XML 259 R19.htm IDEA: XBRL DOCUMENT v2.4.1.9
Postretirement Benefit Plans
 12 Months Ended
Dec. 31, 2014
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]  
Postretirement Benefit Plans

NOTE 12. POSTRETIREMENT BENEFIT PLANS

Pension Benefits

We sponsor a number of pension plans. Principal pension plans, together with affiliate and certain other pension plans (other pension plans) detailed in this note, represent about 99% of our total pension assets. We use a December 31 measurement date for our plans.

Principal Pension Plans are the GE Pension Plan and the GE Supplementary Pension Plan.

The GE Pension Plan provides benefits to certain U.S. employees based on the greater of a formula recognizing career earnings or a formula recognizing length of service and final average earnings. Certain benefit provisions are subject to collective bargaining. Salaried employees who commence service on or after January 1, 2011 and any employee who commences service on or after January 1, 2012 will not be eligible to participate in the GE Pension Plan, but will participate in a defined contribution retirement program.

The GE Supplementary Pension Plan is an unfunded plan providing supplementary retirement benefits primarily to higher-level, longer-service U.S. employees.

Other Pension Plans in 2014 included 40 U.S. and non-U.S. pension plans with pension assets or obligations greater than $50 million. These defined benefit plans generally provide benefits to employees based on formulas recognizing length of service and earnings.

PENSION PLAN PARTICIPANTS
PrincipalOther
pensionpension
December 31, 2014Totalplansplans
Active employees117,00086,00031,000
Vested former employees225,000179,00046,000
Retirees and beneficiaries267,000232,00035,000
Total609,000497,000112,000

COST OF PENSION PLANS
TotalPrincipal pension plansOther pension plans
(In millions) 2014 2013 2012 2014 2013 2012 2014 2013 2012
Service cost for benefits earned$1,608 $1,970 $1,779 $1,205 $1,535 $1,387 $403 $435 $392
Prior service cost amortization 220 253 287 214 246 279 6 7 8
Expected return on plan assets(3,979)(4,163)(4,394)(3,190)(3,500)(3,768)(789)(663)(626)
Interest cost on benefit obligations 3,332 2,983 2,993 2,745 2,460 2,479 587 523 514
Net actuarial loss amortization 2,770 4,007 3,701 2,565 3,664 3,421 205 343 280
Curtailment loss65--65(a)--- - -
Pension plans cost$4,016 $5,050 $4,366 $3,604 $4,405 $3,798 $412 $645 $568

Loss resulting from our agreement with Electrolux to sell the GE Appliances business.

Actuarial assumptions

The actuarial assumptions at December 31 are used to measure the year-end benefit obligations and the pension costs for the subsequent year.

Principal pension plansOther pension plans (weighted average)
December 3120142013201220112014201320122011
Discount rate4.02%4.85%3.96%4.21%3.53%4.39%3.92%4.42%
Compensation increases4.10 4.00 3.90 3.75 3.60 3.76 3.30 4.31
Expected return on assets7.50 7.50 8.00 8.00 6.95 6.92 6.82 7.09

To determine the expected long-term rate of return on pension plan assets, we consider current and target asset allocations, as well as historical and expected returns on various categories of plan assets. In developing future return expectations for our principal pension plans' assets, we formulate views on the future economic environment, both in the U.S. and abroad. We evaluate general market trends and historical relationships among a number of key variables that impact asset class returns such as expected earnings growth, inflation, valuations, yields and spreads, using both internal and external sources. We also take into account expected volatility by asset class and diversification across classes to determine expected overall portfolio results given current and target allocations. Based on our analysis of future expectations of asset performance, past return results, and our current and target asset allocations, we have assumed a 7.5% long-term expected return on those assets for cost recognition in 2015. For the principal pension plans, we apply our expected rate of return to a market-related value of assets, which stabilizes variability in the amounts to which we apply that expected return.

The Society of Actuaries recently issued new mortality tables projecting longer life expectancies that will result in higher postretirement benefit obligations for U.S. companies. We updated our mortality assumptions at December 31, 2014. The new mortality assumptions increased our principal pension plans’ benefit obligations by $3,953 million at December 31, 2014.

