Raytheon 2003 Annual Report Download - page 59

P57 333 RAYTHEON COMPANY 333
Net periodic benefit cost (income) also includes expense from
foreign pension plans of $20 million in 2003, $11 million in 2002,
and $5 million in 2001. Net periodic benefit costs (income)
includes expense from discontinued operations, including curtail-
ments, of $9 million in 2002 and $11 million in 2001.
Components of Net Periodic Benefit Cost
Other Benefits
(In millions) 2003 2002 2001
Service cost $15 $21 $19
Interest cost 106 105 95
Expected return on plan assets (26) (30) (34)
Amortization of transition obligation 25 25 25
Amortization of prior service cost (45) — (1)
Recognized net actuarial loss (gain) 41 9 (10)
Gain due to curtailments/settlements —(47) (5)
Net periodic benefit cost $116 $83 $89
Net periodic benefit cost includes income from discontinued
operations, including curtailments, of $47 million in 2002.
Weighted-Average Net Periodic Benefit Cost Assumptions
Pension Benefits
2003 2002 2001
Discount rate 6.95% 7.21% 7.70%
Expected return on plan assets 8.67% 9.43% 9.44%
Rate of compensation increase 4.46% 4.47% 4.47%
Weighted-Average Net Periodic Benefit Cost Assumptions
Other Benefits
2003 2002 2001
Discount rate 7.00% 7.25% 7.75%
Expected return on plan assets 8.50% 8.50% 8.50%
Rate of compensation increase 4.50% 4.50% 4.50%
Health care trend rate
in the next year 12.00% 11.00% 8.25%
Gradually declining to a trend
rate of 5.50% 5.00% 5.00%
In the years beyond 2013 2013 2006
The effect of a one percent increase or decrease in the
assumed health care trend rate for each future year for the aggre-
gate of service cost and interest cost is $8 million or $(7) million,
respectively, and for the accumulated postretirement benefit obli-
gation is $122 million or $(106) million, respectively.
The projected benefit obligation and fair value of plan assets for
pension plans with projected benefit obligations in excess of plan
assets were $12,390 million and $8,731 million, respectively, at
December 31, 2003, and $11,023 million and $8,022 million,
respectively, at December 31, 2002.
The accumulated benefit obligation and fair value of plan assets
for pension plans with accumulated benefit obligations in excess of
plan assets were $11,118 million and $8,731 million, respectively,
at December 31, 2003, and $9,964 million and $8,022 million,
respectively, at December 31, 2002. The accumulated benefit obli-
gation for all pension plans was $12,184 million and $10,929 mil-
lion at December 31, 2003 and 2002, respectively.
The Company expects total contributions (required and discre-
tionary) to the domestic Pension Benefits and Other Benefits plans
to be approximately $320 million and $115 million, respectively, in
2004.
The Company also maintains an additional supplemental execu-
tive retirement plan or similar contractual benefits for its top executive
officers. The Company’s benefit obligation of $16 million at
December 31, 2003 has been accrued.
On December 8, 2003, Medicare reform legislation (the
“Legislation”) was enacted, providing a Medicare prescription drug
benefit beginning in 2006 and federal subsidies to employers who
provide drug coverage to retirees. Because of significant uncer-
tainties about accounting issues raised by the Legislation, the
eventual regulations required to implement the Legislation, and the
Legislation’s overall effect on plan participants’ behavior and the
level of health care costs, the Company has not reflected any
potential effects of the Legislation. At December 31, 2003, spe-
cific authoritative guidance on accounting for the federal subsidy is
pending, and that guidance, when issued, could require the
Company to change previously reported information.
The Company maintains an employee stock ownership plan
(ESOP) which includes the Company’s 401(k) plan (defined
contribution plan), under which covered employees are allowed to
contribute up to a specific percentage of their pay. The Company
matches the employee’s contribution, up to a maximum of generally
between three and four percent of the employee’s pay, by making a
contribution to the Company stock fund (Company Match). Total
expense for the Company Match was $159 million, $166 million,
and $183 million in 2003, 2002, and 2001, respectively, including
expense from discontinued operations of $2 million in 2002 and
$9 million in 2001.