Travelers 2012 Annual Report Download - page 241

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS (Continued)
Postretirement
Benefit Plans
(at and for the year ended December 31, in millions) 2012 2011
Change in projected benefit obligation:
Benefit obligation at beginning of year .................................... $ 246 $ 254
Benefits earned .................................................... ——
Plan amendments ................................................... (31) —
Interest cost on benefit obligation ....................................... 11 13
Actuarial loss (gain) ................................................. 12 (4)
Benefits paid ...................................................... (16) (17)
Benefit obligation at end of year ...................................... $ 222 $ 246
Change in plan assets:
Fair value of plan assets at beginning of year ............................... $19 $20
Actual return on plan assets ........................................... 11
Company contributions ............................................... 14 15
Benefits paid ...................................................... (16) (17)
Fair value of plan assets at end of year .................................. 18 19
Funded status of plan at end of year ................................... $(204) $(227)
Amounts recognized in the statement of financial position consist of:
Accrued under-funded benefit plan liability ............................... $(204) $(227)
Amounts recognized in accumulated other comprehensive income consist of:
Net actuarial gain ................................................. $ (50) $ (31)
Effective January 1, 2013, the Company converted its current prescription drug program for
Medicare-eligible retirees to a group-based company-sponsored Medicare Part D Employer Group
Waiver Plan (EGWP) program. The EGWP structure was made financially attractive for companies due
to changes stemming from health care reform legislation. Under EGWP, the federal direct capitation
payments will be paid to the Company while the federal reinsurance and pharmaceutical rebates will be
used to offset claims. The Company estimates that the transition to EGWP will lower prescription drug
liabilities by approximately $31 million.
The total accumulated benefit obligation for the Company’s defined benefit pension plans was
$3.21 billion and $2.83 billion at December 31, 2012 and 2011, respectively. The Qualified Domestic
Plan accounted for $3.01 billion and $2.65 billion of the total accumulated benefit obligation at
December 31, 2012 and 2011, respectively, whereas the Nonqualified and Foreign Plans accounted for
$0.20 billion and $0.18 billion of the total accumulated benefit obligation at December 31, 2012 and
2011, respectively.
For pension plans with an accumulated benefit obligation in excess of plan assets, the aggregate
projected benefit obligation was $3.25 billion and the aggregate accumulated benefit obligation was
$3.20 billion at December 31, 2012. The fair value of plan assets for the above plans was $2.85 billion
and $2.49 billion at December 31, 2012 and 2011, respectively.
229