Prudential 2006 Annual Report Download - page 156

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
16. EMPLOYEE BENEFIT PLANS (continued)
Pension benefits for foreign plans comprised 10% and 9% of the ending benefit obligation for 2006 and 2005, respectively.
Foreign plans comprised 2% and 1% of the ending fair value of plan assets for 2006 and 2005, respectively. There are no foreign
postretirement plans.
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 $1,354 million, $1,249 million and $7 million, respectively, at
September 30, 2006 and $1,472 million, $1,372 million and $128 million, respectively, at September 30, 2005.
In 2006 and 2005, the pension plan purchased annuity contracts from Prudential Insurance for $4 million and zero million,
respectively. The approximate future annual benefit payment for all annuity contracts was $24 million and $23 million in 2006 and
2005, respectively.
The benefit obligation for pension benefits increased by $83 million in 2006 related to plan amendments. There was an
increase of $75 million for a cost of living adjustment for retirees and an increase of $11 million for changes as a result of the
Pension Protection Act of 2006. There was also a decrease of $3 million related to labor negotiations in a foreign location. There
were no material pension amendments in 2005. There were postretirement amendments in both 2006 and 2005. The benefit
obligation for other postretirement benefits increased by $61 million for 2006. There was an increase for $62 million related to the
impact of implementing a Retiree Medical Savings Account, which provides an account at retirement that may be used toward the
cost of coverage for medical and dental benefits, and a decrease of $1 million related to cost sharing changes for certain retirees for
dental benefits. The benefit obligation for other postretirement benefits decreased by $48 million in 2005, reflecting a decrease of
$44 million related to cost sharing changes for certain retirees for medical and dental benefits and a decrease of $4 million related to
changes in plan co-payment and coinsurance levels for certain retirees for medical benefits.
The incremental effects of applying SFAS No. 158 on individual line items in the Consolidated Statement of Financial Position
on December 31, 2006 was as follows:
Pre-SFAS
No. 158
Incremental
effect of adopting
SFAS No. 158
Post-
SFAS
No. 158
(in millions)
Other assets ................................................................ $ 18,321 $(487) $ 17,834
Total assets ............................................................ 454,753 (487) 454,266
Income taxes ............................................................... $ 3,518 $(410) $ 3,108
Other liabilities ............................................................. 14,199 479 14,678
Total liabilities ......................................................... 431,305 69 431,374
Accumulated other comprehensive income (loss) .................................. $ 1,075 $(556) $ 519
Total stockholders’ equity ................................................ 23,448 (556) 22,892
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
2006 2005 2004 2006 2005 2004
(in millions)
Components of net periodic (benefit) cost
Service cost ......................................................... $160 $164 $147 $ 10 $ 11 $ 10
Interest cost ......................................................... 418 415 416 128 143 148
Expected return on plan assets ........................................... (741) (796) (831) (89) (80) (81)
Amortization of transition obligation ...................................... — — (23) 1 1 1
Amortization of prior service cost ........................................ 22 25 25 (9) (5) (7)
Amortization of actuarial (gain) loss, net ................................... 48 23 23 18 36 28
Settlements .......................................................... — 3 — — 2 —
Curtailments ......................................................... — — ————
Contractual termination benefits ......................................... — — (1) — — —
Special termination benefits ............................................. 4 10 ————
Net periodic (benefit) cost .............................................. $ (89) $(156) $(244) $ 59 $108 $ 99
PRUDENTIAL FINANCIAL, INC. 2006 ANNUAL REPORT
154