AIG 2008 Annual Report Download - page 310

AIG’s U.S. qualified retirement plans are noncontributory defined benefit plans which are subject to the
provisions of ERISA. U.S. salaried employees who are employed by a participating company, have attained age 21
and completed twelve months of continuous service are eligible to participate in the plans. Employees generally
vest after 5 years of service. Unreduced benefits are paid to retirees at normal retirement (age 65) and are based upon
a percentage of final average compensation multiplied by years of credited service, up to 44 years. Non-U.S. defined
benefit plans are generally either based on the employee’s years of credited service and compensation in the years
preceding retirement or on points accumulated based on the employee’s job grade and other factors during each year
of service.
In 2007, AIG acquired the outstanding minority interest of 21st Century. Assets, obligations and costs with
respect to 21st Century’s plans are included herein. The assumptions used by 21st Century in its plans were not
significantly different from those used by AIG in AIG’s U.S. plans.
AIG also sponsors several unfunded defined benefit plans for certain employees, including key executives,
designed to supplement pension benefits provided by AIG’s other retirement plans. These include the AIG Excess
Retirement Income Plan, which provides a benefit equal to the reduction in benefits payable to certain employees
under the AIG U.S. retirement plan as a result of federal tax limitations on compensation and benefits payable and
the Supplemental Executive Retirement Plan, which provides additional retirement benefits to designated exec-
utives. Under the Supplemental Plan, an annual benefit accrues at a percentage of final average pay multiplied by
each year of credited service, not greater than 60 percent of final average pay, reduced by any benefits from the
current and any predecessor retirement plans (including the AIG Excess Retirement Income Plan and any
comparable plans), Social Security, if any, and from any qualified pension plan of prior employers.
Postretirement Plans
AIG and its subsidiaries also provide postretirement medical care and life insurance benefits in the U.S. and in
certain non-U.S. countries. Eligibility in the various plans is generally based upon completion of a specified period
of eligible service and attaining a specified age. Overseas, benefits vary by geographic location.
U.S. postretirement medical and life insurance benefits are based upon the employee electing immediate
retirement and having a minimum of ten years of service. Medical benefits are contributory, while the life insurance
benefits are non-contributory. Retiree medical contributions vary with age and length of service and range from
requiring no cost for pre-1989 retirees to requiring actual premium payments reduced by certain credits for post-
1993 retirees. These contributions are subject to adjustment annually. Other cost sharing features of the medical
plan include deductibles, coinsurance, Medicare coordination and a lifetime maximum benefit of $2 million.
The following table presents the funded status of the plans, reconciled to the amount reported in the
consolidated balance sheet. The measurement date for some of the non-U.S. defined benefit pension and
postretirement plans is November 30, consistent with the fiscal year-end of the sponsoring companies. For all
other plans, measurement occurs as of December 31, 2008.
As of or for the Year Ended December 31, 2008 2008 2007 2008 2007 2008 2007 2008 2007
Non-U.S. Plans(b) U.S. Plans(c) Non-U.S. Plans U.S. Plans
Pension Postretirement(a)
(In millions)
Change in projected benefit obligation:
Benefit obligation, beginning of year . . . . $ 1,745 $1,578 $ 3,156 $3,079 $79 $53 $ 257 $ 252
Service cost . . . . . . . . . . . . . . . . . . . . . . 112 90 132 135 85811
Interest cost . . . . . . . . . . . . . . . . . . . . . . 62 50 202 186 4316 15
Participant contributions . . . . . . . . . . . . . 44——————
Actuarial (gain) loss . . . . . . . . . . . . . . . . 85 (12) 374 (159) 15 (2) 16 (3)
Plan amendments and mergers . . . . . . . . . 1(2) —17 ————
304 AIG 2008 Form 10-K
American International Group, Inc., and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)