US Bank 2001 Annual Report Download - page 74

structure were earned based on Ñnal average pay and years Post-Retirement Medical Plans In addition to providing
of service, similar to the new plan. Plan assets primarily pension beneÑts, the Company provides health care and
consist of various equity mutual funds, listed stocks and death beneÑts to certain retired employees through several
other miscellaneous assets. retiree medical programs. As a result of the merger of
The Company also maintains several unfunded, non- USBM with Firstar, there were three major retiree medical
qualiÑed, supplemental executive retirement programs that programs in place during 2001 with various terms and
provide additional defined pension benefits for senior subsidy schedules. EÅective January 1, 2002, the Company
managers and executive employees. Because all the non- adopted one retiree medical program for all future retirees.
qualified plans are unfunded, the aggregate accumulated For certain eligible employees, the provisions of the USBM
benefit obligations exceed the assets. A supplemental executive retiree medical plan and the Mercantile retiree medical plan
retirement plan of USBM was frozen for substantially all will remain in place until December 31, 2002. Generally, all
participants as of September 30, 2001, but with service credit employees may become eligible for retiree health care
running through December 31, 2001. The assumptions used in beneÑts by meeting deÑned age and service requirements.
computing the present value of the accumulated benefit The Company may also subsidize the cost of coverage for
obligation, the projected benefit obligation and net pension employees meeting certain age and service requirements.
expense are substantially consistent with those assumptions The medical plan contains other cost-sharing features such
used for the funded qualified plans. The Company anticipates as deductibles and coinsurance. The estimated cost of these
recognizing curtailment gains of approximately $11.7 million retiree beneÑt payments is accrued during the employees'
in early 2002 in connection with changes to non-qualified active service.
pension plans.
Information presented in the four tables below reÖects a measurement date of September 30.
The following table sets forth the components of net periodic beneÑt cost for the retirement plans:
Pension Plans Post-Retirement Medical Plans
(Dollars in Millions) 2001 2000 1999 2001 2000 1999
Components of net periodic beneÑt cost
Service cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 61.0 $ 65.4 $ 70.1 $ 2.1 $ 2.0 $ 3.8
Interest cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 118.7 117.3 107.1 17.9 16.3 16.5
Expected return on plan assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (232.6) (201.6) (177.5) (1.0) (.6) (.5)
Net amortization and deferral ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (10.7) (13.2) 1.3 .2 .2 2.0
Recognized actuarial loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1.2) .7 1.9 (.1) (1.4) .2
Net periodic beneÑt cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (64.8) (31.4) 2.9 19.1 16.5 22.0
Curtailment and settlement (gain) loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (17.0) (6.2) Ì 10.3 Ì
Net periodic beneÑt cost after curtailment and
settlement (gain) lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (64.8) (48.4) $ (3.3) $19.1 $26.8 $22.0
The following table sets forth the weighted average plan assumptions and other data:
USBM Firstar
(Dollars in Millions) 2001 2000 1999 2001 2000 1999
Pension plan actuarial computations
Discount rate in determining beneÑt obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.5% 7.8% 7.5% 7.5% 8.0% 6.6%
Expected long-term return on plan assets(b) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11.0 9.5 9.5 12.2 12.2 11.4
Rate of increase in future compensation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.5 5.6 5.6 3.5 4.0 4.1
Post-retirement medical plan actuarial computations
Discount rate in determining beneÑt obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.5% 7.8% 7.5% 7.5% 8.0% 6.8%
Expected long-term return on plan assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.0 5.0 5.0 * * *
Health care cost trend rate(a)
Prior to age 65 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.5% 7.7% 7.0% 10.5% 7.5% 7.7%
After age 65ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13.0 7.7 5.5 13.0 7.5 7.7
EÅect of one percent increase in health care cost trend rate
Service and interest costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1.2 $ 1.0 $ 1.3 $ .4 $ .4 $ .4
Accumulated post-retirement beneÑt obligation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13.1 13.1 12.4 6.0 5.2 4.0
EÅect of one percent decrease in health care cost trend rate
Service and interest costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (1.0) $ (.9) $ (1.0) $ (.4) $ (.4) $ (.4)
Accumulated post-retirement beneÑt obligation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (13.6) (11.6) (10.9) (5.7) (4.6) (3.6)
* The Firstar plan had no assets as of December 31, 2001, 2000 and 1999.
(a) The pre-65 and post-65 rates are assumed to decrease gradually to 5.5% and 6.0% respectively by 2011 and remain at these levels thereafter.
(b) In connection with the merger of Firstar and USBM, the asset management practices and investment strategies of the plan were conformed. At December 31, 2001, the investment
asset allocation was weighted toward equities and diversiÑed by industry and companies with varying market capitalization levels.
U.S. Bancorp
72