Form 10-K - Union Pacific

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The ABO for all defined benefit pension plans was $3.0 billion and $2.7 billion at December 31, 2011 and 2010, respectively. Assumptions – The weighted-average actuarial assumptions used to determine benefit obligations at December 31: Pension OPEB Percentages 2011 2010 2011 2010 Discount rate 4.54% 5.35% 4.36% 5.01% Compensation increase 4.60% 3.36% N/A N/A Health care cost trend rate (employees under 65) N/A N/A 6.91% 7.07% Ultimate health care cost trend rate N/A N/A 4.50% 4.50% Year ultimate trend rate reached N/A N/A 2028 2028 Expense Both pension and OPEB expense are determined based upon the annual service cost of benefits (the actuarial cost of benefits earned during a period) and the interest cost on those liabilities, less the expected return on plan assets. The expected long-term rate of return on plan assets is applied to a calculated value of plan assets that recognizes changes in fair value over a five-year period. This practice is intended to reduce year-to-year volatility in pension expense, but it can have the effect of delaying the recognition of differences between actual returns on assets and expected returns based on long-term rate of return assumptions. Differences in actual experience in relation to assumptions are not recognized in net income immediately, but are deferred and, if necessary, amortized as pension or OPEB expense. The components of our net periodic pension and OPEB cost/(benefit) were as follows for the years ended December 31: Pension OPEB Millions 2011 2010 2009 2011 2010 2009 Net Periodic Benefit Cost: Service cost $ 40 $ 34 $ 38 $ 2 $ 2 $ 2 Interest cost 145 143 140 15 16 18 Expected return on plan assets (180) (178) (159) - - - Amortization of: Prior service cost/(credit) 2 3 5 (34) (45) (44) Actuarial loss 71 49 30 11 13 12 Net periodic benefit cost/(benefit) $ 78 $ 51 $ 54 $ (6) $ (14) $ (12) Assumptions – The weighted-average actuarial assumptions used to determine expense were as follows for the years ended December 31: Pension OPEB Percentages 2011 2010 2009 2011 2010 2009 Discount rate 5.35% 5.90% 6.25% 5.01% 5.55% 6.25% Expected return on plan assets 7.50% 8.00% 8.00% N/A N/A N/A Compensation increase 4.48% 3.45% 3.50% N/A N/A N/A Health care cost trend rate (employees under 65) N/A N/A N/A 7.07% 7.24% 7.50% Health care cost trend rate (employees over 65) N/A N/A N/A N/A N/A 9.10% Ultimate health care cost trend rate N/A N/A N/A 4.50% 4.50% 4.50% Year ultimate trend reached N/A N/A N/A 2028 2028 2028 The discount rate was based on a yield curve of high quality corporate bonds with cash flows matching our plans’ expected benefit payments. The expected return on plan assets is based on our asset allocation mix and our historical return, taking into account current and expected market conditions. The actual return on pension plan assets, net of fees, was approximately 2% in 2011, 14% in 2010, and 23% in 2009. 64
Assumed health care cost trend rates have a significant effect on the expense and liabilities reported for health care plans. The assumed health care cost trend rate is based on historical rates and expected market conditions. The 2012 assumed health care cost trend rate for employees under 65 is 6.91%. It is assumed the rate will decrease gradually to an ultimate rate of 4.5% in 2028 and will remain at that level. A one-percentage point change in the assumed health care cost trend rates would have the following effects on OPEB: Millions One % pt. Increase One % pt. Decrease Effect on total service and interest cost components $ 1 $ (1) Effect on accumulated benefit obligation 14 (12) Cash Contributions The following table details our cash contributions for the qualified pension plans and the benefit payments for the non-qualified (supplemental) pension and OPEB plans: Pension Millions Qualified Non-qualified OPEB 2010 $ 200 13 24 