Ameriprise 2005 Annual Report Download - page 90

88 |Ameriprise Financial, Inc.
The accumulated benefit obligation for all retirement plans as
of September 30, 2005 and 2004 was $272 million and $241
million, respectively. The accumulated benefit obligation and
fair value of plan assets for pension plans with accumulated
benefit obligations that exceed the fair value of plan assets as
of September 30, 2005 and 2004 are as follows:
2005 2004
(in millions)
Accumulated benefit obligation $47 $27
Fair value of plan assets $15 $–
The projected benefit obligation and fair value of plan assets
for the pension plans with projected benefit obligations that
exceed the fair value of plan assets as of September 30,
2005 and 2004 are as follows:
2005 2004
(in millions)
Projected benefit obligation $ 325 $262
Fair value of plan assets $ 244 $210
The weighted average assumptions used to determine benefit
obligations were:
2005 2004(a)
Discount rates 5.5% 5.6%
Rates of increase in compensation levels 4.4% 4.1%
(a) Assumptions were derived from averages of all American Express
plans and are not necessarily indicative of assumptions Ameriprise
Financial would have used for a stand alone pension plan.
The weighted average assumptions used to determine net peri-
odic benefit cost were:
2005 2004(a) 2003(a)
Discount rates 5.7% 5.7% 6.2%
Rates of increase in compensation
levels 4.4% 4.0% 4.0%
Expected long-term rates of return
on assets 8.2% 7.9% 8.1%
(a) Assumptions were derived from averages of all American Express
plans and are not necessarily indicative of assumptions Ameriprise
Financial would have used for a stand alone pension plan.
In developing the 2005 expected long-term rate of return
assumption, management evaluated input from an external
consulting firm, including their projection of asset class return
expectations, and long-term inflation assumptions. The
Company also considered the historical returns on the Plan’s
assets.
The asset allocation for the Company’s pension plans at
September 30, 2005 and 2004, and the target allocation for
2006, by asset category, are below. Actual allocations will gen-
erally be within 5% of these targets.
Target Percentage of
Allocation Plan Assets at
2006 2005 2004(a)
Equity securities 70% 71% 68%
Debt securities 25 25 27
Other 545
Total 100 100 100
(a) Percentages were derived from averages of all American Express plans
and are not necessarily indicative of percentage allocations Ameriprise
Financial would have used for a stand alone pension plan.
The Company invests in an aggregate diversified portfolio to
ensure that adverse or unexpected results from a security
class will not have a detrimental impact on the entire portfolio.
Diversification is interpreted to include diversification by asset
type, performance and risk characteristics and number of
investments. Asset classes and ranges considered appropri-
ate for investment of the plans’ assets are determined by
each plan’s investment committee. The asset classes typically
include domestic and foreign equities, emerging market equi-
ties, domestic and foreign investment grade and high-yield
bonds and domestic real estate.
The Company’s retirement plans expect to make benefit pay-
ments to retirees as follows (in millions): 2006, $19; 2007,
$19; 2008, $20; 2009, $21; 2010, $24 and 2011-2015,
$144. In addition, the Company expects to contribute $8 mil-
lion to its pension plans in 2006.
Defined Contribution Plans
In addition to the plans described previously, certain Company
employees participate in the Ameriprise Financial 401(k) plan,
under which purchases of Ameriprise Financial’s common
shares are made on behalf of participating U.S. employees.
Under the terms of the 401(k), employees have the option of
investing in the Ameriprise Stock Fund through accumulated
payroll deductions. In addition, at least quarterly Ameriprise
Financial makes automatic cash contributions equal to 1% per
annum of a qualifying employee’s base salary. Such contribu-
tions are invested automatically in the Ameriprise Stock Fund,
which invests primarily in Ameriprise Financial’s common stock
and can be redirected at any time into other 401(k) investment
options. The Company’s defined contribution plan expense was
$34 million, $31 million and $28 million in 2005, 2004 and
2003, respectively.
Other Postretirement Benefits
The Company sponsors defined postretirement benefit plans
that provide health care and life insurance to retired U.S.
employees. Net periodic postretirement benefit costs were $2
million, $2 million and $5 million in 2005, 2004 and 2003,
respectively. Effective January 1, 2004, American Express