Prudential 2007 Annual Report Download - page 158

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
16. EMPLOYEE BENEFIT PLANS (continued)
In addition to the plan assets above, the Company in 2007 established an irrevocable trust, commonly referred to as a “rabbi trust,” for
the purpose of holding assets of the Company to be used to satisfy its obligations with respect to certain non-qualified retirement plans
($686 million benefit obligation at December 31, 2007). Assets held in the rabbi trust are available to the general creditors of the Company
in the event of insolvency or bankruptcy. The Company may from time to time in its discretion make contributions to the trust to fund
accrued benefits payable to participants in one or more of the plans, and, in the case of a change in control of the Company, as defined in
the trust agreement, the Company will be required to make contributions to the plans to fund the accrued benefits, vested and unvested,
payable on a pretax basis to participants in the plans. The Company made a discretionary payment of $95 million to the trust during 2007.
As of December 31, 2007, the assets in these trusts had a carrying value of $90 million and are included in “Equity securities.”
The Company also maintains a separate rabbi trust established at the time of the combination of its retail securities brokerage and
clearing operations with those of Wachovia for the purpose of holding assets of the Company to be used to satisfy its obligations with
respect to certain non-qualified retirement plans ($77 million and $87 million benefit obligation at December 31, 2007 and 2006,
respectively), as well as certain cash-based deferred compensation arrangements. As of December 31, 2007 and 2006, the assets in the trust
had a carrying value of $139 million and $151 million, respectively, and are included in “Other long-term investments.”
Pension benefits for foreign plans comprised 11% and 10% of the ending benefit obligation for 2007 and 2006, respectively. Foreign
pension plans comprised 2% and 2% of the ending fair value of plan assets for 2007 and 2006, respectively. There are no material foreign
postretirement plans.
The projected benefit obligations and fair value of plan assets for the pension plans with projected benefit obligations in excess of plan
assets were $1,627 million and $220 million, respectively, at September 30, 2007 and $1,563 and $205 million, respectively, at
September 30, 2006.
The accumulated benefit obligations and fair value of plan assets for the pension plans with accumulated benefit obligations in excess
of plan assets were $1,311 million and $17 million, respectively, at September 30, 2007 and $1,249 million and $7 million, respectively, at
September 30, 2006.
In 2007 and 2006, the pension plan purchased annuity contracts from Prudential Insurance for $2 million and $4 million, respectively.
The approximate future annual benefit payment payable by Prudential Insurance for all annuity contracts was $26 million and $24 million
as of December 31, 2007 and 2006, respectively.
The benefit obligation for pension benefits increased by $4 million in 2007 related to plan amendments, as a result of the immediate
vesting of plan participants due to the Section 420 transfer discussed above and benefits for prior service associated with foreign plans. The
benefit obligation for pension benefits increased by $83 million in 2006 related to plan amendments, due primarily to a cost of living
adjustment for retirees as well as the impact of changes as a result of the Pension Protection Act of 2006. The benefit obligation for other
postretirement benefits decreased by $69 million in 2007 related to plan amendments, due primarily to changes in the prescription drug
plan design. The benefit obligation for other postretirement benefits increased by $61 million in 2006 related to plan amendments,
primarily a result of 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.
The incremental effects of applying SFAS No. 158 on individual line items in the Consolidated Statement of Financial Position at
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 ........................................................... 14,476 479 14,955
Total liabilities ....................................................... 431,305 69 431,374
Accumulated other comprehensive income (loss) ................................ $ 1,075 $(556) $ 519
Total stockholders’ equity .............................................. 23,448 (556) 22,892
156 Prudential Financial 2007 Annual Report