(b) What is the actual return on the pension and the health care ("Other") plan investments in 2010? Use a negative sign to indicate the actual return was a loss, if applicable. ($ million) (e) How much cash did Xerox contribute to its pension and health care plans in 2010? Pension = $ Health care = $ million million (f) How much cash did retirees receive in 2010 from the pension plan and the health care plan? Pension = $ million Health care = $ million How much cash did Xerox pay these retirees in 2010? $ million (g) Show the computation of the 2010 funded status for the pension and health care plans. Do not use negative signs with your answers. Pension: $9,871 - $ million = $ million Health care : $0 million - $ million = $ million Analyzing and Interpreting Pension and Health Care Footnote Assume Xerox reports the following pension and retiree health care ("Other") footnote as part of its 10-K report. (in millions) Change in Benefit Obligation Benefit obligation, January 1 Service cost Interest cost Plan participants' contributions Plan amendments Acturarialgain Currency exchange rate changes Curtailments Benefits paid/settlements Benefit obligation, December 31 Change in Plan Assets Fair value of plan assets, January 1 Actual return on plan assets Employer contribution Plan participants' contributions Currency exchange rate changes Pension Benefits 2010 2009 Retiree Health 2010 2009 $10,467 $ 10,302 $1,592 $1,653 237 244 17 19 578 732 87 92 12 13 20 19 11 (234) - 31 (508) (85) (114) (105) 331 564 21 (1) (2) (653) (1,067) (140) (117) $10,474 $ 10,467 $1,483 $ 1,592 $ 9,217 $ 8,444 $ -- $ - 681 959 - - 334 355 120 98 12 13 20 20 19 280 513 (653) (1,067) (140) $9,217 $ -- (117) $- Benefits paid/settlements Fair value of plan assets, December 31 Net funded status (including under-funded and non-funded plans) at December 31 $ 9,871 $ (603) $ (1,250) $ (1,483) $ (1,592) Components of Net Periodic Benefit Cost Defined benefit plans Service cost Interest cost Expected return on plan assets Recognized net acturarialloss Amortization of prior service credit Recognized net transition obligation (asset) Recognized curtailment/settlement loss Net periodic benefit cost (in millions) Pension Benefits Retiree Health 2010 2009 2008 2010 2009 2008 $237 $244 $234 578 732 581 $17 $ 19 87 92 $20 92 90 (668) (802) (622) 75 104 98 - - - 10 19 31 (20) (18) (3) (12) (13) (24) - 2 1 33 93 54 235 355 343 102 117 117 80 70 71 - - - Defined contribution plans Total Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income Net acturarialloss (gain) $315 $425 $ 414 $ 102 $117 $117 (114) (499) 5 (108) (10) 20 12 (582) (112) Prior service cost (credit) Amortization of net acturarial(loss) gain Amortizaion of prior service (cost) credit Total recognized in other comprehensive income Total Recognized in Net Periodic Benefit Cost and Other Comprehensive Income $ (267) $ (10) (a) Describe what is meant by service cost and interest cost (the service and interest costs appear both in the reconciliation of the PBO and in the computation of pension expense). Oservice cost represents the additional pension benefits earned by employees during the current year but paid to employees in the future. Interest cost is the expense we incur on funds borrowed by the pension plan. Oservice cost represents the wages earned by employees managing the pension plan during the current year. Interest cost is an expense that accrues on the pension obligation during the year. OService cost represents the additional pension benefits earned by employees during the current year but paid to employees in the future. Interest cost is an expense that accrues on the pension obligation during the year. OService cost represents the wages earned by employees managing the pension plan during the current year. Interest cost is the expense we incur on funds borrowed by the pension plan. Was Xerox's profitability impacted by this amount? OThe actual return for the pension plans is the income or loss that is reported in Xerox's income statement. Because the "Other" (health care) plan is funded on a pay-as-you- go basis, it does not affect Xerox's profit until the benefits are paid. OThe expected return (not the actual return) on the pension plan assets impacts Xerox's income for 2010. Pension expense is reduced by this amount. Because the health care ("Other") plan is not funded, there are no assets generating a return, hence there is no expected return offset for this plan. OXerox's profit is reduced by the expected return on pension assets. Because the health care ("Other") plan is not funded, there are no assets generating a return, hence there is no expected return offset for this plan. OThe actual return for both plans is the income or loss that is reported in Xerox's income statement. (c) Provide an example under which an "actuarial gain," such as the $508 million gain in 2010 that Xerox reports, might arise. OA reduction in the amount of benefit payments. OAn increase in the expected return assumption. OAn increase in the actual return on plan assets. OAn increase in the discount rate. (d) What is the source of funds to make payments to retirees? Opension and health care obligations Opension and health care liabilities Opension and health care assets Ooperating cash flows