We amortize experience gains and losses, as well as the effects of changes in actuarial assumptions and plan provisions, over a period no longer than the average future service of employees.

Funding policy

The funding policy for the GE Pension Plan is to contribute amounts sufficient to meet minimum funding requirements as set forth in employee benefit and tax laws plus such additional amounts as we may determine to be appropriate. We did not make contributions to the GE Pension Plan in 2014 and 2013. The ERISA minimum funding requirements do not require a contribution in 2015. We expect to pay approximately $265 million for benefit payments under our GE Supplementary Pension Plan and administrative expenses of our principal pension plans and expect to contribute approximately $540 million to other pension plans in 2015. In 2014, comparative amounts were $236 million and $726 million, respectively.

Benefit obligations

Benefit obligations are described in the following tables. Accumulated and projected benefit obligations (ABO and PBO) represent the obligations of a pension plan for past service as of the measurement date. ABO is the present value of benefits earned to date with benefits computed based on current compensation levels. PBO is ABO increased to reflect expected future compensation.

PROJECTED BENEFIT OBLIGATION
Principal pension plansOther pension plans
(In millions)2014201320142013
Balance at January 1$58,113$63,502$13,535 $13,584
Service cost for benefits earned1,2051,535 403 435
Interest cost on benefit obligations2,7452,460 587 523
Participant contributions153156 9 14
Plan amendments-- (29) 11
Actuarial loss (gain)11,718(a)(6,406)(b) 2,170(b) (575)(b)
Benefits paid(3,199)(3,134) (493) (477)
Acquisitions (dispositions) / other - net-- 48 46
Exchange rate adjustments-- (641) (26)
Balance at December 31(c)$70,735$58,113$15,589 $13,535

  • Principally associated with discount rate and mortality assumption changes.
  • Principally associated with discount rate changes.
  • The PBO for the GE Supplementary Pension Plan, which is an unfunded plan, was $6,632 million and $5,162 million at year-end 2014 and 2013, respectively.

ACCUMULATED BENEFIT OBLIGATION
December 31 (In millions)20142013
GE Pension Plan$61,631$50,967
GE Supplementary Pension Plan5,0703,946
Other pension plans14,79012,629

PLANS WITH ASSETS LESS THAN ABO
December 31 (In millions)20142013
Funded plans with assets less than ABO
   Plan assets$53,126$57,430
   Accumulated benefit obligations67,67660,715
   Projected benefit obligations70,35463,532
Unfunded plans(a)
   Accumulated benefit obligations6,7195,243
   Projected benefit obligations8,3426,512

(a) Primarily related to the GE Supplementary Pension Plan.

Plan Assets

The fair value of the classes of the pension plans' investments is presented below. The inputs and valuation techniques used to measure the fair value of the assets are consistently applied and described in Note 1.

FAIR VALUE OF PLAN ASSETS
Principal pension plansOther pension plans
(In millions)2014201320142013
Balance at January 1$48,297$44,738$11,059 $9,702
Actual gain on plan assets2,7936,312 1,537 1,212
Employer contributions236225 726 673
Participant contributions153156 9 14
Benefits paid(3,199)(3,134) (493) (477)
Acquisitions (dispositions) / other - net-- - (31)
Exchange rate adjustments-- (452) (34)
Balance at December 31$48,280$48,297$12,386$11,059

ASSET ALLOCATION
Other pension plans
Principal pension plans(weighted average)
2014201420142014
TargetActualTargetActual
allocationallocationallocationallocation
Equity securities(a)17 - 57% (b)45% (c)39%48%
Debt securities (including cash equivalents)13 - 53313538
Private equities8 - 181172
Real estate2 - 12796
Other investments(d)3 - 136106

  • Includes investment funds that primarily hold this type of asset.
  • Target equally divided between U.S. equity securities and non-U.S. equity securities.
  • Actual allocations were 25% for U.S. equity securities and 20% for non-U.S. equity securities.
  • Substantially all represented hedge fund investments.

Plan fiduciaries of the GE Pension Plan set investment policies and strategies for the GE Pension Trust and oversee its investment allocation, which includes selecting investment managers, commissioning periodic asset-liability studies and setting long-term strategic targets. Long-term strategic investment objectives take into consideration a number of factors, including the funded status of the plan, a balance between risk and return and the plan’s liquidity needs. Target allocation percentages are established at an asset class level by plan fiduciaries. Target allocation ranges are guidelines, not limitations, and occasionally plan fiduciaries will approve allocations above or below a target range.

Plan fiduciaries monitor the GE Pension Plan’s liquidity position in order to meet the near-term benefit payment and other cash needs. The GE Pension Plan holds short-term debt securities to meet its liquidity needs.

GE Pension Trust assets are invested subject to the following additional guidelines:

  • Short-term securities purchased must generally be rated A-1/P-1 or better, except for 15% of such securities that may be rated A-2/P-2 and other short-term securities as may be approved by the plan fiduciaries.
  • Real estate investments may not exceed 25% of total assets.
  • Investments in restricted securities (excluding real estate investments) that are not freely tradable may not exceed 30% of total assets (actual was 17% of trust assets at December 31, 2014).

According to statute, the aggregate holdings of all qualifying employer securities (e.g., GE common stock) and qualifying employer real property may not exceed 10% of the fair value of trust assets at the time of purchase. GE securities represented 3.8% and 4.5% of trust assets at year-end 2014 and 2013, respectively.

The GE Pension Plan has a broadly diversified portfolio of investments in equities, fixed income, private equities, real estate and hedge funds; these investments are both U.S. and non-U.S. in nature. As of December 31, 2014, U.S. government direct and indirect obligations represented 16% of total GE Pension Plan assets. No other sector concentration of assets exceeded 15% of total GE Pension Plan assets.

The following tables present GE Pension Plan investments measured at fair value.

(In millions)Level 1Level 2Level 3Total
December 31, 2014
Equity securities
   U.S. equity securities(a)$11,493$1,463$-$12,956
   Non-U.S. equity securities(a)7,0212,132-9,153
Debt securities
   Fixed income and cash investment funds2454,255-4,500
   U.S. corporate(b)-5,15325,155
   Residential mortgage-backed-1,11811,119
   Non-U.S. Corporate-1,09731,100
   U.S. government and federal agency-2,468-2,468
   Other debt securities(c)-1,042-1,042
Private equities(a)-325,2175,249
Real estate(a)--3,1293,129
Other investments(d)-702,2482,318
Total investments$18,759$18,830$10,600$48,189
Other(e)91
Total assets$48,280
December 31, 2013
Equity securities
   U.S. equity securities(a)$11,067$1,568$-$12,635
   Non-U.S. equity securities(a)7,8321,292-9,124
Debt securities
   Fixed income and cash investment funds-2,078-2,078
   U.S. corporate(b)-4,555-4,555
   Residential mortgage-backed-1,093-1,093
   Non-U.S. Corporate-1,269-1,269
   U.S. government and federal agency-5,253-5,253
   Other debt securities(c)-1,048-1,048
Private equities(a)--6,2696,269
Real estate(a)--3,3543,354
Other investments(d)-1691,6221,791
Total investments$18,899$18,325$11,245$48,469
Other(e)(172)
Total assets$48,297

(a) Included direct investments and investment funds.

(b) Primarily represented investment-grade bonds of U.S. issuers from diverse industries.

(c) Primarily represented investments in state and municipal debt, non-U.S. government bonds and commercial mortgage-backed securities.

(d) Substantially all represented hedge fund investments.

(e) Primarily represented net unsettled transactions related investment activity and cash balances.

The following tables present the changes in Level 3 investments for the GE Pension Plan.

CHANGES IN LEVEL 3 INVESTMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
Purchases,Transfers
issuancesin and/or
January 1,Net realizedNet unrealizedandout ofDecember 31,
(In millions)2014gains (losses)(a)gains (losses)(a)settlementsLevel 3(b)2014
Debt securities$-$(9)$11$4$-$6
Private equities6,269592(54)(1,565)(25)5,217
Real estate3,35436334(595)-3,129
Other investments1,62247861942992,248
$11,245$666$377$(1,962)$274$10,600

  • The realized/unrealized gains (losses) include $899 million related to assets still held and $144 million for assets no longer held.
  • Transfers in and out of Level 3 are considered to occur at the beginning of the period.

