The parent company and subsidiaries in Japan have severance indemnity plans and non-contributory defined benefit funded pension plans, or only severance indemnity plans, covering substantially all of their employees who meet eligibility requirements of the retirement regulations. Under the plans, employees whose service with the company is terminated are, under most circumstances, entitled to lump-sum severance indemnities and/or pension payments, determined by reference to current basic rate of pay, length of service and conditions under which the termination occurs. The funding policy is to make contributions that can be deducted for Japanese income tax purposes.
The parent company and certain subsidiaries in Japan also have contributory defined benefit pension plans, covering substantially all of their employees, including the governmental welfare pension benefit plan which would otherwise be provided by the Japanese government. The pension benefits are determined based on years of service and the compensation amount as stipulated in the regulations. The governmental welfare pension contributions are funded in conformity with the requirements regulated by the Japanese Welfare Pension Insurance Law. The contributions to the contributory and the non- contributory pension plans are placed into trusteed pension funds.
Most subsidiaries outside Japan have various retirement plans covering substantially all of their employees, which are primarily defined contribution plans. The funding policy for the defined contribution plans is to annually contribute an amount equal to a certain percentage of the participants' annual salaries.
The combined funded status of the defined benefit pension plans at March 31, 1996 and 1997, were as follows:
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In thousands of
In millions of yen U.S. dollars
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March 31 1996 1997 1997
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Actuarial present value of benefit obligations:
Vested benefit obligation................................ Y462,225 Y522,542 $4,214,048
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Accumulated benefit obligation........................... Y586,639 Y666,853 $5,377,847
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Projected benefit obligation............................. Y766,342 Y864,322 $6,970,339
Plan assets at fair value................................. (482,836) (548,975) (4,427,218)
Unrecognized prior service cost and net loss.............. (58,600) (82,207) (662,960)
Unrecognized net obligation at April 1, 1989 being
recognized over 17 years................................. (30,834) (27,787) (224,089)
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Accrued pension and severance liability
stated in the balance sheets............................ Y194,072 Y205,353 $1,656,072
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The vested benefit obligation shown above is the amount of the actuarial present value of the vested benefits to which the employee is currently entitled but based on the employee's expected date of separation or retirement.
Components of net pension and severance cost for all defined benefit plans including both the company's and employees' contributory portion of such plans for the years ended March 31, 1995, 1996 and 1997 were as follows:
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In thousands of
In millions of yen U.S. dollars
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Year ended March 31 1995 1996 1997 1997
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Service cost-benefits earned during the period....... Y38,550 Y39,562 Y44,154 $356,081
Interest cost on projected benefit obligation........ 30,914 32,073 36,487 294,250
Actual return on plan assets......................... (14,950) (24,154) (22,296) (179,806)
Net amortization and deferral........................ (523) 13,096 13,728 110,709
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Net pension and severance cost for
all defined benefit plans.......................... Y53,991 Y60,577 Y72,073 $581,234
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The weighted-average discount rate and the rate of increase in future compensation levels which were used in determining the actuarial present value of the projected benefit obligation, and the expected long-term rate of return on plan assets were as follows:
----------------------------------------------------------------------------------------------------- Year ended March 31 1995 1996 1997 ----------------------------------------------------------------------------------------------------- Weighted-average discount rate........................ 5.0% 4.5% 4.5% Rate of increase in future compensation levels........ 3.0%-4.8% 2.1%-3.9% 1.7%-3.8% Expected long-term rate of return on plan assets...... 5.5% 5.0% 5.0% -----------------------------------------------------------------------------------------------------
The plan assets consist principally of corporate equity securities, government securities and corporate debt securities.
The total cost for all defined benefit and defined contribution plans was as follows:
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In thousands of
In millions of yen U.S. dollars
----------------------------- ----------------
Year ended March 31 1995 1996 1997 1997
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Net pension and severance cost for
all defined benefit plans........................... Y53,991 Y60,577 Y72,073 $581,234
Net pension cost for employees' portion of
the contributory defined benefit pension plans...... (4,316) (4,887) (13,144) (106,000)
Pension and severance cost for defined
contribution plans and severance indemnity plans.... 681 459 1,560 12,581
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Total cost for all defined benefit
and defined contribution plans...................... Y50,356 Y56,149 Y60,489 $487,815
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