Xerox 2010 Annual Report Download - page 91

Notes to the Consolidated
Financial Statements
Dollars in millions, except per-share data and unless otherwise indicated.
89Xerox 2010 Annual Report
Plan Amendments
In 2010, we amended our domestic retiree health benefit plan to
eliminate the use of the Retiree Drug Subsidy that the Company receives
from Medicare as an offset to retiree contributions. This amendment
is effective January 1, 2011. The Company will instead use this subsidy
to reduce its retiree healthcare costs. The amendment resulted in a
net decrease of $55 to the retiree medical benefit obligation and a
corresponding $34 after-tax increase to equity. This amendment will
reduce 2011 expenses by approximately $13.
In 2010, as a result of a renegotiation of the contract with our
largest union, we amended our union pension plan for this population
to freeze the final average pay formula of the pension plan effective
January 1, 2013 and our union retiree health benefits plan to eliminate
a portion of the subsidy currently paid to current and future Medicare-
eligible retirees effective January 1, 2011. These amendments are
generally consistent with amendments previously made to our salaried
employee retirement plans.
In 2009, the U.K. Final Salary Pension Plan was amended to close the
plan to future accrual effective January 1, 2014. Benefits earned up to
January 1, 2014 will not be affected; therefore, the amendment does
not result in a material change to the projected benefit obligation
at the re-measurement date, December 31, 2009. The amendment
results in substantially all participants becoming inactive; therefore, the
amortization period for actuarial gains and losses changes from the
average remaining service period of active members (approximately
10 years) to the average remaining life expectancy of all members
(approximately 27 years). As of December 31, 2010, the accumulated
actuarial losses for our U.K. plan amounted to $707.
In 2008, we amended our domestic retiree health benefit plan to
eliminate the subsidy currently paid to current and future Medicare-
eligible retirees effective January 1, 2010. The amendment resulted in
a net decrease of approximately $225 in the benefit obligation and a
corresponding after-tax increase to equity.
The following table provides a summary of the components of the Net
change in benefit plans included within Other comprehensive income as
reported in the Consolidated Statement of Shareholders’ Equity.
(Expense)/Benefit 2010 2009 2008
Other changes in plan assets and
benefit obligations $ (15) $ (102) $ (571)
Income tax (12) 61 183
Fuji Xerox changes in defined
benefit plans(1) 28 (36) (75)
Currency, net(2) 22 (90) 175
Other, net — (2) 2
Net Change in Benefit Plans $ 23 $ (169) $ (286)
(1) Represents our share of Fuji Xerox’s benefit plan changes.
(2) Represents currency impact on cumulative amount of benefit plan net actuarial losses
and prior service credits included in AOCL.
The net actuarial loss and prior service credit for the defined benefit
pension plans that will be amortized from Accumulated other
comprehensive loss into net periodic benefit cost over the next fiscal year
are $71 and $(24), respectively. The net actuarial loss and prior service
credit for the retiree health benefit plans that will be amortized from
Accumulated other comprehensive loss into net periodic benefit cost
over the next fiscal year are zero and $(41), respectively.
Pension plan assets consist of both defined benefit plan assets and
assets legally restricted to the TRA accounts. The combined investment
results for these plans, along with the results for our other defined benefit
plans, are shown above in the “actual return on plan assets” caption. To
the extent that investment results relate to TRA, such results are charged
directly to these accounts as a component of interest cost.