SunTrust 2013 Annual Report Download - page 170

Notes to Consolidated Financial Statements, continued
154
Assumptions
Each year, the SunTrust Benefits Finance Committee, which includes several members of senior management, reviews and
approves the assumptions used in the year-end measurement calculations for each plan. The discount rate for each plan, used
to determine the present value of future benefit obligations, is determined by matching the expected cash flows of each plan
to a yield curve based on long-term, high quality fixed income debt instruments available as of the measurement date. A series
of benefit payments projected to be paid by the plan is developed based on the most recent census data, plan provisions, and
assumptions. The benefit payments at each future maturity are discounted by the year-appropriate spot interest rates. The
model then solves for the discount rate that produces the same present value of the projected benefit payments as generated
by discounting each year’s payments by the spot interest rate. Prior to curtailment, a rate of compensation growth was used
to determine future obligations for those plans whose benefits vary by pay.
Actuarial gains and losses are created when actual experience deviates from assumptions. The actuarial gains on obligations
generated within the Pension Plans during 2013 resulted primarily from higher interest rates and better than expected asset
returns. The actuarial losses during 2012 resulted primarily from lower interest rates.
The change in benefit obligations during the year ended December 31 was as follows:
Pension Benefits Other Postretirement Benefits
(Dollars in millions) 2013 2012 2013 2012
Benefit obligation, beginning of year $2,838 $2,661 $167 $173
Interest cost 113 119 67
Plan participants’ contributions ——21 22
Actuarial loss/(gain) (195)242 1(2)
Benefits paid (181)(184)(41)(36)
Less federal Medicare drug subsidy ——33
Plan amendments ——(76)—
Benefit obligation, end of year $2,575 $2,838 $81 $167
The accumulated benefit obligation for the Pension Benefits at December 31, 2013 and 2012 was $2.6 billion and $2.8 billion,
respectively.
Pension benefits with a projected benefit obligation, in excess of plan assets at December 31 were as follows:
(Dollars in millions) 2013 2012
Projected benefit obligation $80 $2,701
Accumulated benefit obligation 79 2,701
Pension Benefits
Other Postretirement
Benefits
(Weighted average assumptions used to determine benefit
obligations, end of year) 2013 2012 2013 2012
Discount rate 4.98% 4.08% 4.15% 3.45%