JP Morgan Chase 2008 Annual Report Download - page 166

Notes to consolidated financial statements
164 JPMorgan Chase & Co./ 2008 Annual Report
The following table presents the components of net periodic benefit costs reported in the Consolidated Statements of Income and other compre-
hensive income for the Firm’s U.S. and non-U.S. defined benefit pension and OPEB plans.
Defined benefit pension plans
U.S. Non-U.S. OPEB plans
Year ended December 31, (in millions) 2008 2007 2006 2008 2007 2006 2008 2007 2006
Components of net periodic benefit cost
Benefits earned during the year $ 278 $ 270 $ 281 $29 $36 $37 $5 $7 $9
Interest cost on benefit obligations 488 468 452 142 144 120 74 74 78
Expected return on plan assets (719) (714) (692) (152) (153) (122) (98) (93) (93)
Amortization:
Net loss ——12 25 55 45 —14 29
Prior service cost (credit) 455 ——— (16) (16) (19)
Curtailment (gain) loss 1—2 ——1 422
Settlement (gain) loss ——— —(1) 4 ———
Special termination benefits ——— 311 —12
Net periodic benefit cost 52 29 60 47 82 86 (31) (11) 8
Other defined benefit pension plans
(a) 11 42 14 27 36 NA NA NA
Total defined benefit plans 63 33 62 61 109 122 (31) (11) 8
Total defined contribution plans 263 268 254 286 219 199 NA NA NA
Total pension and OPEB cost included in
compensation expense $ 326 $ 301 $ 316 $ 347 $ 328 $ 321 $ (31) $ (11) $ 8
Changes in plan assets and benefit
obligations recognized in other
comprehensive income
Net (gain) loss arising during the year $3,243 $ (533) NA $ 235 $(176) NA $ 248 $(223) NA
Prior service credit arising during the year ——NA —(2) NA ——NA
Amortization of net loss ——NA (27) (55) NA —(14) NA
Amortization of prior service (cost) credit (5) (5) NA ——NA 15 16 NA
Curtailment (gain) loss ——NA —(5) NA 33NA
Settlement loss ——NA —1NA ——NA
Foreign exchange impact and other ——NA (150) —NA 3—NA
Total recognized in other
comprehensive income 3,238 (538) NA 58 (237) NA 269 (218) NA
Total recognized in net periodic benefit cost
and other comprehensive income $3,290 $ (509) NA $ 105 $(155) NA $ 238 $(229) NA
(a) Includes various defined benefit pension plans, which are individually immaterial.
The estimated pretax amounts that will be amortized from AOCI into net periodic benefit cost in 2009 are as follows.
Defined benefit pension plans OPEB plans
Year ended December 31, 2009 (in millions) U.S. Non-U.S. U.S. Non-U.S.
Net loss $ 301 $ 42 $ — $ —
Prior service cost (credit) 4 — (14) —
Total $ 305 $ 42 $ (14) $ —
Plan assumptions
JPMorgan Chase’s expected long-term rate of return for U.S. defined
benefit pension and OPEB plan assets is a blended average of the
investment advisor’s projected long-term (10 years or more) returns for
the various asset classes, weighted by the asset allocation. Returns on
asset classes are developed using a forward-looking building-block
approach and are not strictly based upon historical returns. Equity
returns are generally developed as the sum of inflation, expected real
earnings growth and expected long-term dividend yield. Bond returns
are generally developed as the sum of inflation, real bond yield and
risk spread (as appropriate), adjusted for the expected effect on returns
from changing yields. Other asset-class returns are derived from their
relationship to the equity and bond markets. Consideration was also
given to current market conditions and the short-term portfolio mix of
each Plan; as a result, the Firm has generally maintained the same
expected return on assets from the prior year.
For the U.K. defined benefit pension plans, which represent the most
significant of the non-U.S. defined benefit pension plans, procedures
similar to those in the U.S. are used to develop the expected