Hess 2002 Annual Report Download - page 40

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Pension expense consisted of the following:
Millions of dollars 2002 2001 2000
Service cost $23 $20 $18
Interest cost 44 41 37
Expected return on
plan assets (44) (48) (45)
Amortization of prior
service cost 112
Amortization of net (gain) loss 5
—
(1)
Pension expense* $29 $14 $11
*Pension expense is expected to increase to approximately $50 million in 2003.
Prior service costs and gains and losses in excess of 10% of the
greater of the benefit obligation or the market value of assets
are amortized over the average remaining service period of
active employees.
The weighted-average actuarial assumptions used by the
Corporation’s pension plans at December 31 were as follows:
2002 2001
Discount rate 6.6% 7.0%
Expected long-term rate of return on
plan assets 9.0* 9.0
Rate of compensation increases 4.4 4.5
*Decreased to 8.5% effective January 1, 2003.
The Corporation also has a nonqualified supplemental pension plan
covering certain employees. The supplemental pension plan pro-
vides for incremental pension payments from the Corporation’s
funds so that total pension payments equal amounts that would have
been payable from the Corporation’s principal pension plan were it
not for limitations imposed by income tax regulations. The benefit
obligation related to this unfunded plan totaled $61 million at
December 31, 2002 and $59 million at December 31, 2001. Pension
expense for the plan was $8 million in 2002, $9 million in 2001 and
$7 million in 2000. The Corporation has accrued $43 million for
this plan at December 31, 2002 ($44 million at December 31, 2001).
The trust established to fund the supplemental plan held assets
valued at $26 million at December 31, 2002 and $23 million at
December 31, 2001.
11. Pension Plans
The Corporation has defined benefit pension plans for substantially
all of its employees. The following table reconciles the benefit obliga-
tion and fair value of plan assets and shows the funded status:
Millions of dollars 2002 2001
Reconciliation of pension benefit obligation
Benefit obligation at January 1 $ 623 $ 589
Service cost 23 20
Interest cost 44 41
Actuarial (gain) loss 60 (5)
Acquisition of business
—
7
Benefit payments (29) (29)
Pension benefit obligation at
December 31 721 623
Reconciliation of fair value of plan assets
Fair value of plan assets at January 1 495 543
Actual return on plan assets (42) (39)
Employer contributions 63 12
Acquisition of business
—
8
Benefit payments (29) (29)
Fair value of plan assets at
December 31 487 495
Funded status at December 31
Funded status (234) (128)
Prior service cost 55
Unrecognized loss 214 76
Net amount recognized $ (15) $ (47)
Amounts recognized in the consolidated balance sheet at December
31 consists of the following:
Millions of dollars 2002 2001
Accrued benefit liability $(130) $(47)
Intangible asset 5
—
Accumulated other comprehensive income 110
—
Net amount recognized $ (15) $(47)
38