United Technologies 2008 Annual Report Download - page 80

may be prepaid or re-amortized to either increase or decrease the number of shares released so
that the value of released shares equals the value of plan benefit. We may also, at our option,
contribute additional common stock or cash to the ESOP. At December 31, 2008, 38.4 million
common shares had been allocated to employees, leaving 24.6 million unallocated common
shares in the ESOP Trust, with an approximate fair value of $1.3 billion.
Pension Plans. We sponsor both funded and unfunded domestic and foreign defined benefit
pension plans that cover the majority of our employees.
(in millions of dollars) 2008 2007
Change in Benefit Obligation:
Beginning balance $ 21,914 $ 21,948
Service cost 446 438
Interest cost 1,263 1,182
Actuarial loss (gain) 111 (565)
Total benefits paid (1,121) (1,107)
Net settlement and curtailment gain (21) (63)
Acquisitions —38
Other (1,081) 43
Ending balance $ 21,511 $ 21,914
Change in Plan Assets:
Beginning balance $ 22,650 $ 20,593
Actual return on plan assets (5,095) 2,074
Employer contributions 492 380
Benefits paid from plan assets (1,095) (1,073)
Other (1,012) 676
Ending balance $ 15,940 $ 22,650
Funded status:
Fair value of plan assets $ 15,940 $ 22,650
Benefit obligations (21,511) (21,914)
Funded status of plan $ (5,571) $ 736
Amounts Recognized in the Consolidated Balance Sheet
Consist of:
Noncurrent assets $59 $ 2,187
Current liability (47) (57)
Noncurrent liability (5,583) (1,394)
Net amount recognized $ (5,571) $ 736
Amounts Recognized in Accumulated Other Comprehensive
Income Consist of:
Net actuarial loss $ 7,903 $ 1,247
Prior service cost 298 348
Transition obligation 913
Net amount recognized $ 8,210 $ 1,608
The amounts included in Other in the preceding table reflect the impact of the change in
measurement date in 2007, foreign exchange translation, primarily for plans in the United
Kingdom and Canada, and amendments to certain domestic plans.
Qualified domestic pension plan benefits comprise approximately 77% of the projected benefit
obligation. Benefits for union employees are generally based on a stated amount for each year
of service. For non-union employees, benefits are generally based on an employee’s years of
service and compensation near retirement. A cash balance formula was adopted in 2003 for
newly hired non-union employees and for other non-union employees who made a one-time
voluntary election to have future benefit accruals determined under this formula. Certain
foreign plans, which comprise approximately 21% of the projected benefit obligation, are
considered defined benefit plans for accounting purposes. Nonqualified domestic pension
plans provide supplementary retirement benefits to certain employees and are not a material
component of the projected benefit obligation.
We contributed $250 million and $150 million of common stock to our domestic defined
benefit pension plans during 2008 and 2007, respectively.
Information for pension plans with accumulated benefit obligation in excess of plan assets:
(in millions of dollars) 2008 2007
Projected benefit obligation $18,910 $2,412
Accumulated benefit obligation 17,224 1,958
Fair value of plan assets 13,391 1,458
The accumulated benefit obligation for all defined benefit pension plans was $19.6 billion at
both December 31, 2008 and 2007.
The components of the net periodic pension cost are as follows:
(in millions of dollars) 2008 2007 2006
Pension Benefits:
Service cost $ 446 $ 438 $ 432
Interest cost 1,263 1,182 1,128
Expected return on plan assets (1,663) (1,546) (1,413)
Amortization of prior service costs 49 37 36
Amortization of unrecognized net
transition obligation 111
Recognized actuarial net loss 119 253 325
Net settlement and curtailment loss (gain) 1(1) 10
Net periodic pension cost—employer $ 216 $ 364 $ 519
78 United Technologies Corporation