Union Pacific 2009 Annual Report Download - page 72

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72
Assumptions – The weighted-average actuarial assumptions used to determine expense were as follows
for the years ended December 31:
Pension OPEB
Percentages 2009 2008 2007 2009 2008 2007
Discount rate 6.25% 6.50% 6.00% 6.25
%
6.50% 6.00%
Expected return on plan assets 8.00% 8.00% 8.00% N/
A
N/A N/A
Salary increase 3.50% 3.50% 3.00% N/
A
N/A N/A
Health care cost trend rate for next year (employees under 65) N/A N/
A
N/A 7.50
%
8.00% 9.00%
Health care cost trend rate for next year (employees over 65) N/A N/
A
N/A 9.10
%
10.00% 11.00%
Ultimate healthcare cost trend rate N/A N/
A
N/A 4.50
%
5.00% 5.00%
Year ultimate trend reached N/A N/
A
N/A 2028 2013 2013
For 2009 and 2008, the discount rate was based on a Mercer yield curve of high quality corporate bonds
with cash flows matching our plans’ expected benefit payments. For 2007, the discount rate was 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 (loss) on
pension plan assets, net of fees, was approximately 23% in 2009, (30)% in 2008, and 9% in 2007.
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 $ 1 $ (1)
Effect on accumulated benefit obligation 9 (8)
Cash Contributions
The following table details our cash contributions for the qualified pension plan and the benefit payments
for the non-qualified and OPEB plans:
Pension
Millions of Dollars Qualified Non-qualified OPEB
2008 $ 208 $ 12 $ 27
2009 280 13 25
Our policy with respect to funding the qualified plans is to fund at least the minimum required by law and
not more than the maximum amount deductible for tax purposes. All contributions made to the qualified
pension plans in 2009 were voluntary and were made with cash generated from operations.
The OPEB plans are not funded and are not subject to any minimum regulatory funding requirements.
Benefit payments for each year represent claims paid for medical and life insurance, and we anticipate our
2010 OPEB payments will be made from cash generated from operations.