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.

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 2006 included 27 U.S. and non-U.S. pension plans with pension assets or obligations greater than $50 million. These defined benefit plans provide benefits to employees based on formulas recognizing length of service and earnings.

Effective December 31, 2006, we adopted SFAS 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans. See note 1 for the incremental effects of the initial adoption of SFAS 158 on our Statement of Financial Position at December 31, 2006.

Pension Plan Participants

December 31, 2006 (In thousands)		Total			Principal pension plans			Other pension plans
Active employees		179			135			44
Vested former employees		223			185			38
Retirees and beneficiaries		233			210			23
Total		635			530			105

Cost of Pension Plans

		Total
(In millions)	2006			2005			2004
Expected return on plan assets		$ (4,211	)		$ (4,242	)		$ (4,256	)
Service cost for benefits earned		1,719			1,618			1,436
Interest cost on benefit obligation		2,685			2,609			2,511
Prior service cost		258			262			316
Net actuarial loss recognized		893			480			242
Total cost (income)		$ 1,344			$ 727			$ 249
		Principal pension plans
(In millions)		2006			2005			2004
Expected return on plan assets		$ (3,811	)		$ (3,885	)		$ (3,958	)
Service cost for benefits earned		1,402			1,359			1,178
Interest cost on benefit obligation		2,304			2,248			2,199
Prior service cost		253			256			311
Net actuarial loss recognized		729			351			146
Total cost (income)		$ 877			$ 329			$ (124	)
		Other pension plans
(In millions)	2006			2005			2004
Expected return on plan assets		$ (400	)		$ (357	)		$ (298	)
Service cost for benefits earned		317			259			258
Interest cost on benefit obligation		381			361			312
Prior service cost		5			6			5
Net actuarial loss recognized		164			129			96
Total cost (income)		$ 467			$ 398			$ 373

ACTUARIAL ASSUMPTIONS are described below. The discount rates at December 31 were used to measure the year-end benefit obligations and the earnings effects for the subsequent year.

ACTUARIAL ASSUMPTIONS

	Principal pension plans
December 31		2006			2005			2004			2003
Discount rate		5.75	%		5.50	%		5.75	%		6.00	%
Compensation increases		5.00			5.00			5.00			5.00
Expected return on assets		8.50			8.50			8.50			8.50
	Other pension plans (weighted average)
December 31		2006			2005			2004			2003
Discount rate		4.97	%		4.74	%		5.28	%		5.53	%
Compensation increases		4.26			4.20			4.03			3.87
Expected return on assets		7.44			7.47			7.67			7.56

To determine the expected long-term rate of return on pension plan assets, we consider the current and expected asset allocations, as well as historical and expected returns on various categories of plan assets. For the principal pension plans, we apply our expected rate of return to a market-related value of assets, which stabilizes variability in assets to which we apply that expected return.

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 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 have not made contributions to the GE Pension Plan since 1987. We will not make any contributions to the GE Pension Plan in 2007. In 2007, we expect to pay approximately $140 million for benefit payments under our GE Supplementary Pension Plan and administrative expenses of our principal pension plans ($121 million in 2006), and expect to contribute approximately $570 million to other pension plans ($451 million in 2006).

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 plans						Other pension plans
(In millions)		2006			2005			2006			2005
Balance at January 1		$43,331			$39,969			$8,097			$7,122
Service cost for benefits earned		1,402			1,359			317			259
Interest cost on benefit obligations		2,304			2,248			381			361
Participant contributions		162			174			37			36
Plan amendments		80			—			(18	)		3
Actuarial (gain) loss (a)		(1,514	)		1,988			27			909
Benefits paid		(2,472	)		(2,407	)		(287	)		(256	)
Exchange rate adjustments		—			—			520			(402	)
Acquired plans and other		—			—			(40	)		65
Balance at December 31 (b)		$43,293			$43,331			$9,034			$8,097

(a)	Principally associated with discount rate changes.
(b)	The PBO for the GE Supplementary Pension Plan was $3,554 million and $3,534 million at year-end 2006 and 2005, respectively.

ABO balances for our pension plans follow.

Accumulated Benefit Obligation

December 31 (In millions)		2006			2005
GE Pension Plan		$ 38,137			$ 38,044
GE Supplementary Pension Plan		2,314			2,178
Other pension plans		8,053			7,194

Following is information about our pension plans in which the accumulated benefit obligation exceeds the fair value of plan assets.

Plans With Assets Less Than ABO

December 31 (In millions)		2006			2005
Funded plans with assets less than ABO
Plan assets		$ 4,833			$ 4,737
Accumulated benefit obligations		5,828			6,096
Projected benefit obligations		6,667			6,967
Unfunded plans (a)
Accrued pension liability		4,310			3,323
Accumulated benefit obligations		3,052			2,859
Projected benefit obligations		4,310			4,235

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

Pension plan assets are described below.

