Union Pacific 2007 Annual Report Download - page 70

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66
The components of our net periodic pension and OPEB cost/(benefit) were as follows for the years ended
December 31:
Pension OPEB
Millions of Dollars 2007 2006 2005 2007 2006 2005
Net Periodic Benefit Cost:
Service cost ..................................................... $ 34 $ 35 $ 28 $ 3 $ 4 $ 4
Interest cost .................................................... 124 117 115 20 21 25
Expected return on plan assets...................... (144) (134) (134) - - -
Amortization of:
Prior service cost/(credit) ......................... 6 7 7 (33) (33) (30)
Actuarial loss ............................................. 18 21 5 8 13 14
Net periodic benefit cost/(benefit) ............... $ 38 $ 46 $ 21 $ (2) $ 5 $ 13
Assumptions – The weighted-average actuarial assumptions used to determine expense were as follows for the
years ended December 31:
Pension OPEB
Percentages 2007 2006 2005 2007 2006 2005
Discount rate ..................................................... 6.00% 5.75% 6.00% 6.00% 5.75% 6.00%
Expected return on plan assets ......................... 8.00 8.00 8.00 N/A N/A N/A
Salary increase.................................................... 3.00 2.75 3.00 N/A N/A N/A
The discount rate is based on a hypothetical portfolio of high quality corporate bonds with cash flows
matching our plans’ expected benefit payments. The expected return on plan assets is based on our asset
allocation mix and our historical return, taking into account current and expected market conditions. The
actual return on pension plan assets, net of fees, was approximately 9% in 2007, 14% in 2006, and 7% in 2005.
Our historical annualized ten-year rate of return on plan assets is approximately 8%.
Assumed healthcare cost trend rates have a significant effect on the expense and liabilities reported for
healthcare plans. The assumed healthcare cost trend rate is based on historical rates and expected market
conditions. A one-percentage point change in the assumed healthcare cost trend rates would have the
following effects on OPEB:
Millions of Dollars
One % pt.
Increase
One % pt.
Decrease
Effect on total service and interest cost components ............................................ $ 2 $ (2)
Effect on accumulated benefit obligation .............................................................. 25 (21)
Cash Contributions
The following table details our cash contributions for the years ended December 31, 2007 and 2006, and
the expected contributions for 2008:
Pension
Millions of Dollars Qualified Non-qualified OPEB
2006 ................................................................................................ $150 $ 9 $31
2007 ................................................................................................ - 12 27
2008 ................................................................................................ - 12 27