L. Calculate the combined retirement and other benefits expense over the past three years. (See page 61).
i. What general trend do you notice? Do you consider this trend persistent? That is, do you expect it to continue?
ii. Retirement and other benefits expense includes an operating component and a non-operating component. Calculate both components for each of the three years. What trends do you notice in the components? Do you consider these trends persistent?

 

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Net periodic benefit costs for the Company's defined benefit retirement plans and other benefit plans for 2007, 2006 and 2005 include the following components: (Dollars in Millions) Service cost Interest cost Expected return on plan assets Amortization of prior service cost Amortization of net transition asset Recognized actuarial losses Curtailments and settlements Net periodic benefit cost (Dollars in Millions) U.S. Benefit Plans Discount rate Expected long-term rate of return on plan assets Rate of increase in compensation levels International Benefit Plans Discount rate Expected long-term rate of return on plan assets Rate of increase in compensation levels 2007 $ 597 656 (809) 10 1 186 5 $ 646 The Company's discount rates are determined by considering current yield curves representing high quality, long-term fixed income instru- ments. The resulting discount rates are consistent with the duration of plan liabilities. The expected long-term rate of return on plan assets assumption is determined using a building block approach, con- sidering historical averages and real returns of each asset class. In certain countries, where historical returns are not meaningful, consideration is given to local market expectations of long-term returns. Retirement Plans 2006 6.50% 552 570 (701) 10 9.00 4.50 5.50% (1) 8.25 4.00 251 4 685 (Dollars in Millions) Amortization of net transition obligation Amortization of net actuarial losses Amortization of prior service cost 6.00 9.00 4.50 MOTOR 2005 462 488 (579) 12 5.00 The net periodic benefit cost attributable to U.S. retirement plans was $379 million in 2007, $423 million in 2006 and $370 million in 2005. Amounts expected to be recognized in net periodic benefit cost in the coming year for the Company's defined benefit retirement plans and other postretirement plans: 8.00 3.75 (2) Retirement Plans 2007 2006 2005 2007 SAN (Dollars in Maillons) Health Care Plans The weighted-average assumptions in the following table represent the rates used to develop the actuarial present value of projected benefit obligation for the year listed and also the net periodic benefit cost for the following year. 2007 $140 149 219 2 602 $346 5.75 (2) (7) - 66 Total interest and service cost Postretirement benefit obligation Other Benefit Plans 2006 122 136 6.50% 9.00 9.00 4.50 4.50 Health Care Plans Health care cost trend rate assumed for next year Rate to which the cost trend rate is assumed to decline (ultimate trend) Year the rate reaches the ultimate trend rate 4.75 6.50% 8.25 3.75 4.50 (3) (7) 74 322 Other Benefit Plans 2006 6.00 9.00 4.50 6.00 4.50 - 2007 9.00% 2005 56 87 5.00% 2014 One Percentage Point Increase (3) (7) . $35 320 25 158 $2 132 5 The following table displays the assumed health care cost trend rates, for all individuals: 2005 5.75 9.00 4.50 A one-percentage-point change in assured health care cost trend rates would have the following effect: 5.00 4.25 2006 9.00 4.50 2012 Dne-Percentage- Point Decrease $ (27) (259) Net periodic benefit costs for the Company's defined benefit retirement plans and other benefit plans for 2007, 2006 and 2005 include the following components: (Dollars in Millions) Service cost Interest cost Expected return on plan assets Amortization of prior service cost Amortization of net transition asset Recognized actuarial losses Curtailments and settlements Net periodic benefit cost (Dollars in Millions) U.S. Benefit Plans Discount rate Expected long-term rate of return on plan assets Rate of increase in compensation levels International Benefit Plans Discount rate Expected long-term rate of return on plan assets Rate of increase in compensation levels 2007 $ 597 656 (809) 10 1 186 5 $ 646 The Company's discount rates are determined by considering current yield curves representing high quality, long-term fixed income instru- ments. The resulting discount rates are consistent with the duration of plan liabilities. The expected long-term rate of return on plan assets assumption is determined using a building block approach, con- sidering historical averages and real returns of each asset class. In certain countries, where historical returns are not meaningful, consideration is given to local market expectations of long-term returns. Retirement Plans 2006 6.50% 552 570 (701) 10 9.00 4.50 5.50% (1) 8.25 4.00 251 4 685 (Dollars in Millions) Amortization of net transition obligation Amortization of net actuarial losses Amortization of prior service cost 6.00 9.00 4.50 MOTOR 2005 462 488 (579) 12 5.00 The net periodic benefit cost attributable to U.S. retirement plans was $379 million in 2007, $423 million in 2006 and $370 million in 2005. Amounts expected to be recognized in net periodic benefit cost in the coming year for the Company's defined benefit retirement plans and other postretirement plans: 8.00 3.75 (2) Retirement Plans 2007 2006 2005 2007 SAN (Dollars in Maillons) Health Care Plans The weighted-average assumptions in the following table represent the rates used to develop the actuarial present value of projected benefit obligation for the year listed and also the net periodic benefit cost for the following year. 2007 $140 149 219 2 602 $346 5.75 (2) (7) - 66 Total interest and service cost Postretirement benefit obligation Other Benefit Plans 2006 122 136 6.50% 9.00 9.00 4.50 4.50 Health Care Plans Health care cost trend rate assumed for next year Rate to which the cost trend rate is assumed to decline (ultimate trend) Year the rate reaches the ultimate trend rate 4.75 6.50% 8.25 3.75 4.50 (3) (7) 74 322 Other Benefit Plans 2006 6.00 9.00 4.50 6.00 4.50 - 2007 9.00% 2005 56 87 5.00% 2014 One Percentage Point Increase (3) (7) . $35 320 25 158 $2 132 5 The following table displays the assumed health care cost trend rates, for all individuals: 2005 5.75 9.00 4.50 A one-percentage-point change in assured health care cost trend rates would have the following effect: 5.00 4.25 2006 9.00 4.50 2012 Dne-Percentage- Point Decrease $ (27) (259)

Answer rating: 100% (QA)

i The combined retirement and other benefits expense over the past three years has increased from 2049 million in 2017 to 2233 million in 2018 and the... View the full answer