CHANGES IN LEVEL 3 INVESTMENTS FOR THE YEAR ENDED DECEMBER 31, 2013
Purchases,Transfers
issuancesin and/or
January 1,Net realizedNet unrealizedandout ofDecember 31,
(In millions)2013gains (losses)(a)gains (losses)(a)settlementsLevel 3(b)2013
Debt securities$75$(7)$-$(65)$(3)$-
Private equities6,878525588(1,675)(47)6,269
Real estate3,35623330(355)-3,354
Other investments1,694(1)200(77)(194)1,622
$12,003$540$1,118$(2,172)$(244)$11,245

  • The realized/unrealized gains (losses) include $1,616 million related to assets still held and $42 million for assets no longer held.
  • Transfers in and out of Level 3 are considered to occur at the beginning of the period.

Other pension plans’ assets were $12,386 million and $11,059 million at December 31, 2014 and 2013, respectively. Public equity and debt securities amounting to $10,578 million and $9,781 million represented approximately 86% and 89% of total investments at December 31, 2014 and 2013, respectively. The plans’ investments were classified as 9% Level 1, 77% Level 2 and 14% Level 3 at December 31, 2014. The plans’ investments were classified as 11% Level 1, 78% Level 2 and 11% Level 3 at December 31, 2013. The changes in Level 3 investments between the years ended December 31, 2014 and 2013 were primarily due to investments in hedge funds and real estate. Other changes in Level 3 investments were insignificant for the years ended December 31, 2014 and 2013.

PENSION ASSET (LIABILITY)
Principal pension plansOther pension plans
December 31 (In millions)2014201320142013
Funded status(a)(b)$(22,455)$(9,816)$(3,203) $(2,476)
Pension asset (liability) recorded in the
   Statement of Financial Position
      Pension asset$-$-$295 $325
      Pension liabilities
         Due within one year(c)(190)(170) (72) (67)
         Due after one year(22,265)(9,646) (3,426) (2,734)
Net amount recognized$(22,455)$(9,816)$(3,203)$(2,476)
Amounts recorded in shareowners’
   equity (unamortized)
      Prior service cost (credit)$881$1,160$(23)$9
      Net actuarial loss21,10511,5553,5332,459
Total$21,986$12,715$3,510$2,468

Fair value of assets less PBO, as shown in the preceding tables.

(b) The GE Pension Plan was underfunded by $15.8 billion and $4.7 billion at December 31, 2014 and 2013, respectively.

(c) For principal pension plans, represents the GE Supplementary Pension Plan liability.

In 2015, we estimate that we will amortize $210 million of prior service cost and $3,300 million of net actuarial loss for the principal pension plans from shareowners’ equity into pension cost. For other pension plans, the estimated prior service cost and net actuarial loss to be amortized in 2015 will be $5 million and $305 million, respectively. Comparable amortized amounts in 2014, respectively, were $214 million and $2,565 million for the principal pension plans and $6 million and $205 million for other pension plans.

ESTIMATED FUTURE BENEFIT PAYMENTS
2020 -
(In millions)201520162017201820192024
Principal pension plans$3,225$3,300$3,380$3,465$3,560$19,430
Other pension plans$505$510$520$530$540$2,925

Retiree Health and Life Benefits

We sponsor a number of retiree health and life insurance benefit plans (retiree benefit plans). Principal retiree benefit plans are discussed below; other such plans are not significant individually or in the aggregate. We use a December 31 measurement date for our plans.

Principal Retiree Benefit Plans provide health and life insurance benefits to eligible participants and these participants share in the cost of healthcare benefits. These plans cover approximately 193,000 retirees and dependents. In 2012, we amended our principal retiree benefit plans such that, effective January 1, 2015, our post-65 retiree health plans will be closed to certain salaried and retired salaried employees who are not enrolled in the plans as of that date, and we will no longer offer company-provided life insurance in retirement for certain salaried employees who retire after that date. In 2014, we amended our post-65 retiree health plans for certain former salaried employees and eligible dependents. Effective January 1, 2015, the Company will provide eligible participants with a Retiree Reimbursement Account to help pay for coverage purchased through a private exchange instead of offering our current post-65 retiree health plans.

