Notes to Consolidated Financial Statements

Retirement Benefit Plans
Certain domestic full-time and part-time employees are eligible to participate in noncontributory defined benefit plans after meeting age and service requirements. Substantially all Canadian employees are eligible to participate in contributory defined benefit plans. Pension benefits are based on length of service, compensation and, in certain plans, Social Security or other benefits. Funding for the various plans is determined using various actuarial cost methods. The Company uses October 31 as the measurement date for determining pension plan assets and obligations.

In addition to providing pension benefits, the Company provides certain medical and life insurance benefits for retired employees. Employees may become eligible for medical benefits if they retire in accordance with the Company's established retirement policy and are continuously insured under the Company's group medical plans or other approved plans for 10 or more years immediately prior to retirement. The Company shares the cost of the retiree medical benefits with retirees based on years of service. Generally, the Company's share of these benefit costs will be capped at the Company contribution calculated during the first year of retirement. The Company's postretirement benefit plans are not funded. The Company has the right to modify or terminate these plans.

The change in benefit obligation, change in plan assets, funded status, reconciliation to amounts recognized in the consolidated balance sheets and weighted average assumptions are as follows:

The components of net periodic benefit cost are as follows:

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $2,309, $2,210 and $1,845 million, respectively, at January 2, 1999, and $2,268, $2,123 and $1,928 million, respectively, at January 3, 1998. The provisions of SFAS No. 87, "Employers' Accounting for Pensions," require the recognition of a minimum pension liability for each defined benefit plan for which the accumulated benefit obligation exceeds plan assets. The minimum pension liability, net of tax, was $299 million at January 2, 1999 and $217 million at January 3, 1998, and is included in accumulated other comprehensive income as a reduction of shareholders' equity.

In 1997, the Company announced changes to its postretirement life insurance benefit plan. Retiree life insurance benefits were eliminated for all active associates not retired by December 31, 1997. This plan change resulted in a one-time pretax gain of $61 million. In connection with the elimination of retirement life insurance benefits for all active associates, the Company also announced the reduction in life insurance over a 10-year period to a maximum coverage of $5,000 for all post-1977 retirees.

The weighted-average health care cost trend rate used in measuring the postretirement benefit expense is 5.0% for 1999 and thereafter. A one percentage point change in the assumed health care cost trend rate would have the following effects:

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