benefits Postretirement Benefits
benefit obligations, end of year) 2003 2002 2003 2002 2003 2002
Discount rate 6.25% 6.75% 6.25% 6.75% 6.25% 6.75%
Rate of compensation increase 3.50 3.50 3.50 3.50 N/A N/A
Annual Report 2003 SunTrust Banks, Inc. 77
Company. The healthcare plans are contributory with participant
contributions adjusted annually; the life insurance plans are
noncontributory. As part of the benefit study performed in 2002,
SunTrust realigned the cost sharing of the postretirement welfare
plans with retirees and eliminated postretirement life insurance
benefits for employees who retire after December 31, 2003.
Additionally, effective January 1, 2004, SunTrust will no longer
subsidize post-65 medical benefits for future retirees. Certain
retiree health benefits are funded in a Retiree Health Trust. In
addition, certain retiree life insurance benefits are funded in a
Voluntary Employees’ Beneficiary Association (VEBA).
SunTrust uses a measurement date of December 31 for its
pension and other postretirement benefit plans.
The change in benefit obligations for the years ended December 31 was as follows:
Supplemental Other
Retirement Benefits Retirement Benefits Postretirement Benefits
(Dollars in thousands) 2003 2002 2003 2002 2003 2002
Benefit obligations, beginning of year $1,046,260 $914,090 $89,305 $64,680 $158,201 $164,055
Service cost 43,071 42,530 1,520 823 2,515 4,146
Interest cost 74,574 69,067 4,991 4,995 10,823 11,052
Plan participants’ contributions ————9,192 8,216
Amendments ——1,434 2,882 —(14,873)
Actuarial loss 186,775 83,304 6,304 19,006 20,012 9,343
Acquisition ——————
Benefits paid (81,990) (62,731) (3,118) (3,081) (24,343) (23,738)
Benefit obligations, end of year $1,268,690 $1,046,260 $100,436 $89,305 $176,400 $158,201
The accumulated benefit obligation for the Retirement
Benefits at the end of 2003 and 2002 was $1,141 million
and $938 million, respectively. For the Supplemental
Retirement Benefits, the accumulated benefit obligation at
the end of 2003 and 2002 was $87 million and $77 mil-
lion, respectively.
The weighted-average assumptions used to determine
benefit obligations at December 31 were as follows:
(Dollars in thousands) 1% Increase 1% Decrease
Effect on postretirement benefit obligation $7,781 $(6,853)
Effect on postretirement expense 491 (432)
Assumed healthcare cost trend rates have a significant
effect on the amounts reported for the postretirement health-
care plans. As of December 31, 2003, SunTrust assumed that
retiree healthcare costs will increase at an initial rate of 12%
per year. SunTrust’s medical plans are managed carefully and
retirees share a large portion of the medical cost. Therefore,
SunTrust expects this annual cost increase to decrease over
time to 5.25% per year. Due to changing medical inflation, it
is important to understand the effect of a one percent point
change in assumed healthcare cost trend rates. These
amounts are shown below: