Retirement And Pension Plans

12 Months Ended

Mar. 31, 2012

Retirement And Pension Plans

10. RETIREMENT AND PENSION PLANS

The parent company and most subsidiaries mainly in Japan have defined benefit pension plans and/or severance indemnity plans covering substantially all of their employees. In the parent company and certain subsidiaries, employees who terminate their employment have the option to receive benefits in the form of a lump-sum payment or annuity payments from defined benefit pension plans. The benefits are mainly calculated based on accumulated “points” under the point-based benefits system. The “points” consist of “service period points” which are attributed to the length of service, “job title points” which are attributed to the job title of each employee, and “performance points” which are attributed to the annual performance evaluation of each employee.

Certain subsidiaries have defined contribution pension plans covering most of their employees.

Funded Status

The following table presents the funded status and the amounts recognized in the consolidated balance sheets:

(¥ in millions)
At March 31:	2012			2011
Funded status:
Benefit obligations	¥	180,868		¥	165,637
Fair value of plan assets		138,986			130,437
Funded status-net	¥	(41,882	)	¥	(35,200	)
Amounts recognized in the consolidated balance sheets:
Accrued retirement and pension costs	¥	(41,882	)	¥	(35,285	)
Prepaid expenses for benefit plans, included in other assets		—			85
Amounts recognized in the consolidated balance sheets-net	¥	(41,882	)	¥	(35,200	)

The following table presents the amounts recognized in accumulated other comprehensive income (loss), before tax:

(¥ in millions)
At March 31:	2012			2011
Actuarial loss	¥	(39,794	)	¥	(28,344	)
Prior service benefit		2,820			3,628
Total recognized in accumulated other comprehensive income (loss), before tax	¥	(36,974	)	¥	(24,716	)

The following table presents the projected benefit obligations and the fair value of plan assets for the pension plans with projected benefit obligations in excess of plan assets, and the accumulated benefit obligations and the fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets:

(¥ in millions)
At March 31:	2012		2011
Plans with projected benefit obligations in excess of plan assets:
Projected benefit obligations	¥	180,868	¥	163,060
Fair value of plan assets		138,986		127,775
Plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligations	¥	175,419	¥	161,322
Fair value of plan assets		135,314		126,380

Benefit Obligations

The following table presents the changes in benefit obligations, the balances of accumulated benefit obligations, and the weighted-average assumptions used in calculating benefit obligation:

(¥ in millions)
	2012			2011
Change in benefit obligations:
Benefit obligations at beginning of year	¥	165,637		¥	168,974
Service cost		6,584			6,117
Interest cost		3,589			3,315
Actuarial loss (gain)		11,979			(831	)
Benefits paid (lump-sum payments)		(7,444	)		(7,226	)
Benefits paid (annuity payments)		(4,493	)		(4,349	)
Addition from acquisition		5,464			—
Foreign currency exchange rate changes		(448	)		(363	)
Benefit obligations at end of year	¥	180,868		¥	165,637
Accumulated benefit obligations at March 31	¥	178,525		¥	164,942
Weighted-average assumptions used in calculating benefit obligation at March 31 *1 :
Discount rate		2.2	%		2.6	%

^*1  The rate of compensation increase is not used in the calculations of benefit obligations under the point-based benefits system.

Plan Assets

The following table presents the changes in plan assets:

(¥ in millions)
For the years ended March 31:	2012			2011
Fair value of plan assets at beginning of year	¥	130,437		¥	129,156
Actual return on plan assets		1,933			(2,694	)
Employer contributions		13,741			13,427
Benefits paid (lump-sum payments)		(5,048	)		(4,763	)
Benefits paid (annuity payments)		(4,493	)		(4,349	)
Addition from acquisition		2,672			—
Foreign currency exchange rate changes		(256	)		(340	)
Fair value of plan assets at end of year	¥	138,986		¥	130,437

The Company’s policy and objective for plan asset management is to maximize returns on plan assets to meet future benefit payment requirements under risks which the Company considers permissible. To mitigate any potential concentration risk, careful consideration is given to balancing the portfolio among industry sectors, companies and geographies, taking into account interest rate sensitivity, dependence on economic growth, currency and other factors that affect investment returns. The Company’s target allocation is 31% equity securities, 50% debt securities, and 19% other investment vehicles, mainly consisting of cash and short-term investments and the general accounts of insurance company.

A large portion of the plan assets is managed by trust banks and investment advisors. Those fund managers are bound by the Company’s plan asset management guidelines which are established to achieve the optimized asset compositions in terms of the long-term overall plan asset management, and are measured against specific benchmarks.

To measure the performance of the plan asset management, the Company establishes bench mark return rates for each individual investment, combines these individual bench mark rates based on the asset composition ratios within each asset category, and compares the combined rates with the corresponding actual return rates on each asset category.