2011 200 15 24 Our policy with respect to funding the qualified plans is to fund at least the minimum required by law and not more than the maximum amount deductible for tax purposes. All contributions made to the qualified pension plans in 2011 were voluntary and were made with cash generated from operations. The non-qualified pension and OPEB plans are not funded and are not subject to any minimum regulatory funding requirements. Benefit payments for each year represent supplemental pension payments and claims paid for medical and life insurance. We anticipate our 2012 supplemental pension and OPEB payments will be made from cash generated from operations. Benefit Payments The following table details expected benefit payments for the years 2012 through 2021: Millions Pension OPEB 2012 $ 158 $ 26 2013 161 26 2014 166 26 2015 171 26 2016 176 26 Years 2017 - 2021 957 119 Asset Allocation Strategy Our pension plan asset allocation at December 31, 2011 and 2010, and target allocation for 2012, are as follows: Percentage of Plan Assets Target December 31, Allocation 2012 2011 2010 Equity securities 47% to 63% 58% 60% Debt securities 30% to 40% 32 31 Real estate 2% to 8% 5 4 Commodities 4% to 6% 5 5 Total 100% 100% 65
Page 1 and 2:
(Mark One) [X] UNITED STATES SECURI
Page 3 and 4:
February 3, 2012 Fellow Shareholder
Page 5 and 6:
PART I Item 1. Business GENERAL Uni
Page 7 and 8:
goods, lumber and other miscellaneo
Page 9 and 10:
Partnership Against Terrorism, a pa
Page 11 and 12:
and liquidity. Additionally, any fu
Page 13 and 14: that meet our specifications. Rail
Page 15 and 16: Annual Lifts Top 10 Intermodal Term
Page 17 and 18: including sites on the Superfund Na
Page 19 and 20: Executive Officers of the Registran
Page 21 and 22: Five-Year Performance Comparison -
Page 23 and 24: Item 7. Management’s Discussion a
Page 25 and 26: Positive Train Control - In respons
Page 27 and 28: Agricultural Products - Fuel surcha
Page 29 and 30: Intermodal - Fuel surcharge gains,
Page 31 and 32: Purchased Services and Materials -
Page 33 and 34: 2011, effectively handling the 3% i
Page 35 and 36: LIQUIDITY AND CAPITAL RESOURCES As
Page 37 and 38: Credit Facilities - During the seco
Page 39 and 40: The following table lists the outst
Page 41 and 42: Amount of Commitment Expiration per
Page 43 and 44: estimated, we have recorded a liabi
Page 45 and 46: compensation of claimants; and ther
Page 47 and 48: For retirements of depreciable rail
Page 49 and 50: information. To the extent circumst
Page 51 and 52: REPORT OF INDEPENDENT REGISTERED PU
Page 53 and 54: CONSOLIDATED STATEMENTS OF FINANCIA
Page 55 and 56: CONSOLIDATED STATEMENTS OF CHANGES
Page 57 and 58: Investments - Investments represent
Page 59 and 60: does not change the items which mus
Page 61 and 62: Retention Awards - The fair value o
Page 63: Amounts recognized in the statement
Page 67 and 68: multiples to private company cash f
Page 69 and 70: Other Retirement Programs 401(k)/Th
Page 71 and 72: A reconciliation of changes in unre
Page 73 and 74: Receivables Securitization Facility
Page 75 and 76: which all items with similar charac
Page 77 and 78: hedges using the short-cut method;
Page 79 and 80: dividends to our shareholders. The
Page 81 and 82: 17. Commitments and Contingencies A
Page 83 and 84: environmental remediation. Current
Page 85 and 86: MANAGEMENT’S ANNUAL REPORT ON INT
Page 87 and 88: Item 9B. Other Information None. PA
Page 89 and 90: Item 15. Exhibits, Financial Statem
Page 91 and 92: SCHEDULE II - VALUATION AND QUALIFY
Page 93 and 94: 3(b) 4(a) 4(b) 4(c) By-Laws of UPC,
Page 95 and 96: 10(v) 10(w) 10(x) 10(y) 10(z) 10(aa
Page 97 and 98: Exhibit 21 SIGNIFICANT SUBSIDIARIES
Page 99 and 100: Exhibit 24 UNION PACIFIC CORPORATIO
Page 101 and 102: Exhibit 31(b) CERTIFICATION OF PRIN
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Form 10-K - Union Pacific

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