Albertsons 2003 Annual Report Download - page 68

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SUPERVALU INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Pension Benefits Post Retirement Benefits
2003 2002 2001 2003 2002 2001
(In thousands)
NET BENEFIT COSTS FOR THE FISCAL
YEAR
Service cost $ 18,333 $ 17,487 $ 16,217 $ 1,790 $1,902 $2,000
Interest cost 33,228 31,163 28,859 7,336 6,031 5,407
Expected return on plan assets (40,323) (41,386) (38,231) — — —
Amortization of:
Unrecognized net loss — — — 2,744 715 167
Unrecognized prior service cost (158) (159) (159) (1,200) (736) (271)
Unrecognized net obligation 2,085 — (306) — — —
Net benefit costs for the fiscal year $ 13,165 $ 7,105 $ 6,380 $10,670 $7,912 $7,303
In March 2002, the company amended its pension plan by adopting the Economic Growth and Tax Relief
Reconciliation Act of 2001. The amendments included increasing the maximum plan benefit from $140,000 to
$160,000 and the compensation limit from $170,000 to $200,000 and resulted in an increase to the plan’s benefit
obligation of approximately $10.1 million in fiscal 2003. In July 2001, the company amended its post retirement
medical health care benefit plan, making changes to plan eligibility, benefit coverage, and premium
subsidization. This amendment resulted in a decrease in the plan’s benefit obligation of approximately $8.3
million in fiscal 2002.
SFAS No. 87, “Employers’ Accounting for Pension”, requires the balance sheet to reflect a prepaid pension
asset or minimum pension liability based on the current market value of plan assets and the accumulated benefit
obligation of the plan. Based on both performance of the pension plan assets and plan assumption changes, the
company recorded a net after-tax adjustment in fiscal 2003 of $72.3 million to reflect a minimum pension
liability. The $119.4 million pre-tax adjustment includes $112.5 million for the pension plan and $6.9 million for
the non-contributory, unfunded pension plans, discussed below.
The company utilized the following assumptions in the calculations for pension and the non-contributory
unfunded pension plans:
2003 2002 2001
Discount rate 7.00% 7.25% 7.75%
Rate of compensation increase 3.25% 3.50% 4.00%
Expected return on plan assets 9.25% 10.00% 10.00%
The assumed health care cost trend rate used in measuring the accumulated post retirement benefit
obligation was 9.0 percent in fiscal 2003. The assumed health care cost trend rate will decrease by one percent
each year for the next four years until it reaches the ultimate trend rate of 5.0 percent. The health care cost trend
rate assumption has a significant impact on the amounts reported. For example, a one percent increase in the
trend rate would increase the accumulated postretirement benefit obligation by $6.7 million and the net periodic
cost by $0.5 million in fiscal 2003. In contrast, a one percent decrease in the trend rate would decrease the
accumulated postretirement benefit obligation by $6.3 million and the net periodic cost by $0.5 million in fiscal
2003. The weighted average discount rates used in determining the benefit obligation were 7.0% and 7.25% for
fiscal 2003 and 2002, respectively.
F-33