Ford 2007 Annual Report Download - page 107

Notes to the Financial Statements
105Ford Motor Company | 2007 Annual Report
NOTE 24. RETIREMENT BENEFITS (Continued)
Plan obligations and costs are based on existing retirement plan provisions. No assumption is made regarding any
potential future changes to benefit provisions beyond those to which we are presently committed (e.g., in existing labor
contracts).
In general, our plans are funded, with the main exceptions being certain plans in Germany and U.S. defined benefit
plans for senior management. In such cases, an unfunded liability is recorded.
The expense for our worldwide defined contribution plans was $130 million in 2007, $80 million in 2006 and
$134 million in 2005. This includes the expense for company matching contributions to our primary employee savings
plans (United States and Canada) of $34 million in 2007, $0 in 2006 and $44 million in 2005. Company matching
contributions were reinstated in June 2007.
Other Postretirement Employee Benefits
We, and certain of our subsidiaries, sponsor plans to provide other postretirement benefits for retired employees,
primarily certain health care and life insurance benefits. The Ford UAW Hospital-Surgical-Medical-Drug-Dental-Vision
Program ("H-S-M-D-D-V Program") covers hourly employees represented by the UAW, and the Ford Salaried Health Care
Plan covers substantially all other Ford employees in the United States hired before June 1, 2001. U.S. salaried
employees hired on or after June 1, 2001 are covered by a separate plan that provides for annual company allocations to
employee-specific notional accounts to be used to fund postretirement health care benefits. We also provide company-
paid postretirement life insurance benefits to U.S. salaried employees hired before January 1, 2004 and all U.S. hourly
employees. Our employees generally may become eligible for benefits when they retire; however, benefits and eligibility
rules may be modified from time to time.
Effective January 1, 2007 for U.S. salaried employees hired before June 1, 2001, we established a company
contribution limit set at 2006 levels for retiree health care benefits. U.S. salaried employees hired on or after June 1, 2001
participate in a defined contribution retiree health care plan. In addition, for U.S. salaried employees hired before
January 1, 2004 who are retirement eligible after June 1, 2006, company-paid retiree life insurance benefits are limited to
$50,000 (employees hired on or after January 1, 2004 do not receive company-paid life insurance benefits). These
benefit changes resulted in a reduction in 2006 and ongoing expense of about $400 million annually as well as a decrease
in the year-end 2005 OPEB obligation of about $3 billion.
Effective January 1, 2008 for U.S. salaried employees hired before June 1, 2001, we replaced health care coverage
(including prescription drugs and dental) for retirees and surviving spouses who are age 65 and older or Medicare eligible
with a new Health Reimbursement Arrangement ("HRA"). Each such surviving spouse, retiree and his or her eligible
spouse are provided an annual amount of up to $1,800 in an HRA account. The HRA may be used to help offset health
care, dental, vision and hearing costs. This benefit change resulted in a decrease in the year-end 2006 OPEB obligation
of about $500 million and a reduction in 2006 and ongoing expense of about $80 million annually.
On November 3, 2007, we agreed in principle with the UAW on a Memorandum of Understanding that permanently
shifts responsibility for providing retiree health care benefits to current and former UAW-represented employees from the
Company to a New Retiree Plan ("New Plan") funded by a new independent Voluntary Employee Benefit Association
Trust ("New VEBA", and together with the New Plan, "MOU"). The effective date of the MOU is anticipated to occur in the
third quarter of 2008. This date is subject to, among other conditions, federal district court approval of the final settlement
agreement relating to the MOU and SEC pre-clearance of the accounting treatment of the New VEBA and our retiree
health care obligation.
In 2005, we entered into an agreement with the UAW ("Agreement") to increase retiree health care cost sharing as
part of our overall cost reduction efforts. On July 13, 2006 we received the necessary court approval of a settlement of a
lawsuit challenging proposed modifications to the H-S-M-D-D-V Program and cost savings began to accrue as of that
date. The Agreement provides for increased cost sharing of health care expenses by retirees presently covered under the
H-S-M-D-D-V Program ("Plan Amendment") and established an independent Defined Contribution Retiree Health Benefit
Trust ("UAW Benefit Trust") which serves as a non-Ford sponsored Voluntary Employee Benefits Association. The UAW
Benefit Trust is used to mitigate the reduction in health plan benefits for certain eligible present and future