COST OF PRINCIPAL RETIREE BENEFIT PLANS
(In millions)201420132012
Service cost for benefits earned$164$229$219
Prior service cost amortization353393518
Expected return on plan assets(50)(60)(73)
Interest cost on benefit obligations424410491
Net actuarial loss (gain) amortization(150)(45)32
Net curtailment/settlement loss (gain)48(a)-(101)
Retiree benefit plans cost$789$927$1,086

(a) Loss resulting from our agreement with Electrolux to sell the GE Appliances business.

Actuarial assumptions

The actuarial assumptions at December 31 are used to measure the year-end benefit obligations and the retiree benefit plan costs for the subsequent year.

December 312014201320122011
Discount rate3.89%4.61%(a)3.74%(a)4.09%(a)
Compensation increases4.104.003.903.75
Expected return on assets7.007.007.007.00
Initial healthcare trend rate(b)6.006.006.507.00

  • Weighted average discount rates of 4.47%, 3.77%, and 3.94% were used for determination of costs in 2014, 2013 and 2012, respectively.
  • For 2014, ultimately declining to 5% for 2030 and thereafter.

To determine the expected long-term rate of return on retiree life plan assets, we consider current and target asset allocations, historical and expected returns on various categories of plan assets, as well as expected benefit payments and resulting asset levels. In developing future return expectations for retiree benefit plan assets, we formulate views on the future economic environment, both in the U.S. and abroad. We evaluate general market trends and historical relationships among a number of key variables that impact asset class returns such as expected earnings growth, inflation, valuations, yields and spreads, using both internal and external sources. We also take into account expected volatility by asset class and diversification across classes to determine expected overall portfolio results given current and target allocations. Based on our analysis of future expectations of asset performance, past return results, our current and target asset allocations as well as a shorter time horizon for retiree life plan assets, we have assumed a 7.0% long-term expected return on those assets for cost recognition in 2015. We apply our expected rate of return to a market-related value of assets, which stabilizes variability in the amounts to which we apply that expected return.

The Society of Actuaries recently issued new mortality tables projecting longer life expectancies that will result in higher postretirement obligations for U.S. companies. We updated our mortality assumptions at December 31, 2014. The new mortality assumptions increased our principal retiree benefit plans’ benefit obligations by $612 million at December 31, 2014.

We amortize experience gains and losses, as well as the effects of changes in actuarial assumptions and plan provisions, over a period no longer than the average future service of employees.

Funding Policy

We fund retiree health benefits on a pay-as-you-go basis. We expect to contribute approximately $540 million in 2015 to fund such benefits. We fund the retiree life insurance trust at our discretion.

Changes in the accumulated postretirement benefit obligation for retiree benefit plans follow.

ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION (APBO)
(In millions)20142013
Balance at January 1$9,913$11,804
Service cost for benefits earned164229
Interest cost on benefit obligations424410
Participant contributions5252
Plan amendments(586)-
Actuarial loss (gain)1,440(a)(1,836)(b)
Benefits paid(704)(746)
Balance at December 31(c)$10,703$9,913

  • Primarily associated with discount rate and mortality assumption changes.
  • Primarily associated with discount rate change and lower costs from new healthcare supplier contracts.
  • The APBO for the retiree health plans was $8,445 million and $7,626 million at year-end 2014 and 2013, respectively.

A one percentage point change in the assumed healthcare cost trend rate would have the following effects.

1%1%
(In millions)IncreaseDecrease
APBO at December 31, 2014$977$(810)
Service and interest cost in 201456(47)

Plan Assets

The fair value of the classes of retiree benefit plans' investments is presented below. The inputs and valuation techniques used to measure the fair value of assets are consistently applied and described in Note 1.

