Sunoco 2003 Annual Report Download - page 55

Defined benefit plans and postretirement benefit plans expense consisted of the following components:
Defined Benefit Plans Postretirement Benefit Plans
(Millions of Dollars) 2003 2002 2001 2003 2002 2001
Service cost (cost of benefits earned during the year) $38 $33 $32 $6 $7 $6
Interest cost on benefit obligations 89 89 92 25 28 26
Expected return on plan assets (85) (100) (120) —— —
Amortization of:
Prior service cost (benefit) 322(12) (10) (9)
Unrecognized (gains) losses 21 2 (2) 32—
Net curtailment (gains) losses —— 1(1) — 2
$66 $26 $ 5 $21 $ 27 $25
Defined benefit plans and postretirement benefit plans expense is determined using actuarial assumptions as of the
beginning of the year. The following weighted-average assumptions were used to determine defined benefit plans and
postretirement benefit plans expense:
Defined Benefit Plans Postretirement Benefit Plans
2003 2002 2001 2003 2002 2001
Discount rate 6.75% 7.25% 7.50% 6.75% 7.25% 7.50%
Long-term rate of return on plan assets 8.75% 9.00% 9.00%
Rate of compensation increase 4.00% 4.00% 4.00%
The expected rate of return on plan assets was estimated based on a variety of factors including the historical invest-
ment return achieved over a long-term period, the targeted allocation of plan assets and expectations concerning fu-
ture returns in the marketplace for both equity and debt securities.
The following tables set forth the components of the changes in benefit obligations and fair value of plan assets during
2003 and 2002 as well as the funded status and amounts both recognized and not recognized in the consolidated bal-
ance sheets at December 31, 2003 and 2002:
Defined Benefit Plans
Postretirement
Benefit Plans
2003 2002
(Millions of Dollars)
Funded
Plans
Unfunded
Plans
Funded
Plans
Unfunded
Plans 2003 2002
Benefit obligations at beginning of year* $1,235 $ 118 $1,143 $ 122 $ 398 $ 374
Service cost 36 2 32 1 67
Interest cost 81 8 81 8 25 28
Actuarial losses 120 11 118 2 34 19
Plan amendments — 42 (2) (26) —
Benefits paid (159) (15) (141) (13) (36) (37)
Premiums paid by participants — —— — 87
Benefit obligations at end of year* $1,313 $ 128 $1,235 $ 118 $ 409 $ 398
Fair value of plan assets at beginning of year** $ 930 $1,110
Actual return (loss) on plan assets 211 (91)
Employer contributions 89 52
Benefits paid from plan assets (159) (141)
Fair value of plan assets at end of year** $1,071 $ 930
Unfunded accumulated obligation $ (121) $(120) $ (176) $(110)
Provision for future salary increases (121) (8) (129) (8)
Benefit obligations in excess of plan assets at end of year (242) (128) (305) (118) $(409) $(398)
Unrecognized prior service cost (benefit) 18 (1) 20 (4) (34) (20)
Unrecognized net loss 382 51 407 43 83 52
Net amount recognized in balance sheet at end of year $ 158 $ (78) $ 122 $ (79) $(360) $(366)
* Represents the projected benefit obligations for defined benefit plans and the accumulated postretirement benefit obligations (“APBO”) for postretirement benefit plans. The
accumulated benefit obligations for funded and unfunded defined benefit plans amounted to $1,192 and $120 million, respectively, at December 31, 2003, and $1,106 and $110
million, respectively, at December 31, 2002.
** There are no plan assets invested in Company stock.
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