CenterPoint Energy 2008 Annual Report Download - page 98

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76
The Company used the following assumptions to determine net periodic cost relating to pension and
postretirement benefits:
December 31,
2006
2007
2008
Pension
Benefits
Postretirement
Benefits
Pension
Benefits
Postretirement
Benefits
Pension
Benefits
Postretirement
Benefits
Discount rate .......................................................
5.70%
5.70%
5.85%
5.85%
6.40%
6.40%
Expected return on plan assets ............................
8.50
8.00
8.50
7.60
8.50
7.60
Rate of increase in compensation levels .............
4.60
—
4.60
—
4.60
—
In determining net periodic benefits cost, the Company uses fair value, as of the beginning of the year, as its basis
for determining expected return on plan assets.
The following table summarizes changes in the benefit obligation, plan assets, the amounts recognized in
consolidated balance sheets and the key assumptions of the Company’s pension, including benefit restoration, and
postretirement plans. The measurement dates for plan assets and obligations were December 31, 2007 and 2008.
December 31,
2007
2008
Pension
Benefits
Postretirement
Benefits
Pension
Benefits
Postretirement
Benefits
(In millions, except for actuarial assumptions)
Change in Benefit Obligation
Benefit obligation, beginning of year ................................................................
$ 1,776
$ 469
$ 1,645
$ 437
Service cost ................................................................................................
37
2
31
1
Interest cost ................................................................................................
100
26
101
27
Participant contributions ................................................................
—
5
—
5
Benefits paid................................................................................................
(145)
(35)
(123)
(38)
Actuarial gain ................................................................................................
(123)
(33)
(59)
(10)
Plan amendment ................................................................................................
—
—
114
—
Medicare reimbursement ................................................................
—
3
—
4
Benefit enhancement ..............................................................................................
—
—
1
—
Benefit obligation, end of year ................................................................
1,645
437
1,710
426
Change in Plan Assets
Plan assets, beginning of year ................................................................
1,806
158
1,792
161
Employer contributions ................................................................
9
22
8
27
Participant contributions ................................................................
—
5
—
5
Benefits paid................................................................................................
(145)
(35)
(123)
(38)
Actual investment return ................................................................
122
11
(401)
(20)
Plan assets, end of year ................................................................
1,792
161
1,276
135
Funded status, end of year ................................................................
$ 147
$ (276)
$ (434)
$ (291)
Amounts Recognized in Balance Sheets
Other assets-other ................................................................................................
$ 231
$ —
$ —
$ —
Current liabilities-other ................................................................
(8)
(8)
(9)
(10)
Other liabilities-benefit obligations ................................................................
(76)
(268)
(425)
(281)
Net asset (liability), end of year ................................................................
$ 147
$ (276)
$ (434)
$ (291)
Actuarial Assumptions
Discount rate ................................................................................................
6.40%
6.40%
6.90%
6.90%
Expected return on plan assets ................................................................
8.50
7.60
8.00
7.05%
Rate of increase in compensation levels ................................................................
4.60
—
4.60
—
Healthcare cost trend rate assumed for the next year ................................
—
7.00
—
6.50
Prescription drug cost trend rate assumed for the next year ................................
—
13.00
—
12.00
Rate to which the cost trend rate is assumed to decline (the
ultimate trend rate) ...............................................................................................
—
5.50
—
5.50
Year that the healthcare rate reaches the ultimate trend rate ................................
—
2012
—
2011
Year that the prescription drug rate reaches the ultimate trend
rate ................................................................................................
—
2015
—
2014