Boeing 2006 Annual Report Download - page 66

64 The Boeing Company and Subsidiaries
Notes to Consolidated Financial Statements
Amounts recognized in Accumulated other comprehensive loss
at December 31, 2006 are as follows:
Other
Postretirement
Pensions Benefits
At December 31, 2006 2006
Net actuarial loss (gain) $10,201 $2,494
Prior service cost (credit) 1,336 (568)
Total recognized in Accumulated
other comprehensive loss $11,537 $1,926
The estimated amount that will be amortized from Accumulated
other comprehensive loss into net periodic benefit cost in 2007
is as follows:
Other
Postretirement
Pensions Benefits
Year ending December 31, 2007 2007
Recognized net actuarial loss/(gain) $762 $159
Amortization of prior service costs 197 (88)
Total $959 $÷71
The accumulated benefit obligation (ABO) for all pension plans
was $41,706 and $40,999 at September 30, 2006 and 2005.
All of our major tax qualified pension plans, have plan assets
that exceed ABOs at September 30, 2006. The following table
shows the key information for all plans with ABO in excess of
plan assets:
At September 30, 2006 2005
Projected benefit obligation $1,602 $10,638
Accumulated benefit obligation 1,342 10,343
Fair value of plan assets 573 9,405
The Medicare Prescription Drug, Improvement and
Modernization Act of 2003 reduced our APBO by $156 at
September 30, 2005 and $439 at September 30, 2004. These
reductions/actuarial gains are amortized over the expected
average future service of current employees.
Assumptions
At September 30, 2006 2005 2004 2003
Discount rate:
pension and OPB 5.90%5.50%5.75%6.00%
Expected return on
plan assets 8.25%8.50%8.50%8.75%
Rate of compensation
increase 5.50%5.50%5.50%5.50%
In 2005, we modified our method of determining the discount
rate so that the discount rate for each individual pension plan
is determined separately based on the duration of each plan’s
liabilities. Previously, we determined a single discount rate for all
our postretirement benefit plans. We made the change mainly
because of the divergence in the populations of our various
plans due to employee transfers, layoffs and divestitures. The
new method continues to include a matching of the plans’
expected future benefit payments against a yield curve that’s
based on high quality, non-callable bonds in the Bloomberg
index as of the measurement date, omitting bonds with the
ten percent highest and the ten percent lowest yields. The dis-
closed rate is the average rate for all the plans, weighted by the
projected benefit obligation. As of September 30, 2006, the
weighted average was 5.9%, and the rates for individual plans
ranged from 5.00% to 6.00%. As of September 30, 2005, the
weighted average was 5.50%, and the rates for individual plans
ranged from 5.00% to 6.00%.
The pension fund’s expected return on assets assumption
is derived from an extensive study conducted by our Trust
Investments group and its actuaries on a periodic basis. The
study includes a review of actual historical returns achieved by
the pension trust and anticipated future long-term performance
of individual asset classes with consideration given to the
related investment strategy. While the study gives appropriate
consideration to recent trust performance and historical returns,
the assumption represents a long-term prospective return.
The expected return on plan assets determined on each
measurement date is used to calculate the net periodic benefit
cost/(income) for the upcoming plan year.
At September 30, 2006 2005
Assumed healthcare cost trend rates
Healthcare cost trend rate assumed next year 8.00%9.00%
Ultimate trend rate 5.00%5.00%
Year that trend reached ultimate rate 2013 2013
Assumed healthcare cost trend rates have a significant
effect on the amounts reported for the healthcare plans. To
determine the healthcare cost trend rates we look at a
combination of information including ongoing claims cost
monitoring, annual statistical analyses of claims data, reconcilia-
tion of forecast claims against actual claims, review of trend
assumptions of other plan sponsors and national health trends,
and adjustments for plan design changes, workforce changes,
and changes in plan participant behavior. A one-percentage-
point change in assumed healthcare cost trend rates would
have the following effect:
Increase Decrease
Effect on postretirement benefit obligation $683 $(653)
Effect on total of service and interest cost 58 (50)