The following table presents the fair value of plan assets by category:

(¥ in millions)
At March 31	Level 1		Level 2		Level 3		Total
2012:
Equity securities:
Financial institutions (Japanese companies)	¥	5,448	¥	—	¥	—	¥	5,448
Other industries (Japanese companies)		4,723		—		—		4,723
Pooled funds (Japanese companies) *1		—		14,030		—		14,030
Pooled funds (foreign companies) *1		—		22,203		—		22,203
Debt securities:
Pooled funds (Japanese issuers) *2		—		50,604		—		50,604
Pooled funds (foreign issuers) *3		—		13,638		—		13,638
Cash and short-term investments		1,166		1,526		—		2,692
General accounts of insurance company		—		25,293		—		25,293
Other assets *4		—		186		169		355
Fair value of plan assets	¥	11,337	¥	127,480	¥	169	¥	138,986
2011:
Equity securities:
Financial institutions (Japanese companies)	¥	5,318	¥	—	¥	—	¥	5,318
Other industries (Japanese companies)		4,390		—		—		4,390
Pooled funds (Japanese companies) *1		—		19,054		—		19,054
Pooled funds (foreign companies) *1		—		22,639		—		22,639
Debt securities:
Pooled funds (Japanese issuers) *2		—		61,575		—		61,575
Pooled funds (foreign issuers) *3		—		11,766		—		11,766
Cash and short-term investments		1,084		2,168		—		3,252
General accounts of insurance company		—		1,923		—		1,923
Other assets *4		—		204		316		520
Fair value of plan assets	¥	10,792	¥	119,329	¥	316	¥	130,437

^*1 These funds are invested in listed equity securities.

^*2 These funds are invested in approximately 88% Japanese government and municipal bonds and 12% Japanese corporate bonds at March 31, 2012, and 85% Japanese government and municipal bonds and 15% Japanese corporate bonds at March 31, 2011.

^*3 These funds are invested in foreign government bonds.

^*4  This class includes the pooled funds which invest in private equity.

Plan assets are categorized by level based on the inputs used to measure the fair value of each asset.

The equity securities of financial institutions and other industries are valued at the closing price reported on the stock exchange on which the individual securities are traded. Pooled funds and the general accounts of insurance company are typically valued using the net asset value per share (“NAV”) provided by the administrator of the fund or insurance company. The NAV is based on the value of the underlying assets owned by the fund or insurance company, minus liabilities and divided by the number of shares or units outstanding. Cash and short-term investments are valued at their cost plus imputed interest. These assets were classified as Level 1 or Level 2, depending on availability of quoted market prices.

The ending balance of, and the change in, the other assets categorized as Level 3 were not material for the year ended March 31, 2012 and 2011.

Net Periodic Benefit Cost

The following table presents the components of the total net periodic benefit cost for the defined benefit pension plans and the severance indemnity plans:

(¥ in millions)
For the years ended March 31:	2012			2011			2010
Net periodic benefit cost:
Service cost	¥	6,584		¥	6,117		¥	5,933
Interest cost		3,589			3,315			3,646
Expected return on plan assets		(2,657	)		(2,585	)		(2,200	)
Amortization of prior service benefit		(808	)		(808	)		(808	)
Amortization of actuarial loss		693			472			9,611
Total	¥	7,401		¥	6,511		¥	16,182
Weighted-average assumptions used in calculating net periodic benefit cost *1 :
Expected long-term rate of return on plan assets		2.5	%		2.5	%		2.5	%
Discount rate		2.6	%		2.4	%		2.5	%

^*1  The rate of compensation increase is not used in the calculations of net periodic benefit cost under the point-based benefits system.

The amortization of actuarial loss of ¥9,611 million for the year ended March 31, 2010 contained the immediate recognition amount of net actuarial losses in excess of 20% of the projected benefit obligation. This actuarial loss was derived from significant decline in the fair values of plan assets during the years ended March 31, 2009 and 2008 due to financial crisis.

The expected long-term rate of return on plan assets is determined after considering several applicable factors including the composition of plan assets held, assumed risks of asset management, historical results of the returns on plan assets, the Company’s principal policy for plan asset management, and forecasted market conditions.

The following table presents the amounts recognized in other comprehensive income (loss), before tax, and the reclassification adjustments for the loss (benefit) realized in net income, before tax:

(¥ in millions)
For the years ended March 31:	2012			2011			2010
Actuarial gain (loss) recognized in other comprehensive income	¥	(12,529	)	¥	(4,602	)	¥	7,712
Reclassification adjustment for prior service benefit realized in net income		(808	)		(808	)		(808	)
Reclassification adjustment for actuarial loss realized in net income		693			472			9,611
Net recognized in other comprehensive income (loss), before tax	¥	(12,644	)	¥	(4,938	)	¥	16,515

The following table presents the estimated prior service benefit and actuarial loss that will be amortized from accumulated other comprehensive income into net periodic benefit cost for the year ending March 31, 2013:

(¥ in millions)
Prior service benefit	¥	(808	)
Actuarial loss		6,092

Expected Cash Flows

The Company estimates contributions to its defined benefit pension plans for the year ending March 31, 2013, to be approximately ¥14,300 million.

The following table presents the total expected benefit payments to the participants of the defined benefit pension plans and the severance indemnity plans:

(¥ in millions)
Years ending March 31:
2013	¥	12,341
2014		11,921
2015		11,734
2016		11,462
2017		11,725
2018-2022		47,748