Union Pacific 2010 Annual Report Download - page 47

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The following tables present the key assumptions used to measure net periodic pension and OPEB
cost/(benefit) for 2010 and the estimated impact on 2010 net periodic pension and OPEB cost/(benefit)
relative to a change in those assumptions:
Assumptions Pension OPEB
Discount rate 5.90% 5.55%
Expected return on plan assets 8.00% N/A
Salary increase 3.46% N/A
Health care cost trend rate:
Pre-65 current N/A 7.24%
Pre-65 level in 2028 N/A 4.50%
Sensitivities Increase in Expense
Millions Pension OPEB
0.25% decrease in discount rate $ 7 $ -
0.25% increase in salary scale $ 3 N/A
0.25% decrease in expected return on plan assets $ 6 N/A
1% increase in health care cost trend rate N/A $ 2
The following table presents the net periodic pension and OPEB cost/(benefit) for the years ended
December 31:
Est.
Millions 2011 2010 2009 2008
Net periodic pension cost $ 79 $ 51 $ 54 $ 35
Net periodic OPEB cost/(benefit) (4) (14) (12) 5
Our net periodic pension cost is expected to increase to approximately $79 million in 2011 from $51
million in 2010. The increase is driven by a decrease in the discount rate to 5.35%, a decrease in our
expected rate of return on plan assets to 7.5%, and an increase in the amortization of actuarial losses
from accumulated other comprehensive income. We reduced our expected rate of return on plan assets
to 7.5% in 2011 from 8% in 2010 to reflect our expected future returns on plan assets based on our
current asset allocation strategy. Our net periodic OPEB benefit is expected to decrease to
approximately $(4) million in 2011 from $(14) million in 2010. The decrease in our net periodic OPEB
benefit is primarily driven by a decrease in the amortization of prior service credits from accumulated
other comprehensive income.
CAUTIONARY INFORMATION
Certain statements in this report, and statements in other reports or information filed or to be filed with the
SEC (as well as information included in oral statements or other written statements made or to be made
by us), are, or will be, forward-looking statements as defined by the Securities Act of 1933 and the
Securities Exchange Act of 1934. These forward-looking statements and information include, without
limitation, (A) statements in the Chairman’s letter preceding Part I regarding increasing profitability and
financial returns, expanding international and domestic market share, and future capital investments;
statements regarding planned capital expenditures under the caption “2011 Capital Expenditures” in Item
2 of Part I; statements regarding dividends in Item 5 and statements; and information set forth under the
captions “2011 Outlook” and “Liquidity and Capital Resources” in this Item 7, and (B) any other
statements or information in this report (including information incorporated herein by reference) regarding:
expectations as to financial performance, revenue growth and cost savings; the time by which goals,
targets, or objectives will be achieved; projections, predictions, expectations, estimates, or forecasts as
to our business, financial and operational results, future economic performance, and general economic
conditions; expectations as to operational or service performance or improvements; expectations as to
the effectiveness of steps taken or to be taken to improve operations and/or service, including capital
expenditures for infrastructure improvements and equipment acquisitions, any strategic business
acquisitions, and modifications to our transportation plans (including statements set forth in Item 2 as to
expectations related to our planned capital expenditures); expectations as to existing or proposed new
products and services; expectations as to the impact of any new regulatory activities or legislation on our
operations or financial results; estimates of costs relating to environmental remediation and restoration;