Union Pacific 2001 Annual Report Download - page 74

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Funding and Benefit Payments – Qualified and non-qualified pension benefits are based on years of service and the
highest compensation during the latest years of employment. The qualified plans are funded based on the Projected Unit
Credit actuarial funding method and are funded at not less than the minimum funding standards set forth in the
Employee Retirement Income Security Act of 1974, as amended. The Corporation has settled a portion of the non-
qualified unfunded supplemental plan’s accumulated benefit obligation by purchasing annuities. Corporation
contributions into the thrift plan are based on 50% of the participant’s contribution, limited to 3% of the participant’s
base salary. Corporation thrift plan contributions were $21 million, $20 million and $20 million for the years ended
December 31, 2001, 2000, and 1999, respectively. The Corporation also provides medical and life insurance benefits on
a cost sharing basis for qualifying employees. These costs are funded as incurred. In addition, contributions made to the
System are expensed as incurred and amounted to approximately $429 million in 2001, $430 million in 2000 and $426
million in 1999.
Changes in the Corporation’s projected benefit obligation are as follows for the years ended December 31, 2001 and
2000:
Pension
Other Postretirement
Benefits
Millions of Dollars 2001 2000 2001 2000
Net benefit obligation at beginning of year........................................... $2,121 $1,883 $438 $412
Service cost ............................................................................................. 47 38 9 7
Interest cost ............................................................................................ 158 150 36 32
Plan amendments................................................................................... (19) 5 2 -
Actuarial loss .......................................................................................... 82 164 135 30
Acquisitions ............................................................................................ 7 - - -
Special termination benefits .................................................................. 59 - 1 -
Gross benefits paid ................................................................................. (134) (119) (41) (43)
Net benefit obligation at end of year..................................................... $2,321 $2,121 $580 $438
As part of the work force reduction plan, discussed in note 15, the Corporation reclassified $59 million and $1 million
in 2001 for pension and other postretirement benefits, respectively, from other current liabilities to retiree benefits
obligation.
Changes in the Corporation’s benefit plan assets are as follows for the years ended December 31, 2001 and 2000:
Pension
Other Postretirement
Benefits
Millions of Dollars 2001 2000 2001 2000
Fair value of plan assets at beginning of year ........................................ $2,240 $2,367 $ - $ -
Actual return on plan assets................................................................... (190) (16) - -
Employer contributions......................................................................... 9 8 41 43
Acquisitions ............................................................................................ 6 - - -
Gross benefits paid ................................................................................. (134) (119) (41) (43)
Fair value of plan assets at end of year .................................................. $1,931 $2,240 $ - $ -
The components of funded status of the benefit plans for the years ended December 31, 2001 and 2000 were as follows:
Pension
Other Postretirement
Benefits
Millions of Dollars 2001 2000 2001 2000
Funded status at end of year....................................................................... $(390) $ 119 $(580) $(438)
Unrecognized net actuarial (gain) loss................................................. (38) (521) 92 (41)
Unrecognized prior service cost (credit)................................................... 95 132 (12) (17)
Unrecognized net transition obligation..................................................... (5) (9) - -
Net liability recognized at end of year........................................................ $(338) $(279) $(500) $(496)