Prudential 2003 Annual Report Download - page 152

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
15. EMPLOYEE BENEFIT PLANS (continued)
The projected benefit obligations, accumulated benefit obligations and fair value of plan assets for the pension
plans with accumulated benefit obligations in excess of plan assets were $1,195 million, $1,057 million and $88
million, respectively, at September 30, 2003 and $1,480 million, $1,247 million and $77 million, respectively, at
September 30, 2002.
In 2003 and 2002, the pension plan purchased annuity contracts from Prudential Insurance for $3 million and $68
million, respectively. The approximate future annual benefit payment for all annuity contracts was $22 million and $20
million in 2003 and 2002, respectively.
The benefit obligation for pensions increased by $17 million in 2003 for the inclusion of a new non-qualified
pension plan for mid-career hires. The benefit obligation for pensions increased by $218 million in 2002 for
amendments related to the distribution of value to the pension plan upon demutualization for $200 million and $18
million related to Prudential Securities cash balance feature, which increased the amount of earnings considered
pensionable.
The benefit obligation for other postretirement benefits decreased by $73 million in 2003 for changes in the
substantive plan made to medical, dental and life insurance benefits. There was a reduction in cost related to changes in
the prescription drug program of $39 million and a reduction of $39 million for cost sharing shifts to certain retirees for
medical and dental benefits. There was an increase in cost of $5 million associated with providing Prudential Financial
benefits to former Prudential Securities Inc. employees that transferred to Prudential Financial effective July 1, 2003.
The benefit obligation for other postretirement benefits decreased by $141 million in 2002 for changes in the
substantive plan made to medical and dental benefits. The significant cost reduction relates to changes in the
prescription drug program of $128 million for co-payments and $13 million for cost sharing shifts to certain retirees for
medical and dental benefits. Also in 2002, the Company approved the establishment of a new category of retiree called
disabled retirees. Based on this new category, $95 million of medical and dental benefits were transferred from
postemployment benefits to postretirement benefits.
The pension benefits were amended during the time periods presented for 2002 and 2001 to provide contractual
termination benefits to certain plan participants whose employment had been terminated. Costs related to these
amendments are reflected in contractual termination benefits in the table below.
Employees were provided special termination benefits in conjunction with their termination of employment
related to the Prudential Securities Inc. and Prudential Property and Casualty transactions in 2003. These benefits
include the cost of vesting plan participants, accruing benefits until year-end, crediting service for vesting purposes and
certain early retirement subsidies.
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