Federal Express 2005 Annual Report Download - page 79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Our pension plans included the following components at May 31, 2005 and 2004 (in millions):
U.S. Plans
Qualified Nonqualified International Plans Total
2005 2004 2005 2004 2005 2004 2005 2004
ABO $ 8,534 $ 7,069 $ 166 $ 166 $ 233 $ 192 $ 8,933 $7,427
PBO $ 9,937 $ 8,274 $ 181 $ 179 $ 283 $ 230 $10,401 $ 8,683
Fair Value of Plan Assets 8,699 7,678 ––127 105 8,826 7,783
Funded Status $(1,238) $ (596) $ (181) $(179) $(156) $(125) $ (1,575) $ (900)
Unrecognized actuarial loss 2,414 1,621 27 32 59 41 2,500 1,694
Unamortized prior service cost 86 95 14 20 43104 118
Unrecognized transition amount (5) (7) ––12(4) (5)
Prepaid (accrued) benefit cost $ 1,257 $ 1,113 $ (140) $(127) $(92) $(79) $ 1,025 $ 907
The projected benefit obligation (“PBO”) is the actuarial present
value of benefits attributable to employee service rendered to
date, including the effects of estimated future pay increases. The
accumulated benefit obligation (“ABO”) also reflects the actuar-
ial present value of benefits attributable to employee service
rendered to date, but does not include the effects of estimated
future pay increases. Therefore, the ABO as compared to plan
assets is an indication of the assets currently available to fund
vested and nonvested benefits accrued through May 31.
The measure of whether a pension plan is underfunded for finan-
cial accounting purposes is based on a comparison of the ABO to
the fair value of plan assets and amounts accrued for such bene-
fits in the balance sheet. Although not legally required, we made
$460 million in contributions to our qualified U.S. pension plans in
2005 compared to total contributions of $320 million in 2004.
Currently, we do not expect any contributions for 2006 will be
legally required. However, we currently expect to make tax-
deductible voluntary contributions to our qualified plans in 2006
at levels comparable to 2005.
We have certain nonqualified defined benefit pension plans that
are not funded because such funding would be deemed current
compensation to plan participants. Primarily related to those
plans and certain international plans, we have ABOs aggregat-
ing approximately $399 million at May 31, 2005 and $358 million at
May 31, 2004, with assets of $127 million at May 31, 2005 and $105
million at May 31, 2004. Plans with this funded status resulted in
the recognition of a minimum pension liability in our balance
sheets. This minimum liability was $63 million at May 31, 2005 and
$67 million at May 31, 2004.
Net periodic benefit cost for the three years ended May 31 was
as follows (in millions):
Pension Plans Postretirement Healthcare Plans
2005 2004 2003 2005 2004 2003
Service cost $ 417 $ 376 $ 374 $37 $35 $27
Interest cost 579 490 438 32 25 25
Expected return on plan assets (707) (597) (594) –––
Recognized actuarial losses 60 62 – –––
Other amortization 12 12 10 (1) – (2)
$ 361 $ 343 $ 228 $68 $60 $50
Increases in pension costs from the prior year are primarily the result of changes in discount rate.
Weighted-average actuarial assumptions for our primary U.S. plans, which comprise substantially all of our projected benefit obligations,
are as follows: Pension Plans Postretirement Healthcare Plans
2005 2004 2003 2005 2004 2003
Discount rate 6.285% 6.78% 6.99% 6.16% 6.57% 6.75%
Rate of increase in future compensation levels 3.15 3.15 3.15 –––
Expected long-term rate of return on assets 9.10 9.10 10.10 –––
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