E-Z-GO 2003 Annual Report Download - page 62

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The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 was enacted in Decem-
ber 2003 and allows for a two-year transitional period. The Act provides for discounts on prescription
drug costs through the Medicare Program to eligible retirees (Medicare Part D) as well as a subsidy to
sponsors of retiree healthcare benefit plans that provide a benefit that is at least actuarially equivalent to
the Medicare Part D benefit. The potential impact of the Act has not been included in Textron’s estimate
of the accumulated postretirement benefit obligation or the net periodic postretirement benefit cost for
2003. Textron will evaluate the impact of the Act, including assessing potential amendments to Textron’s
Retirement Plan, in 2004.
Textron’s percentages of the fair value of total pension plan assets by major category are as follows:
December 28,
2002
Equity securities 61% 52%
Debt securities 24% 31%
Real estate 7% 9%
Other 8% 8%
Total 100% 100%
Textron’s pension assets are invested with the objective of achieving a total rate of return over the long
term, sufficient to fund future pension obligations and to minimize future pension contributions. Textron is
willing to tolerate a commensurate level of risk to achieve this objective based on the funded status of
the plans and the long-term nature of Textron’s pension liability. Risk is controlled by maintaining a port-
folio of assets that is diversified across a variety of asset classes, investment styles and investment man-
agers. All of the assets are managed by external investment managers, and the majority of the assets
are actively managed. Where possible, investment managers are prohibited from owning Textron stock
in the portfolios that they manage on behalf of Textron.
Asset allocation target ranges were established consistent with the investment objectives, and the
assets are rebalanced periodically. The expected long-term rate of return on plan assets was deter-
mined based on a variety of considerations, including the established asset allocation targets and
expectations for those asset classes, historical returns of the plans’ assets and the advice of outside
advisors. For 2004, the target allocation range is 47% to 67% for equity securities, 18% to 28% for debt
securities and 7% to 13% each for real estate and other assets.
In 2004, Textron expects to contribute in the range of $20 to $25 million to its pension plans and does not
expect to contribute to its other postretirement benefit plans.
The following benefit payments, which reflect expected future employee service, as appropriate, are
expected to be paid. The benefit payments are based on the same assumptions used to measure Tex-
tron’s benefit obligation at the end of fiscal 2003.
(In millions)
2004 $ 276 $ 59
2005 281 59
2006 285 59
2007 291 59
2008 298 59
2009 - 2013 1,639 271
60