General Mills (GIS)

 

Health Care Cost Trend Rates We review our health care trend rates annually. Our review is based on data we collect about our health care claims experience and information provided by our actuaries. This information includes recent plan experience, plan design, overall industry experience and projections, and assumptions used by other similar organizations. Our initial health care cost trend rate is adjusted as necessary to remain consistent with this review, recent experiences, and short-term expectations. Our initial health care cost trend rate assumption is 10.25 percent for retirees age 65 and over and 9.25 percent for retirees under age 65. These rates are graded down annually until the ultimate trend rate of 5.2 percent is reached in 2016 for all retirees. The trend rates are applicable for calculations only if the retirees’ benefits increase as a result of health care inflation. The ultimate trend rate is adjusted annually, as necessary, to approximate the current economic view on the rate of long-term inflation plus an appropriate health care cost premium. Assumed trend rates for health care costs have an important effect on the amounts reported for the other postretirement benefit plans.

 

A one percentage point change in the health care cost trend rate would have the following effects:

 

 

Any arising health care claims cost-related experience gain or loss is recognized in the calculation of expected future claims. Once recognized, experience gains and losses are amortized using a straight-line method over 15 years, resulting in at least the minimum amortization required being recorded.

 

Financial Statement Impact In fiscal 2008, we recorded net defined benefit pension, other postretirement, and postemployment benefit plan expense of $18.9 million compared to $36.2 million in fiscal 2007 and $29.7 million in fiscal 2006. As of May 25, 2008, we had cumulative unrecognized actuarial net losses of $276.8 million on our defined benefit pension plans, $115.6 million on our other postretirement benefit plans, and $8.0 million on our postemployment benefit plans, mainly as the result of decreases in our discount rate assumptions. These unrecognized actuarial net losses will result in decreases in our future pension income and increases in postretirement expense since they currently exceed the corridors defined by GAAP.

 

We use the Retirement Plans (RP) 2000 Mortality Table projected forward to our plans’ measurement dates for calculating the year end defined benefit pension, other postretirement, and postemployment benefit obligations and annual expense.

 

Actual future net defined benefit pension, other postretirement, and postemployment benefit plan income or expense will depend on investment performance, changes in future discount rates, changes in health care trend rates, and various other factors related to the populations participating in these plans.

 

 

 

Lowering the discount rates by 50 basis points would
increase our net defined benefit pension, other postretirement,
and postemployment benefit plan expense for fiscal 2009 by
approximately $18 million. All obligation-related
experience gains and losses are amortized using a straight-line
method over the average remaining service period of active plan
participants.

 

Health Care Cost Trend Rates We review our
health care trend rates annually. Our review is based on data we
collect about our health care claims experience and information
provided by our actuaries. This information includes recent plan
experience, plan design, overall industry experience and
projections, and assumptions used by other similar
organizations. Our initial health care cost trend rate is
adjusted as necessary to remain consistent with this review,
recent experiences, and short-term expectations. Our initial
health care cost trend rate assumption is 10.25 percent for
retirees age 65 and over and 9.25 percent for retirees
under age 65. These rates are graded down annually until
the ultimate trend rate of 5.2 percent is reached in 2016
for all retirees. The trend rates are applicable for
calculations only if the retirees’ benefits increase as a
result of health care inflation. The ultimate trend rate is
adjusted annually, as necessary, to approximate the current
economic view on the rate of long-term inflation plus an
appropriate health care cost premium. Assumed trend rates for
health care costs have an important effect on the amounts
reported for the other postretirement benefit plans.

 

A one percentage point change in the health care cost trend rate
would have the following effects:

 

 

Any arising health care claims cost-related experience gain or
loss is recognized in the calculation of expected future claims.
Once recognized, experience gains and losses are amortized using
a straight-line method over 15 years, resulting in at least
the minimum amortization required being recorded.

 

Financial Statement Impact In fiscal 2008, we
recorded net defined benefit pension, other postretirement, and
postemployment benefit plan expense of $18.9 million
compared to $36.2 million in fiscal 2007 and
$29.7 million in fiscal 2006. As of May 25, 2008, we
had cumulative unrecognized actuarial net losses of
$276.8 million on our defined benefit pension plans,
$115.6 million on our other postretirement benefit plans,
and $8.0 million on our postemployment benefit plans,
mainly as the result of decreases in our discount rate
assumptions. These unrecognized actuarial net losses will result
in decreases in our future pension income and increases in
postretirement expense since they currently exceed the corridors
defined by GAAP.

 

We use the Retirement Plans (RP) 2000 Mortality Table projected
forward to our plans’ measurement dates for calculating the
year end defined benefit pension, other postretirement, and
postemployment benefit obligations and annual expense.

 

Actual future net defined benefit pension, other postretirement,
and postemployment benefit plan income or expense will depend on
investment performance, changes in future discount rates,
changes in health care trend rates, and various other factors
related to the populations participating in these plans.