Union Pacific 2002 Annual Report Download - page 79

53
Changes in the Corporation’s projected benefit obligation are as follows for the years ended December 31, 2002 and 2001:
Pension Other Postretirement
Benefits Benefits
Millions of Dollars 2002 2001 2002 2001
Net benefit obligation at beginning of year.......................... $2,321 $2,121 $580 $438
Service cost ............................................................................. 49 47 10 9
Interest cost............................................................................. 166 158 43 36
Plan amendments................................................................... (1) (19) (48) 2
Actuarial loss .......................................................................... 99 82 117 135
Acquisitions ............................................................................ - 7 - -
Special termination benefits .................................................. - 59 - 1
Gross benefits paid................................................................. (152) (134) (55) (41)
Net benefit obligation at end of year .................................... $2,482 $2,321 $647 $580
As part of the work force reduction plan, discussed in note 13, the Corporation reclassified $59 million for pension and
$1 million for other postretirement benefits in 2001, 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, 2002 and 2001:
Pension Other Postretirement
Benefits Benefits
Millions of Dollars 2002 2001 2002 2001
Fair value of plan assets at beginning of year....................... $1,931 $2,240 $ - $ -
Actual return on plan assets .................................................. (211) (190) - -
Voluntary funded pension plan contributions..................... 225---
Unfunded plan contributions................................................ 9 9 55 41
Acquisitions ............................................................................ - 6 - -
Gross benefits paid................................................................. (152) (134) (55) (41)
Fair value of plan assets at end of year ................................. $1,802 $1,931 $ - $ -
As of December 31, 2002, the Corporation had pension plans with accumulated benefits that exceeded the fair value of
plan assets. The accumulated benefit obligation for these plans was $2.4 billion while the fair value of the assets was $1.8
billion at the end of 2002.
The components of the funded status of the benefit plans for the years ended December 31, 2002 and 2001 were as follows:
Pension Other Postretirement
Benefits Benefits
Millions of Dollars 2002 2001 2002 2001
Funded status at end of year.................................................. $(680) $(390) $(647) $(580)
Unrecognized net actuarial (gain) loss ................................. 487 (38) 204 92
Unrecognized prior service cost (credit) .............................. 80 95 (57) (12)
Unrecognized net transition obligation................................ (3) (5) - -
Net liability recognized at end of year .................................. $(116) $(338) $(500) $(500)
At December 31, 2002 and 2001, $53 million and $37 million, respectively, of the total pension and other postretirement
liability were classified as a current liability.
The Corporation decreased its assumed long-term rate of return on pension plan assets, during 2002, from 10% to 9%.
This assumption change resulted in an increase to 2002 pension expense of $22 million.
During 2002, actual asset returns for the Corporation’s pension plans were adversely impacted by continued deterioration
in the equity markets. Actual return on pension plan assets was approximately negative 10% in 2002. During the same time,
corporate bond yields, which are used in determining the discount rate for future pension obligations, continued to decline.
As a result of negative asset returns and lower discount rates, the Corporation was required to recognize an additional