Sunoco 2005 Annual Report Download - page 59

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The investment strategy of the Company’s funded defined benefit plans is to achieve consistent positive returns, after
adjusting for inflation, and to maximize long-term total return within prudent levels of risk through a combination of
income and capital appreciation. Risk to capital is minimized through the diversification of investments across and
within various asset categories.
Management currently anticipates making $100 million of voluntary contributions to the Company’s funded defined
benefit plans in 2006.
The expected benefit payments through 2015 for the defined benefit and postretirement benefit plans are as follows:
Defined Benefit Plans
(Millions of Dollars)
Funded
Plans
Unfunded
Plans
Postretirement
Benefit Plans*
Year ending December 31:
2006 $111 $12 $52
2007 $116 $16 $56
2008 $121 $20 $59
2009 $124 $19 $62
2010 $126 $12 $64
2011 through 2015 $679 $67 $348
*Before premiums paid by participants.
The measurement date for the Company’s defined benefit and postretirement benefit plans is December 31. The fol-
lowing weighted-average assumptions were used at December 31, 2005 and 2004 to determine benefit obligations for
the plans:
Defined
Benefit Plans
Postretirement
Benefit Plans
(In Percentages) 2005 2004 2005 2004
Discount rate 5.60% 5.75% 5.50% 5.50%
Rate of compensation increase 4.00% 4.00%
The health care cost trend assumption used at December
31, 2005 to compute the
APBO
for the postretirement
benefit plans was an increase of 11.0 percent (10.3 percent
at December 31, 2004), which is assumed to decline gradu-
ally to 5.5 percent in 2012 and to remain at that level
thereafter. A one-percentage point change each year in as-
sumed health care cost trend rates would have the follow-
ing effects at December 31, 2005:
(Millions of Dollars)
1-Percentage
Point Increase
1-Percentage
Point Decrease
Effect on total of service and
interest cost components of
postretirement benefits expense $1 $(1)
Effect on APBO $12 $(11)
Defined Contribution Pension Plans
Sunoco has defined contribution pension plans which
provide retirement benefits for most of its employees.
Sunoco’s contributions, which are principally based on a
percentage of employees’ annual base compensation and
are charged against income as incurred, amounted to $24,
$21 and $20 million in 2005, 2004 and 2003,
respectively.
Sunoco’s principal defined contribution plan is SunCAP.
Sunoco matches 100 percent of employee contributions
to this plan up to 5 percent of an employee’s base
compensation. SunCAP is a combined profit sharing and
employee stock ownership plan which contains a
provision designed to permit SunCAP, only upon
approval by the Company’s Board of Directors, to borrow
in order to purchase shares of Company common stock.
As of December 31, 2005, no such borrowings had been
approved.
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