Union Pacific 2011 Annual Report Download - page 65

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65
Assumed health care cost trend rates have a significant effect on the expense and liabilities reported for
health care plans. The assumed health care cost trend rate is based on historical rates and expected
market conditions. The 2012 assumed health care cost trend rate for employees under 65 is 6.91%. It is
assumed the rate will decrease gradually to an ultimate rate of 4.5% in 2028 and will remain at that level.
A one-percentage point change in the assumed health care cost trend rates would have the following
effects on OPEB:
Millions
One % pt.
Increase
One % pt.
Decrease
Effect on total service and interest cost components $ 1 $ (1)
Effect on accumulated benefit obligation 14 (12)
Cash Contributions
The following table details our cash contributions for the qualified pension plans and the benefit payments
for the non-qualified (supplemental) pension and OPEB plans:
Pension
Millions Qualifie
d
Non-qualifie
d
OPEB
2010 $ 200 13 24
2011 200 15 24
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 2011 were voluntary and were made with cash generated from operations.
The non-qualified pension and OPEB plans are not funded and are not subject to any minimum regulatory
funding requirements. Benefit payments for each year represent supplemental pension payments and
claims paid for medical and life insurance. We anticipate our 2012 supplemental pension and OPEB
payments will be made from cash generated from operations.
Benefit Payments
The following table details expected benefit payments for the years 2012 through 2021:
Millions Pension OPEB
2012 $ 158 $ 26
2013 161 26
2014 166 26
2015 171 26
2016 176 26
Years 2017 - 2021 957 119
Asset Allocation Strategy
Our pension plan asset allocation at December 31, 2011 and 2010, and target allocation for 2012, are
as follows:
Target
Allocation 2012
Percentage of Plan Assets
December 31,
2011 2010
Equity securities 47% to 63% 58% 60%
Debt securities 30% to 40% 32 31
Real estate 2% to 8% 5 4
Commodities 4% to 6% 5 5
Total 100% 100%