Northrop Grumman 2009 Annual Report Download - page 104

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The accumulated benefit obligation for all defined benefit pension plans was $22.1 billion and $20.4 billion at
December 31, 2009 and 2008, respectively.
$ in millions 2009 2008 2009 2008
Pension Benefits
Medical and
Life Benefits
Amounts Recorded in Accumulated Other Comprehensive
Loss
Net actuarial loss $(4,648) $(5,509) $(451) $(539)
Prior service cost and net transition obligation (242) (287) 298 357
Income tax benefits related to above items 1,923 2,286 61 72
Unamortized benefit plan costs $(2,967) $(3,510) $ (92) $(110)
Amounts for pension plans with accumulated benefit obligations in excess of fair value of plan assets are as
follows:
$ in millions 2009 2008
December 31
Projected benefit obligation $20,687 $19,926
Accumulated benefit obligation 19,162 18,217
Fair value of plan assets 17,739 16,036
Plan Assumptions
On a weighted-average basis, the following assumptions were used to determine the benefit obligations and the
net periodic benefit cost:
2009 2008 2009 2008
Medical and
Life Benefits
Pension
Benefits
Assumptions Used to Determine Benefit Obligation at December 31
Discount rate 6.03% 6.25% 5.80% 6.25%
Rate of compensation increase 3.75% 4.00%
Initial health care cost trend rate assumed for the next year 7.00% 7.50%
Rate to which the cost trend rate is assumed to decline (the ultimate
trend rate) 5.00% 5.00%
Year that the rate reaches the ultimate trend rate 2014 2014
Assumptions Used to Determine Benefit Cost for the Year Ended
December 31
Discount rate 6.25% 6.22% 6.25% 6.12%
Expected long-term return on plan assets 8.50% 8.50% 6.95% 6.85%
Rate of compensation increase 4.00% 4.25%
Initial health care cost trend rate assumed for the next year 7.50% 8.00%
Rate to which the cost trend rate is assumed to decline (the ultimate
trend rate) 5.00% 5.00%
Year that the rate reaches the ultimate trend rate 2014 2012
The discount rate is generally based on the yield on high-quality corporate fixed-income investments. At the end
of each year, the discount rate is primarily determined using the results of bond yield curve models based on a
portfolio of high quality bonds matching the notional cash inflows with the expected benefit payments for each
significant benefit plan.
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NORTHROP GRUMMAN CORPORATION
eBP - v54508-i003_a.pdf - Page 98 of 124 - March 11, 2010 - 20:02:40