Exelon 2003 Annual Report Download - page 113

111Notes to Consolidated Financial Statements
EXELON CORPORATION AND SUBSIDIARY COMPANIES
The accumulated benefit obligation (ABO) for all defined
benefit pension plans was $8,104 million and $7,355 million
at December 31, 2003 and 2002, respectively. The acquisition
of AmerGen and assumption of its pension liabilities in De-
cember 2003 resulted in a $55 million increase in Exelon’s
ABO. The following table provides the projected benefit obli-
gation, accumulated benefit obligation, and fair value of
plan assets for pension plans with an ABO in excess of plan
assets. The table below is also representative of all pension
plans with a projected benefit obligation in excess of plan
assets.
December 31,
2003 2002
Projected benefit obligation $8,758 $7,854
Accumulated benefit obligation 8,104 7,355
Fair value of plan assets 6,442 5,395
The following table provides the components of the net periodic benefit costs (benefits) recognized for the years ended De-
cember 31. A portion of the net periodic benefit cost (benefit) is capitalized within the Consolidated Balance Sheets.
Pension Benefits
Other Postretirement
Benefits
2003 2002 2001 2003 2002 2001
Service cost $109 $95$94 $68 $57 $42
Interest cost 519 525 498 167 160 161
Expected return on assets (584) (628) (625) (75) (93) (99)
Amortization of:
Transition obligation (asset) (4) (4) (4) 10 10 10
Prior service cost 16 16 9 (54) (37) (9)
Actuarial (gain) loss 23 –(25) 47 61
Curtailment charge (credit) 59 – (12) 21 –9
Settlement charge (credit) ––(9) –––
Net periodic benefit cost (benefit) $ 138 $ 4 $ (74) $184 $ 103 $ 115
Special accounting costs $–$4$48 $48 $– $3
Other additional information:
Increase (decrease) in other comprehensive income (net of tax) $26 $(1,007) $ – $– $– $–
Exelon’s costs of providing pension and postretirement bene-
fit plans are dependent upon a number of factors, such as
the rates of return on pension plan assets, discount rate, and
the rate of increase in health care costs. The market value of
plan assets was affected by sharp declines in the equity
market from 2000 through 2002. As a result, at December 31,
2002, Exelon was required to recognize an additional mini-
mum liability and an intangible asset as prescribed by SFAS
No. 87. The liability was recorded as a reduction to share-
holders’ equity, and the equity will be restored to the balance
sheet in future periods when the fair value of plan assets
exceeds the ABO. The amount of the reduction to share-
holders’ equity (net of income taxes) in 2002 was $1.0 billion.
The recording of this reduction did not affect net income or
cash flows in 2002 or compliance with debt covenants. In
2003, the additional minimum liability was reduced by $69
million. In 2003, shareholders’ equity increased by $26 mil-
lion (net of income taxes) as a result of accounting asso-
ciated with Exelon’s pension plans.
Special accounting costs of $48 million in 2003 represent
special health and welfare severance benefits offered
through The Exelon Way. These costs were recorded pur-
suant to SFAS No. 112. See Note 9—Severance Accounting for
additional information. Special accounting costs of $4 mil-
lion in 2002 and $48 million in 2001 represented accelerated
separation and enhancement benefits provided to PECO
employees expected to be terminated as a result of the
Merger.
Prior service cost is amortized on a straight-line basis
over the average remaining service period of employees ex-
pected to receive benefits under the plans.