Travelers 2013 Annual Report Download - page 245

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) 2013 2012
Change in projected benefit obligation:
Benefit obligation at beginning of year .................................... $ 222 $ 246
Benefits earned .................................................... ——
Plan amendments ................................................... —(31)
Interest cost on benefit obligation ....................................... 912
Actuarial loss (gain) ................................................. (25) 11
Benefits paid ...................................................... (14) (16)
Acquisition ........................................................ 19 —
Benefit obligation at end of year ...................................... $ 211 $ 222
Change in plan assets:
Fair value of plan assets at beginning of year ............................... $18 $19
Actual return on plan assets ........................................... —1
Company contributions ............................................... 13 14
Benefits paid ...................................................... (14) (16)
Fair value of plan assets at end of year .................................. 17 18
Funded status of plan at end of year ................................... $(194) $(204)
Amounts recognized in the statement of financial position consist of:
Accrued under-funded benefit plan liability ............................... $(194) $(204)
Amounts recognized in accumulated other comprehensive income consist of:
Net actuarial gain ................................................. $ (44) $ (50)
Prior service benefit ................................................ (28) —
Total ........................................................... $ (72) $ (50)
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. Due to the transition to EGWP, the Company reduced its prescription drug
liability at December 31, 2012 by approximately $31 million.
The total accumulated benefit obligation for the Company’s defined benefit pension plans was
$3.05 billion and $3.21 billion at December 31, 2013 and 2012, respectively. The Qualified Domestic
Plan accounted for $2.85 billion and $3.01 billion of the total accumulated benefit obligation at
December 31, 2013 and 2012, respectively, whereas the Nonqualified and Foreign Plans accounted for
$0.20 billion of the total accumulated benefit obligation at both December 31, 2013 and 2012.
For pension plans with an accumulated benefit obligation in excess of plan assets, the aggregate
projected benefit obligation was $123 million and $3.25 billion at December 31, 2013 and 2012,
respectively, and the aggregate accumulated benefit obligation was $121 million and $3.20 billion at
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