Albertsons 2005 Annual Report Download - page 79

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SUPERVALU INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Pension Benefits Post Retirement Benefits
2005 2004 2003 2005 2004 2003
(In thousands)
NET BENEFIT COSTS FOR THE FISCAL
YEAR
Service cost $ 19,370 $ 18,243 $ 18,333 $ 1,443 $ 1,350 $ 1,790
Interest cost 37,957 35,003 33,228 6,899 7,457 7,336
Expected return on plan assets (41,843) (40,970) (40,323) — — —
Amortization of:
Unrecognized net loss 18,895 7,898 2,085 3,722 3,305 2,744
Unrecognized prior service cost 1,261 1,106 (158) (1,949) (1,200) (1,200)
Net benefit costs for the fiscal year $ 35,640 $ 21,280 $ 13,165 $10,115 $10,912 $10,670
In March 2003, the company amended its post retirement medical health care benefit plan, primarily making
changes to benefit coverage. This amendment resulted in a decrease in the plan’s benefit obligation of
approximately $4.5 million in fiscal 2004.
The company utilized the following assumptions in the calculations for pension and the non-contributory
unfunded pension plans:
2005 2004 2003
Weighted-average assumptions used to determine benefit
obligations:
Discount rate 6.00% 6.25% 7.00%
Rate of compensation increase 3.00% 3.00% 3.25%
Weighted-average assumptions used to determine net periodic
benefit cost:
Discount rate 6.25% 7.00% 7.25%
Rate of compensation increase 3.00% 3.25% 3.50%
Expected return on plan assets 8.75% 9.00% 9.25%
The assumed health care cost trend rate used in measuring the accumulated post retirement benefit obligation
was 12.0 percent in fiscal 2005. The assumed health care cost trend rate will decrease by one percent each year for
the next seven 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 post retirement benefit obligation by approximately $11 million and the service and
interest cost by approximately $1 million in fiscal 2005. In contrast, a one percent decrease in the trend rate would
decrease the accumulated post retirement benefit obligation by approximately $10 million and the service and
interest cost by approximately $1 million in fiscal 2005.
The company also maintains non-contributory unfunded pension plans to provide certain employees with
pension benefits in excess of limits imposed by federal tax law. The projected benefit obligation of the unfunded
plans was $18.1 million and $24.9 million at February 26, 2005 and February 28, 2004, respectively. The
accumulated benefit obligation of these plans totaled $14.2 million and $21.0 million at February 26, 2005 and
February 28, 2004, respectively. Net periodic pension cost was $3.6 million, $3.6 million and $2.7 million for
fiscal 2005, 2004 and 2003, respectively.
The company employs a total return approach whereby a mix of equities and fixed income investments are
used to maximize the long-term return of plan assets for a prudent level of risk. Alternative investments,
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