Tyson Foods 2009 Annual Report Download - page 68

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68
Net Periodic Benefit Cost
Components of net periodic benefit cost for pension and postretirement benefit plans recognized in the Consolidated Statements of
Income are as follows:
in millions
Pension Benefits
Other Postretirement
Qualified
Non-Qualified
Benefits
2009
2008
2007
2009
2008
2007
2009
2008
2007
Service cost
$
-
$
-
$
-
$
4
$
3
$
6
$
-
$
1
$
1
Interest cost
6
6
5
2
2
2
3
3
4
Expected return on plan assets
(7
)
(7
)
(7
)
-
-
-
-
-
-
Amortization of prior service
cost
-
-
-
1
1
1
-
(1
)
(2
)
Recognized actuarial loss, net
1
1
1
-
-
-
1
1
12
Curtailment and settlement gain
-
-
-
-
-
-
-
-
(27
)
Net periodic benefit cost
$
-
$
-
$
(1
)
$
7
$
6
$
9
$
4
$
4
$
(12
)
Assumptions
Weighted average assumptions are as follows:
Pension Benefits
Other Postretirement
Qualified
Non-Qualified
Benefits
2009
2008
2007
2009
2008
2007
2009
2008
2007
Discount rate to determine net
periodic benefit cost
6.36
%
6.33
%
5.93
%
6.50
%
6.25
%
6.00
%
6.50
%
6.25
%
6.00
%
Discount rate to determine
benefit obligations
6.00
%
5.88
%
5.39
%
6.00
%
6.50
%
6.25
%
5.71
%
6.50
%
6.25
%
Rate of compensation increase
N/A
N/A
N/A
3.50
%
3.50
%
3.50
%
N/A
N/A
N/A
Expected return on plan assets
8.00
%
8.02
%
7.89
%
N/A
N/A
N/A
N/A
N/A
N/A
To determine the rate-of-return on assets assumption, we first examined historical rates of return for the various asset classes. We then
determined a long-term projected rate-of-return based on expected returns over the next five to 10 years.
We have three postretirement health plans. Two of these consist of fixed, annual payments and account for $33 million of the
postretirement medical obligation at October 3, 2009. A healthcare cost trend is not required to determine this obligation. The
remaining plan accounts for $13 million of the postretirement medical obligation at October 3, 2009. The plan covers retirees who do
not yet qualify for Medicare and uses a healthcare cost trend of 9% in the current year, grading down to 6% in fiscal 2012. A
one-percentage point change in assumed healthcare cost trend rate would have an immaterial impact on the postretirement benefit
obligation and total service and interest cost.
Plan Assets
The fair value of plan assets for domestic pension benefit plans was $54 million and $64 million as of October 3, 2009, and
September 27, 2008, respectively. The following table sets forth the actual and target asset allocation for pension plan assets:
Target Asset
2009
2008
Allocation
Cash
0.2
%
0.9
%
1.0
%
Fixed income securities
19.7
31.1
19.0
US Stock Funds
43.2
44.1
45.0
International Stock Funds
20.2
18.8
20.0
Real Estate
4.7
5.1
5.0
Alternatives
12.0
-
10.0
Total
100.0
%
100.0
%
100.0
%
A foreign subsidiary pension plan had $14 million and $15 million in plan assets at October 3, 2009, and September 27, 2008,
respectively. All of this plan’s assets are held in annuity contracts consistent with its target asset allocation.