Allstate 2008 Annual Report Download - page 303

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The PBO, ABO and fair value of plan assets for the Company’s pension plans with an ABO in excess of plan
assets were $4.57 billion, $3.93 billion, and $3.40 billion, respectively as of December 31, 2008, and $175 million,
$175 million, and $5 million, respectively as of December 31, 2007. Included in the accrued benefit cost of the
pension benefits are certain unfunded non-qualified plans with accrued benefit costs of $198 million and
$170 million for 2008 and 2007, respectively.
The changes in benefit obligations for all plans for the years ended December 31 are as follows:
Pension Postretirement
benefits benefits
2008 2007 2008 2007
($ in millions)
Change in benefit obligation
Benefit obligation, beginning of year $5,002 $5,293 $ 908 $1,115
Effects of changing the measurement date pursuant to SFAS No. 158:
Transition period adjustment to retained earnings (2) — 12 —
Net actuarial (gain) loss for October 31—December 31, 2007 15 — (30) —
Benefit obligation 5,015 5,293 890 1,115
Service cost 145 162 18 24
Interest cost 313 311 58 65
Participant contributions 1 2 37 41
Actuarial gain (471) (349) (155) (300)
Benefits paid(1) (367) (455) (77) (86)
Plan amendment(2) ———41
Translation adjustment and other (70) 38 (9) 8
Benefit obligation, end of year $4,566 $5,002 $ 762 $ 908
(1) Benefits paid include lump sum distributions, a portion of which may trigger settlement accounting treatment.
(2) In 2007, the Company amended its postretirement benefits plan to allow exclusive agent independent contractors who met eligibility
requirements at the time of conversion from an employee agent, to enroll in the retiree medical plan under certain circumstances.
Components of net periodic cost
The components of net periodic cost for all plans for the years ended December 31 are as follows:
Pension Postretirement
benefits benefits
2008 2007 2006 2008 2007 2006
($ in millions)
Service cost $ 145 $ 162 $ 185 $ 18 $24 $26
Interest cost 313 311 304 58 65 68
Expected return on plan assets (397) (354) (321) — — —
Amortization of:
Prior service (credit) cost (2) (2) (3) 2 (1) (1)
Net actuarial (gain) loss 37 116 143 (24) 1 1
Settlement loss 57 35 142 — — —
Special termination benefit — — — — — 3
Net periodic cost $ 153 $ 268 $ 450 $ 54 $89 $97
Assumptions
Weighted average assumptions used to determine net pension cost and net postretirement benefit cost for
the years ended December 31 are:
Pension Postretirement
benefits benefits
2008 2007 2006 2008 2007 2006
($ in millions)
Weighted average discount rate 6.50% 6.00% 6.00% 6.75% 6.00% 6.00%
Rate of increase in compensation levels 4.0-4.5 4.0-4.5 4.0-4.5 n/a n/a n/a
Expected long-term rate of return on plan assets 8.5 8.5 8.5 n/a n/a n/a
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Notes