Union Pacific 2012 Annual Report Download - page 61

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61
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.
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
projected benefit obligation (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 compensation 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 compensation 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 2012 2011 2012 2011
Projected Benefit Obligation
Projected benefit obligation at beginning of year $ 3,165 $ 2,759 $ 336 $ 318
Service cost 54 40 3 2
Interest cost 141 145 15 15
Plan amendments - - - 10
Actuarial loss 391 377 42 15
Gross benefits paid (160) (156) (24) (24)
Projected benefit obligation at end of year $ 3,591 $ 3,165 $ 372 $ 336
Plan Assets
Fair value of plan assets at beginning of year $ 2,505 $ 2,404 $ - $ -
Actual return on plan assets 315 42 - -
Voluntary funded pension plan contributions 200 200 - -
Non-qualified plan benefit contributions 15 15 24 24
Gross benefits paid (160) (156) (24) (24)
Fair value of plan assets at end of year $ 2,875 $ 2,505 $ - $ -
Funded status at end of year $ (716) $ (660) $ (372) $ (336)
Amounts recognized in the statement of financial position as of December 31, 2012 and 2011 consist of:
Pension OPEB
Millions 2012 2011 2012 2011
Noncurrent assets $ 1 $ - $ - $ -
Current liabilities (16) (15) (27) (26)
Noncurrent liabilities (701) (645) (345) (310)
Net amounts recognized at end of year $ (716) $ (660) $ (372) $ (336)