Northrop Grumman 2011 Annual Report Download - page 98

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NORTHROP GRUMMAN CORPORATION
In addition to a medical inflation cost-sharing feature, the plans also have provisions for deductibles, co-payments,
coinsurance percentages, out-of-pocket limits, conformance to a schedule of reasonable fees, the use of managed
care providers, and coordination of benefits with other plans. The plans also provide for a Medicare carve-out.
Subsequent to January 1, 2005 (or earlier at some segments), newly hired employees are not eligible for post
employment medical and life benefits.
The effect of the Medicare prescription drug subsidy from the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 to reduce the company’s net periodic post-retirement benefit cost and accumulated
post-retirement benefit obligation for the periods presented was not material. Pursuant to the new healthcare law
described below, the tax benefits related to Medicare Part D subsidies will expire on December 31, 2012.
Health Care Legislation – The Patient Protection and Affordable Care Act and the Health Care and Education
Reconciliation Act became law during the first quarter of 2010. The provisions of these new laws affected the
company’s costs of providing health care benefits to its employees beginning this year. The company participated
in the Early Retiree Reinsurance Program and continues to assess the extent to which the provisions of the new
laws will affect its future health care and related employee benefit plan costs.
Spin-off of Shipbuilding Business – As a result of the spin-off of HII discussed in Note 6, the company reclassified to
assets and liabilities of discontinued operations, certain pension and other post-retirement benefit plan assets and
liabilities related exclusively to Shipbuilding employees and the Shipbuilding portion of Northrop Grumman
pension and other post-retirement benefit plans that included Shipbuilding employees.
Summary Plan Results
The cost to the company of its retirement benefit plans in each of the three years ended December 31 is shown in
the following table:
Year Ended December 31
Pension Benefits
Medical and
Life Benefits
$ in millions 2011 2010 2009 2011 2010 2009
Components of Net Periodic Benefit Cost
Service cost $ 520 $ 531 $ 547 $ 32 $ 34 $ 34
Interest cost 1,223 1,212 1,180 114 117 124
Expected return on plan assets (1,690) (1,517) (1,366) (62) (56) (48)
Amortization of:
Prior service cost (credit) 23 35 34 (51) (51) (51)
Net loss from previous years 162 206 289 17 18 19
Other 21 (6)
Net periodic benefit cost $ 238 $ 467 $ 705 $ 44 $ 62 $ 78
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