UPS 2010 Annual Report Download - page 87

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Net Periodic Benefit Cost
Information about net periodic benefit cost for the company-sponsored pension and postretirement benefit
plans is as follows (in millions):
U.S. Pension Benefits
U.S. Postretirement
Medical Benefits
International
Pension Benefits
2010 2009 2008 2010 2009 2008 2010 2009 2008
Net Periodic Cost:
Service cost .................... $ 723 $ 689 $ 707 $ 86 $ 85 $ 96 $ 24 $ 17 $ 26
Interest cost .................... 1,199 1,130 1,051 214 211 202 34 28 31
Expected return on assets .......... (1,599) (1,488) (1,517) (22) (27) (49) (36) (26) (35)
Amortization of:
Transition obligation ......... — 4 5 ——————
Prior service cost ............ 172 178 184 4 6 (4) 1 1 1
Actuarial (gain) loss .......... 78 46 8 16 14 20 3 — —
Other .......................... — 3 ———— 6 1—
Net periodic benefit cost .......... $ 573 $ 562 $ 438 $298 $289 $265 $ 32 $ 21 $ 23
Actuarial Assumptions
The table below provides the weighted-average actuarial assumptions used to determine the net periodic
benefit cost.
U.S. Pension Benefits
U.S. Postretirement
Medical Benefits
International
Pension Benefits
2010 2009 2008 2010 2009 2008 2010 2009 2008
Discount rate .................... 6.58% 6.75% 6.47% 6.43% 6.66% 6.25% 5.84% 6.17% 5.57%
Rate of compensation increase ...... 4.50% 4.50% 4.50% N/A N/A N/A 3.62% 3.65% 3.64%
Expected return on assets .......... 8.75% 8.96% 8.96% 8.75% 9.00% 9.00% 7.25% 7.09% 7.54%
The table below provides the weighted-average actuarial assumptions used to determine the benefit
obligations of our plans.
U.S. Pension Benefits
U.S. Postretirement
Medical Benefits
International
Pension Benefits
2010 2009 2010 2009 2010 2009
Discount rate .................................. 5.98% 6.58% 5.77% 6.43% 5.36% 5.84%
Rate of compensation increase ..................... 4.50% 4.50% N/A N/A 3.57% 3.62%
A discount rate is used to determine the present value of our future benefit obligations. In 2008 and prior
years, the discount rate for U.S. plans was determined by matching the expected cash flows to a yield curve
based on long-term, high quality fixed income debt instruments available as of the measurement date. In 2008,
we reduced the population of bonds from which the yield curve was developed to better reflect bonds we would
more likely consider to settle our obligations. In 2009, we further enhanced this process for plans in the U.S. by
using a bond matching approach to select specific bonds that would satisfy our projected benefit payments. We
believe the bond matching approach more closely reflects the process we would employ to settle our pension and
postretirement benefit obligations. These modifications had an impact of increasing the pension benefits and
75