Union Pacific 2010 Annual Report Download - page 61

Download and view the complete annual report

Please find page 61 of the 2010 Union Pacific annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 101

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101

61
At December 31, 2010, there was $25 million of total unrecognized compensation expense related to
nonvested performance retention awards, which is expected to be recognized over a weighted-average
period of 1.2 years. A portion of this expense is subject to achievement of the ROIC levels established for
the performance stock unit grants.
5. Retirement Plans
Pension and Other Postretirement Benefits
Pension Plans – We provide defined benefit retirement income to eligible non-union employees through
qualified and non-qualified (supplemental) pension plans. Qualified and non-qualified pension benefits are
based on years of service and the highest compensation during the latest years of employment, with
specific reductions made for early retirements.
Other Postretirement Benefits (OPEB) – We provide medical and life insurance benefits for eligible
retirees. These benefits are funded as medical claims and life insurance premiums are paid.
Plan Amendment
Effective January 1, 2010, Medicare-eligible retirees who are enrolled in the Union Pacific Retiree Medical
Program received a contribution to a Health Reimbursement Account, which can be used to pay eligible
out-of-pocket medical expenses. The impact of the plan amendment was reflected in the projected
benefit obligation (PBO) at December 31, 2009.
Funded Status
We are required by GAAP to separately recognize the overfunded or underfunded status of our pension
and OPEB plans as an asset or liability. The funded status represents the difference between the PBO
and the fair value of the plan assets. Our non-qualified (supplemental) pension plan is unfunded by
design. The PBO of the pension plans is the present value of benefits earned to date by plan participants,
including the effect of assumed future salary increases. The PBO of the OPEB plan is equal to the
accumulated benefit obligation, as the present value of the OPEB liabilities is not affected by salary
increases. Plan assets are measured at fair value. We use a December 31 measurement date for plan
assets and obligations for all our retirement plans.
Changes in our PBO and plan assets were as follows for the years ended December 31:
Funded Status Pension OPEB
Millions 2010 2009 2010 2009
Projected Benefit Obligation
Projected benefit obligation at beginning of year $ 2,448 $ 2,272 $ 314 $ 418
Service cost 34 38 2 2
Interest cost 143 140 16 18
Plan amendments - - (6) (78)
Actuarial loss (gain) 281 140 16 (21)
Gross benefits paid (147) (142) (24) (25)
Projected benefit obligation at end of year $ 2,759 $ 2,448 $ 318 $ 314
Plan Assets
Fair value of plan assets at beginning of year $ 2,044 $ 1,543 $ - $ -
Actual return on plan assets 294 350 - -
Voluntary funded pension plan contributions 200 280 - -
Non-qualified plan benefit contributions 13 13 24 25
Gross benefits paid (147) (142) (24) (25)
Fair value of plan assets at end of year $ 2,404 $ 2,044 $ - $ -
Funded status at end of year $ (355) $ (404) $ (318) $ (314)