Sunoco 2009 Annual Report Download - page 58

Retirement Benefit Plans
The following table sets forth the components of the change in market value of the investments in Sunoco’s
defined benefit pension plans (in millions of dollars):
December 31
2009 2008
Balance at beginning of year ...................................... $837 $1,315
Increase (reduction) in market value of investments resulting from:
Net investment income (loss) .................................... 169 (358)
Company contributions ......................................... 47 46
Plan benefit payments ......................................... (249) (166)
Balance at end of year ....................................... $804 $ 837
As a result of the poor performance of the financial markets during 2008, the projected benefit obligation of
the Company’s funded defined benefit plans at December 31, 2008 exceeded the market value of the plan assets
by $358 million. In connection therewith, the Company was required to recognize a $299 million unfavorable
after-tax adjustment to the accumulated other comprehensive loss component of shareholders’ equity at
December 31, 2008. Poor investment results for the plans during 2008 also resulted in an increase of
approximately $50 million after tax in pension expense for 2009 due to lower expected returns on plan assets and
higher amortization of actuarial losses. As a result of the workforce reduction, the sale of the Tulsa refinery and
the permanent shutdown of the Eagle Point refinery, the Company incurred noncash settlement and curtailment
losses in these plans during 2009 totaling approximately $75 million after tax. At December 31, 2009, the
projected benefit obligation for the Company’s funded pension plans exceeded plan assets by $319 million. In
early 2010, the Company contributed $230 million to its funded defined benefit plans consisting of $140 million
of cash and 3.59 million shares of Sunoco common stock valued at $90 million. The Company may make
additional contributions to its funded defined benefit plans during the remainder of 2010 if it has available cash.
The Company also has unfunded obligations for other defined benefit plans and postretirement benefit plans
which totaled $505 million at December 31, 2009. There is no legal requirement to pre-fund these plans which
are funded as benefit payments are made.
Effective June 30, 2010, pension benefits under the Company’s defined benefit pension plans will be frozen
for most of the participants in these plans at which time the Company will institute a profit-sharing contribution
on behalf of these employees in its defined contribution plan. Postretirement medical benefits have also been
phased down or eliminated for all employees retiring after July 1, 2010. There are currently no planned changes
in benefits for any employees who retire prior to this date or for current retirees. As a result of these changes, the
Company’s pension and postretirement benefits liability declined approximately $95 million in the fourth quarter
of 2009. The benefit of this liability reduction will be amortized into income through 2019. The pretax cost of
benefits earned (net of the expected profit sharing contributions) and interest on the existing obligations are
expected to decline approximately $25 million on an annualized basis as a result of these changes. The reduction
in service and interest cost will also increase the likelihood that settlement gains or losses, representing the
accelerated amortization of deferred gains and losses, will be recognized in the future as previously earned lump
sum payments are made.
Environmental Matters
General
Sunoco is subject to extensive and frequently changing federal, state and local laws and regulations,
including, but not limited to, those relating to the discharge of materials into the environment or that otherwise
relate to the protection of the environment, waste management and the characteristics and composition of fuels.
As with the industry generally, compliance with existing and anticipated laws and regulations increases the
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