FAIR VALUE OF PLAN ASSETS
(In millions)20142013
Balance at January 1$903$946
Actual gain on plan assets44118
Employer contributions518533
Participant contributions5252
Benefits paid(704)(746)
Balance at December 31$813$903

ASSET ALLOCATION
20142014
TargetActual
December 31allocationallocation
Equity securities(a)35 - 75%(b)50%(c)
Debt securities (including cash equivalents)11 - 4626
Private equities0 - 2513
Real estate0 - 129
Other investments(d)0 - 102

  • Includes investment funds that primarily hold this type of asset.
  • Target allocations were 18-38% for U.S. equity securities and 17-37% for non-U.S. equity securities.
  • Actual allocations were 29% for U.S. equity securities and 21% for non-U.S. equity securities.
  • Substantially all represented hedge fund investments.

Plan fiduciaries set investment policies and strategies for the trust and oversee its investment allocation, which includes selecting investment managers and setting long-term strategic targets. The primary strategic investment objectives are balancing investment risk and return and monitoring the plan’s liquidity position in order to meet the near-term benefit payment and other cash needs. Target allocation percentages are established at an asset class level by plan fiduciaries. Target allocation ranges are guidelines, not limitations, and occasionally plan fiduciaries will approve allocations above or below a target range.

Short-term securities purchased must generally be rated A-1/P-1 or better, except for 15% of such securities that may be rated A-2/P-2 and other short-term securities as may be approved by the plan fiduciaries. According to statute, the aggregate holdings of all qualifying employer securities (e.g., GE common stock) and qualifying employer real property may not exceed 10% of the fair value of trust assets at the time of purchase. GE securities represented 3.9% and 4.0% of trust assets at year-end 2014 and 2013, respectively.

Retiree life plan assets were $813 million and $903 million at December 31, 2014 and 2013, respectively. Public equity and debt securities amounting to $615 million and $727 million represented approximately 78% and 77% of total investments at December 31, 2014 and 2013, respectively. The plans’ investments were classified as 37% Level 1, 41% Level 2 and 22% Level 3 at December 31, 2014. The plans’ investments were classified as 33% Level 1, 43% Level 2 and 24% Level 3 at December 31, 2013. The changes in Level 3 investments were insignificant for the years ended December 31, 2014 and 2013.

RETIREE BENEFIT ASSET(LIABILITY)
December 31 (In millions)20142013
Funded status(a)$(9,890)$(9,010)
Liability recorded in the Statement of Financial Position
   Retiree health plans
      Due within one year$(518)$(531)
      Due after one year(7,927)(7,095)
   Retiree life plans(1,445)(1,384)
Net liability recognized$(9,890)$(9,010)
Amounts recorded in shareowners' equity (unamortized)
   Prior service cost (credit)$(24)$963
   Net actuarial gain(71)(1,667)
Total$(95)$(704)

Fair value of assets less APBO, as shown in the preceding tables.

In 2015, we estimate that we will amortize $125 million of prior service cost and $5 million of net actuarial loss from shareowners’ equity into retiree benefit plans cost. Comparable amortized amounts in 2014 were $353 million of prior service cost and $150 million of net actuarial gain.

ESTIMATED FUTURE BENEFIT PAYMENTS
2020 -
(In millions)201520162017201820192024
$680$665$670$675$685$3,285

POSTRETIREMENT BENEFIT PLANS
2014 COST OF POSTRETIREMENT BENEFIT PLANS AND CHANGES IN OTHER COMPREHENSIVE INCOME
TotalPrincipalOtherRetiree
postretirementpensionpensionbenefit
(In millions)benefit plansplansplansplans
Cost of postretirement benefit plans$4,805$3,604$412 $789
Changes in other comprehensive income
      Prior service cost – current year(615)- (29) (586)
      Net actuarial loss – current year(a)14,84312,1151,282 1,446
Net curtailment/settlement(113)(65)-(48)
      Prior service cost amortization(573)(214) (6) (353)
      Net actuarial gain (loss) amortization(2,620)(2,565) (205) 150
Total changes in other comprehensive income10,9229,271 1,042609
Cost of postretirement benefit plans and
   changes in other comprehensive income$15,727$12,875$1,454$1,398

Principally associated with discount rate and mortality assumption changes.