SunTrust 2006 Annual Report Download - page 127

SUNTRUST BANKS, INC.
Notes to Consolidated Financial Statements (Continued)
Net Periodic Cost
Components of net periodic benefit cost for the twelve months ended December 31 were as follows:
Retirement Benefits Supplemental Retirement Benefits Other Postretirement Benefits
(Dollars in thousands) 2006 2005 2004 2006 2005 2004 2006 2005 2004
Service cost $72,441 $63,604 $50,085 $2,479 $2,130 $1,713 $3,118 $3,034 $2,277
Interest cost 103,510 94,494 82,084 6,679 5,718 5,082 10,913 9,921 9,803
Expected return on plan assets (165,441) (156,426) (134,625) ---(8,126) (8,880) (8,606)
Amortization of prior service cost (480) (480) (480) 3,530 2,533 1,992 ---
Recognized net actuarial loss 49,664 37,129 37,910 5,399 6,229 4,751 9,912 6,833 5,554
Amortization of initial transition
obligation ------2,322 2,322 2,322
Other 505 (14,600) - 54 10,998 - -3,032 -
Net periodic benefit cost $60,199 $23,721 $34,974 $18,141 $27,608 $13,538 $18,139 $16,262 $11,350
Weighted average assumptions used to determine net cost
Discount rate 5.68% 15.90% 6.25% 5.56% 4.53% 4.91% 5.45% 5.35% 6.25%
Expected return on plan assets 8.50 8.50 8.50 N/A N/A N/A 5.30 26.00 6.00
Rate of compensation increase 4.50 4.00 3.50 4.50 4.00 3.50 N/A N/A N/A
1The weighted average shown for 2006 is the weighted average discount rate of all qualified and nonqualified plans as of the beginning of the fiscal year. Interim remeasurement was required on September 1,
2006, for the SunTrust Retirement Plan due to the passage of the Pension Protection Act. The discount rate as of the remeasurement date was selected based on the economic environment as of that date.
2The weighted average shown for the other postretirement benefit plan is determined on an after-tax basis.
The Pension Protection Act of 2006, which makes significant changes in funding rules effective 2008,
increased the maximum tax deductible contribution limits for 2006 and 2007. In response, SunTrust
contributed a voluntary $100 million to the SunTrust Retirement Plan and subsequently remeasured plan
assets and liabilities as of August 31, 2006. The impact of the additional contribution and of the
remeasurement of plan assets and liabilities reduced the plan’s net periodic pension cost for the
remainder of 2006, excluding funding costs, by approximately $10 million.
Based on a ten-year capital market projection of the target asset allocation set forth in the investment
policy for the SunTrust and NCF Retirement Plans, the pre-tax expected rate of return on plan assets
was 8.50% in 2006 and 2005. SunTrust will leave the return on asset assumption at 8.50% for 2007 for
the Retirement Plans. The pre-tax return on asset assumption for the Other Postretirement Benefit Plan
was 8.50% for 2005 and 7.50% for 2006 and 2007.
The estimated amounts that will be amortized from accumulated other comprehensive income into net
periodic benefit cost in 2007 are as follows:
(Dollars in thousands)
Retirement
Benefits
Supplemental
Retirement
Benefits
Other
Postretirement
Benefits
Actuarial loss $30,300 $3,900 $8,800
Prior service (credit)/cost (500) 3,800 -
Transition obligation - - 2,300
Total $29,800 $7,700 $11,100
In addition, SunTrust sets pension asset values equal to their market value, in contrast to the use of a
smoothed asset value that incorporates gains and losses over a period of years. Utilization of market
value of assets provides a more realistic economic measure of the plan’s funded status and cost.
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