Notes to Consolidated Financial Statements

(Continued)

Note 16.
Benefit Plans:

In December 2003, the FASB issued a revised SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits.” In accordance with the pronouncement, Altria Group, Inc. adopted the revised disclosure requirements of this pronouncement for its U.S. plans in 2003 and for its non-U.S. plans in 2004.

Altria Group, Inc. sponsors noncontributory defined benefit pension plans covering substantially all U.S. employees. Pension coverage for employees of ALG’s non-U.S. subsidiaries is provided, to the extent deemed appropriate, through separate plans, many of which are governed by local statutory requirements. In addition, ALG and its U.S. and Canadian subsidiaries provide health care and other benefits to substantially all retired employees. Health care benefits for retirees outside the United States and Canada are generally covered through local government plans.

The plan assets and benefit obligations of Altria Group, Inc.’s U.S. and Canadian pension plans are measured at December 31 of each year and all other non-U.S. pension plans are measured at September 30 of each year. The benefit obligations of Altria Group, Inc.’s postretirement plans are measured at December 31 of each year.

Pension Plans

Obligations and Funded Status

The benefit obligations, plan assets and funded status of Altria Group, Inc.’s pension plans at December 31, 2004 and 2003, were as follows:

		U.S. Plans							Non-U.S. Plans
	(in millions)		2004				2003			2004			2003
	Benefit obligation at
	January 1		$9,683				$ 9,002			$5,156			$ 4,074
	Service cost		247				234			180			140
	Interest cost		613				579			254			217
	Benefits paid		(677)				(618)			(315)			(209)
	Termination,
	settlement and
	curtailment		36				46
	Actuarial losses		988				428			175			236
	Currency									546			626
	Other		6				12			205			72
	Benefit obligation at
	December 31		10,896				9,683			6,201			5,156
	Fair value of plan assets
	at January 1		9,555				7,535			3,433			2,548
	Actual return on
	plan assets		1,044				1,821			346			351
	Contributions		659				867			419			316
	Benefits paid		(686)				(662)			(139)			(164)
	Currency									392			382
	Actuarial (losses) gains		(3)				(6)			25
	Fair value of plan assets at
	December 31		10,569				9,555			4,476			3,433
	Funded status (plan assets less
	than benefit obligations)
	at December 31		(327)				(128)			(1,725)			(1,723)
	Unrecognized actuarial
	losses		4,350				3,615			1,727			1,482
	Unrecognized prior
	service cost		120				130			108			105
	Additional minimum
	liability		(206)				(196)			(663)			(618)
	Unrecognized net
	transition obligation									9			7
	Net prepaid pension
	asset (liability) recognized		$3,937				$ 3,421			$  (544)			$  (747)

 
The combined U.S. and non-U.S. pension plans resulted in a net prepaid pension asset of $3.4 billion and $2.7 billion at December 31, 2004 and 2003, respectively. These amounts were recognized in Altria Group, Inc.’s consolidated balance sheets at December 31, 2004 and 2003, as other assets of $5.2 billion and $4.5 billion, respectively, for those plans in which plan assets exceeded their accumulated benefit obligations, and as other liabilities of $1.8 billion in each year, for those plans in which the accumulated benefit obligations exceeded their plan assets.

For U.S. and non-U.S. pension plans, the change in the additional minimum liability in 2004 and 2003 was as follows:

U.S. Plans Non-U.S. Plans (in millions) 2004 2003 2004 2003 (Increase) decrease in   minimum liability included   in other comprehensive   earnings (losses), net of tax $(5) $508 $(48) $(44)

 
The accumulated benefit obligation for the U.S. pension plans was $9.5 billion and $8.5 billion at December 31, 2004 and 2003, respectively. The accumulated benefit obligation for non-U.S. pension plans was $5.5 billion and $4.6 billion at December 31, 2004 and 2003, respectively.

For U.S. plans with accumulated benefit obligations in excess of plan assets, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets were $584 million, $415 million and $15 million, respectively, as of December 31, 2004, and $557 million, $396 million and $17 million, respectively, as of December 31, 2003. At December 31, 2004, the majority of these relate to plans for salaried employees that cannot be funded under I.R.S. regulations. For non-U.S. plans with accumulated benefit obligations in excess of plan assets, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets were $3,689 million, $3,247 million and $2,013 million, respectively, as of December 31, 2004, and $3,780 million, $3,307 million and $2,048 million, respectively, as of December 31, 2003.

The following weighted-average assumptions were used to determine Altria Group, Inc.’s benefit obligations under the plans at December 31:

U.S. Plans Non-U.S. Plans 2004   2003   2004   2003   Discount rate 5.75% 6.25% 4.75% 4.87% Rate of compensation increase 4.20    4.20    3.28    3.40