Hitachi 2004 Annual Report Download - page 60

56 Hitachi, Ltd. Annual Report 2005
12. RETIREMENT AND SEVERANCE BENEFITS
(a) Defined benefit plans
The Company and its subsidiaries have a number of contributory and noncontributory pension plans to provide retirement
and severance benefits to substantially all employees.
Under unfunded defined benefit pension plans, employees are entitled to lump-sum payments based on the current rate
of pay and the length of service upon retirement or termination of employment for reasons other than dismissal for cause.
Directors, Executive Officers and certain employees are not covered by the programs described above. Certain benefits
paid to such persons are charged to income as paid as it is not practicable to compute the liability for future payments
since amounts vary with circumstances.
In addition to unfunded defined benefit pension plans, the Company and certain of its subsidiaries make contributions to
a number of defined benefits pension plans. During the years ended March 31, 2005 and 2004, the Company and certain
subsidiaries amended a portion of their defined benefit plans to cash balance plans.
Under the cash balance plans, each employee has a notional account which represents pension benefits. The balance in
the notional account is based on principal credits, which are accumulated as employees render services, and interest
credits, which are determined based on the market interest rates.
Net periodic benefit cost for the funded benefit pension plans and the unfunded lump-sum payment plans for the years
ended March 31, 2005, 2004 and 2003 consists of the following components:
Thousands of
Millions of yen U.S. dollars
2005 2004 2003 2005
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 85,500 ¥107,002 ¥112,948 $ 799,065
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,637 78,493 97,161 594,738
Expected return on plan assets for the period . . . . . . . (33,749) (32,863) (71,679) (315,411)
Amortization of transition asset . . . . . . . . . . . . . . . . . . (208) (368) (421) (1,944)
Amortization of prior service benefit . . . . . . . . . . . . . . . (13,842) (13,423) (10,115) (129,364)
Recognized actuarial loss . . . . . . . . . . . . . . . . . . . . . . . 100,274 151,567 107,478 937,140
Transfer to defined contribution pension plan . . . . . . . 3,223 1,557 5,167 30,121
Derecognition of previously accrued salary progression
due to transfer of substitutional portion . . . . . . . . . . . . (16,235) (17,215) – (151,729)
Loss on previously deferred actuarial losses
due to transfer of substitutional portion . . . . . . . . . . . 105,758 375,049 – 988,393
Curtailment and settlement loss . . . . . . . . . . . . . . . . . . 173 1,072 700 1,617
Employees’ contributions . . . . . . . . . . . . . . . . . . . . . . . (3,187) (9,735) (16,558) (29,785)
Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . 291,344 641,136 224,681 2,722,841
Difference between the obligations settled and
the assets transferred due to transfer of
substitutional portion . . . . . . . . . . . . . . . . . . . . . . . . . (165,247) (411,621) – (1,544,364)
¥126,097 ¥229,515 ¥224,681 $1,178,477
Unrecognized transition asset, unrecognized prior service benefit and cost and unrecognized actuarial gain and loss are
amortized using the straight-line method over the average remaining service period of active employees.