Fair Value of Plan Assets

	Principal pension plans						Other pension plans
(In millions)		2006			2005			2006			2005
Balance at January 1		$ 49,096			$ 46,665			$ 5,213			$ 4,602
Actual gain on plan assets		7,851			4,558			679			670
Employer contributions		121			106			451			365
Participant contributions		162			174			37			36
Benefits paid		(2,472	)		(2,407	)		(287	)		(256	)
Exchange rate adjustments		—			—			340			(233	)
Acquired plans and other		—			—			2			29
Balance at December 31		$ 54,758			$ 49,096			$ 6,435			$ 5,213

Our pension plan assets are held in trust, as follows:

Plan Asset Allocation

	Principal pension plans
	2006							2005
December 31		Target allocation			Actual allocation			Actual allocation
U.S. equity securities		30–45	%		41	%		42	%
Non-U.S. equity securities		15–25			22			21
Debt securities		15–30			17			18
Real estate		4–10			6			6
Private equities		5–11			7			7
Other		1–12			7			6
Total					100	%		100	%

Plan fiduciaries of the GE Pension Plan set investment policies and strategies for the GE Pension Trust. Long-term strategic investment objectives include preserving the funded status of the plan and balancing risk and return. These plan fiduciaries oversee the investment allocation process, which includes selecting investment managers, commissioning periodic asset-liability studies, setting long-term strategic targets and monitoring asset allocations. Target allocation ranges are guidelines, not limitations, and occasionally plan fiduciaries will approve allocations above or below a target range.

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

• Short-term securities must be rated A1/P1 or better, other than 15% of short-term holdings which may be rated A2/P2,
• Real estate may not exceed 25% of total assets (6% of trust assets at December 31, 2006),
• Investments in securities not freely tradable may not exceed 20% of total assets (13% of trust assets at December 31, 2006), and
• GE stock is limited by statute when it reaches 10% of total trust assets (6.1% and 6.4% at the end of 2006 and 2005, respectively).

	Other pension plans (weighted average)
	2006							2005
December 31		Target allocation			Actual allocation			Actual allocation
Equity securities		66	%		67	%		65	%
Debt securities		28			26			28
Real estate		3			3			3
Other		3			4			4
Total					100	%		100	%

Our recorded assets and liabilities for pension plans are as follows:

Prepaid Pension Asset (Liability)

	Principal pension plans							Other pension plans
December 31 (In millions)		2006			2005			2006			2005
Funded status(a)		$ 11,465			$ 5,765			$ (2,599	)		$ (2,884	)
Unrecognized prior service cost		(b)			1,004			(b)			37
Unrecognized net actuarial loss		(b)			8,445			(b)			2,046
Net amount recognized		$ 11,465			$ 15,214			$ (2,599	)		$ (801	)
Pension asset (liability) recorded in the Statement of Financial Position
Prepaid pension asset		$ 15,019			$ 17,853			$ 46			$ 114
Unfunded liabilities
Due within one year (c)		(106	)		(90	)		(49	)		(43	)
Due after one year (c)		(3,448	)		(2,549	)		(2,596	)		(2,154	)
Intangible assets		—			—			(b)			54
Shareowners’ equity		—			—			(b)			1,228
Net amount recognized		$ 11,465			$ 15,214			$ (2,599	)		$ (801	)
Amounts recorded in shareowners’ equity
Prior service cost		$ 831			$ —			$ 15			$ —
Net actuarial loss		2,162			—			1,704			— ­
Total		$ 2,993			$ —			$ 1,719			$ —

(a)	Fair value of assets less PBO, as shown in the preceding tables.
(b)	Amounts recognized in shareowners’ equity in 2006 upon adoption of SFAS 158. See note 1.
(c)	For principal pension plans, represents the GE Supplementary Pension Plan liability.

The estimated prior service cost and net actuarial loss for the principal pension plans that will be amortized from shareowners’ equity into pension cost in 2007 are $200 million and $700 million, respectively. For other pension plans, the estimated prior service cost and net actuarial loss to be amortized over the next fiscal year is $10 million and $160 million, respectively. Comparable amortized amounts in 2006, respectively, were $253 million and $729 million for principal pension plans and $5 million and $164 million for other pension plans.

Estimated future benefit payments are as follows:

Estimated Future Benefit Payments

(In millions)		2007			2008			2009			2010			2011			2012– 2016
Principal pension plans		$ 2,500			$ 2,500			$ 2,550			$ 2,600			$ 2,600			$ 14,500
Other pension plans		325			300			300			325			350			1,875

Our labor agreements with various U.S. unions expire in June 2007, and we will be engaged in negotiations to attain new agreements. While results of the 2007 union negotiations cannot be predicted, our recent past negotiations have resulted in agreements that increased costs.

Back to top

Previous  Next