E-Z-GO 2004 Annual Report Download - page 81

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60
Other Postretirement Benefits
For measurement purposes, Textron has assumed an annual healthcare cost trend rate of 11% for covered healthcare benefits in
2005. The rate was assumed to decrease gradually to 5% in 2009 and remain at that level thereafter. Assumed healthcare cost trend
rates have a significant effect on the amounts reported for the healthcare plans. A one-percentage-point change in assumed health-
care cost trend rates would have the following effects:
One- One-
Percentage- Percentage-
Point Point
(In millions)
Increase Decrease
Effect on total of service and interest cost components $ 5 $ (4)
Effect on postretirement benefit obligations other than pensions $ 59 $ (51)
During the third quarter of 2004, Textron adopted FASB Staff Position No. 106-2, “Accounting and Disclosure Requirements
related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (the “Act”). The Act provides for a pre-
scription drug benefit under Medicare (“Medicare Part D”) as well as a federal subsidy to sponsors of retiree healthcare benefit
plans that provide benefits that are at least actuarially equivalent to Medicare Part D. Textron has determined that the benefits it
provides meet the equivalency tests as defined in the Act and has included the effects of the subsidy as a reduction to the accumu-
lated projected benefit obligation of approximately $50 million. The total impact of the subsidy on the net periodic benefit cost for
postretirement benefits other than pensions in 2004 is approximately $7 million.
Estimated Future Cash Flow Impact
In 2005, Textron expects to contribute in the range of $30 million to $35 million to fund its qualified pension plans and does not
expect to contribute to its other postretirement benefit plans. The benefit payments provided below reflect expected future
employee service, as appropriate, that are expected to be paid, net of estimated participant contributions. The benefit payments are
based on the same assumptions used to measure Textron’s benefit obligation at the end of fiscal 2004. Pension benefit payments
will primarily be made out of qualified pension trusts. Postretirement benefits other than pensions are paid out of Textron’s assets.
Post-
retirement Expected
Benefits Medicare
Pension Other Than Part D
(In millions)
Benefits Pensions Subsidy
2005 $ 292 $ 62 $ —
2006 296 66 (4)
2007 301 68 (4)
2008 307 70 (5)
2009 314 70 (5)
2010 – 2014 1,678 324 (23)
Note 13 Income Taxes
Textron files a consolidated federal income tax return for all U.S. subsidiaries and separate returns for foreign subsidiaries. Income
from continuing operations before income taxes and distributions on preferred securities of subsidiary trusts is as follows:
(In millions)
2004 2003 2002
United States $ 296 $ 253 $ 475
Foreign 232 164 101
Total $ 528 $ 417 $ 576
Notes to Consolidated Financial Statements