Prudential 2005 Annual Report Download - page 141

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
16. 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 $1,472 million, $1,372 million and $128 million, respectively, at
September 30, 2005 and $1,305 million, $1,186 million and $124 million, respectively, at September 30, 2004.
In 2005 and 2004, the pension plan purchased annuity contracts from Prudential Insurance for zero million and $3 million,
respectively. The approximate future annual benefit payment for all annuity contracts was $23 million in both 2005 and 2004.
There were no material pension amendments in 2005 or 2004. There were postretirement amendments in 2005 and 2004,
respectively. The benefit obligation for other postretirement benefits decreased by $48 million in 2005 for changes in the
substantive plan made to medical and dental benefits. There was a decrease in cost of $44 million related to cost sharing changes for
certain retirees for medical and dental benefits. There was also a decrease of $4 million related to change in plan co-payment and
coinsurance levels for certain retirees for medical benefits. The benefit obligation for other postretirement benefits increased by $13
million in 2004 for changes in the substantive plan made to medical, dental and life insurance benefits. There was an increase in
cost of $11 million related to cost sharing changes for certain retirees for medical benefits. There was also an increase in cost of $2
million associated with providing Prudential Financial benefits to employees of CIGNA Life that were brought into Prudential
Financial postretirement plans reflected at the January 1, 2004 remeasurement with credit for prior service.
Net periodic (benefit) cost included in “General and administrative expenses” in the Company’s Consolidated Statements of
Operations for the years ended December 31, includes the following components:
Pension Benefits
Other Postretirement
Benefits
2005 2004 2003 2005 2004 2003
(in millions)
Components of net periodic (benefit) cost
Service cost ......................................................... $164 $147 $180 $ 11 $ 10 $ 14
Interest cost ......................................................... 415 416 444 143 148 152
Expected return on plan assets ........................................... (796) (831) (839) (80) (81) (83)
Amortization of transition amount ........................................ — (23) (106) 1 1 3
Amortization of prior service cost ........................................ 25 25 29 (5) (7) (1)
Amortization of actuarial (gain) loss, net ................................... 23 23 14 36 28 10
Settlements .......................................................... 3 — 16 2 — —
Curtailments ......................................................... — — 31 — — —
Contractual termination benefits ......................................... — (1) ————
Special termination benefits ............................................. 10 — 61 — — 1
Net periodic (benefit) cost .............................................. $(156) $(244) $(170) $108 $ 99 $ 96
Certain employees in 2005 were provided special termination benefits under non-qualified plans in the form of unreduced early
retirement benefits as a result of their involuntary termination. Certain employees were provided special termination benefits in
conjunction with their termination of employment related to the Wachovia Securities and Prudential Property and Casualty
transactions in 2003, which include the cost of vesting plan participants, accruing benefits until year-end, crediting service for
vesting purposes and certain early retirement subsidies.
The increase in the minimum liability included in “Accumulated other comprehensive income” as of September 30, 2005 and
September 30, 2004 is as follows:
Pension Benefits
Other Postretirement
Benefits
2005 2004 2005 2004
(in millions)
Increase in minimum liability included in other comprehensive income .................. $168 $33 $— $—
Prudential Financial 2005 Annual Report 139