Dominion Power 2004 Annual Report Download - page 87

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The following benefit payments, which reflect expected future service,
as appropriate, are expected to be paid:
Other
Pension Postretirement
Benefits Benefits
(millions)
2005 $ 152 $ 70
2006 175 75
2007 155 80
2008 160 84
2009 165 89
2010-2014 1,108 528
Dominion’s overall objective for investing its pension and other postre-
tirement plan assets is to achieve the best possible long-term rates of
return commensurate with prudent levels of risk. To minimize risk, funds
are broadly diversified among asset classes, investment strategies and
investment advisors. The strategic target asset allocation for Dominion’s
pension fund is 45% U.S. equity securities; 8% non-U.S. equity securities;
22% debt securities; and 25% other, such as real estate and private equity
investments. Financial derivatives may be used to obtain or manage market
exposures and to hedge assets and liabilities. Dominion’s pension plans
and other postretirement plans asset allocations at December 31, 2004 and
2003 are as follows:
D 2004/Page 85
Pension Plans Other Postretirement Plans
Year Ended December 31, 2004 2003 2004 2003
Fair % of Fair % of Fair % of Fair % of
Value Total Value Total Value Total Value Total
(millions)
Equity securities:
U.S. $1,761 44 $1,658 44 $308 44 $251 43
International 522 13 407 11 74 11 62 11
Debt securities 947 23 859 23 250 36 205 35
Real estate 298 7 264 7 17 2 14 2
Other 521 13 546 15 48 7 55 9
Total $4,049 100 $3,734 100 $697 100 $587 100
The components of the provision for net periodic benefit cost were as follows:
Pension Benefits Other Postretirement Benefits
Year Ended December 31, 2004 2003 2002 2004 2003 2002
(millions)
Service cost $97 $86 $ 77 $63 $55 $44
Interest cost 190 182 177 83 79 68
Expected return on plan assets (336) (332) (349) (44) (33) (34)
Amortization of prior service cost 221 —1
Amortization of transition obligation —(2) (4) 7911
Amortization of net loss 56 20 2 21 20 5
Net periodic benefit cost (credit) $9 $ (44) $(96) $130 $130 $ 95
Significant assumptions used in determining the net periodic cost recognized in the Consolidated Statements of Income were as follows, on a weighted-
average basis:
Pension Benefits Other Postretirement Benefits
2004 2003 2002 2004 2003 2002
Discount rate 6.25% 6.75% 7.25% 6.25% 6.75% 7.25%
Expected return on plan assets 8.75% 8.75% 9.50% 7.79% 7.78% 7.82%
Rate of increase for compensation 4.70% 4.70% 4.60% 4.70% 4.70% 4.60%
Medical cost trend rate(1) 9.00% 9.00% 9.00%
(1) Decreasing to 5.00% in 2008 and years thereafter.
Significant assumptions used in determining the projected pension benefit and postretirement benefit obligations recognized in the Consolidated Balance
Sheets were as follows, on a weighted-average basis:
Other Postretirement
Pension Benefits Benefits
2004 2003 2004 2003
Discount rate 6.00% 6.25% 6.00% 6.25%
Rate of increase for compensation 4.70% 4.70% 4.70% 4.70%