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9. Retirement Benefit Plans
Defined Benefit Pension Plans and Postretirement Health Care Plans
Sunoco has noncontributory defined benefit pension plans (“defined benefit plans”) which provide retirement benefits
for approximately one-half of its employees. Sunoco also has plans which provide health care benefits for substantially
all of its retirees (“postretirement benefit plans”). The postretirement benefit plans are unfunded and the costs are
shared by Sunoco and its retirees. The levels of required retiree contributions to postretirement benefit plans are ad-
justed periodically, and the plans contain other cost-sharing features, such as deductibles and coinsurance. In addition,
in 1993, Sunoco implemented a dollar cap on its future contributions for its principal postretirement health care bene-
fits plan.
Defined benefit plans and postretirement benefit plans expense consisted of the following components:
Defined Benefit Plans Postretirement Benefit Plans
(Millions of Dollars) 2005 2004 2003 2005 2004 2003
Service cost (cost of benefits earned during the year) $49 $46 $38 $9 $8 $ 6
Interest cost on benefit obligations 84 86 89 22 24 25
Expected return on plan assets (91) (84) (85) ———
Amortization of:
Prior service cost (benefit) 333(5) (7) (12)
Unrecognized losses 29 33 21 333
Net curtailment gains ————— (1)
$74 $84 $66 $29 $28 $ 21
Defined benefit plans and postretirement benefit plans expense is determined using actuarial assumptions as of the
beginning of the year. The following weighted-average assumptions were used to determine defined benefit plans and
postretirement benefit plans expense:
Defined Benefit Plans Postretirement Benefit Plans
(In Percentages) 2005 2004 2003 2005 2004 2003
Discount rate 5.75% 6.00% 6.75% 5.50% 6.00% 6.75%
Long-term expected rate of return on plan assets 8.50% 8.75% 8.75%
Rate of compensation increase 4.00% 4.00% 4.00%
The long-term expected rate of return on plan assets was estimated based on a variety of factors including the histor-
ical investment return achieved over a long-term period, the targeted allocation of plan assets and expectations con-
cerning future returns in the marketplace for both equity and debt securities.
55