content_image/86289.jpg content_image/86290.jpg content_image/86288.jpg
## Assumptions 

The actuarial assumptions were as follows: 

<img src='content_image/86289.jpg'>

Refer to Note E for descriptions of the basis for determining the expected return on assets and investment policies and strategies. 

The health care cost trend rate used to determine net periodic benefit cost for the year ended December 31, 2003 was 9.00%. This rate was assumed to decrease gradually to 4.75% for 2009 and remain at that level thereafter. The health care cost trend rate used to determine benefit obligations at December 31, 2003 was 9.00%. This rate was assumed to decrease gradually to 4.50% for 2009 and remain at that level thereafter. 

A one-percentage point change in the assumed health care cost trend rate would have the following effects at December 31, 2003: 

<img src='content_image/86290.jpg'>

## Expected Contributions 

Based on current estimates, Con Edison of New York and O&R expect to contribute $27 million and $8 million, respectively, to the other postretirement benefit plans in 2004. 

## Plan Assets 

The asset allocation for Con Edison of New York’s other postretirement benefit plans at the end of 2003, 2002 and 

2001, and the target allocation for 2004, by asset category, ar e as follows: 

<img src='content_image/86288.jpg'>

The asset allocation for O&R’s other postretirement benefit plans at the end of 2003, 2002 and 2001 was approximately 90% and 10% in debt and equity securities, respectively. The company plans to align its asset allocation to the target shown above. 

Con Edison has established postretirement health and life insurance benefit plan trusts for the investment of assets to be used for the exclusive purpose of providing other postretire- ment benefits to participants and beneficiaries. 

Refer to Note E for a discussion of Con Edison’s investment strategy . 

## Effect of Medicare Prescription Subsidy 

In December 2003, President Bush signed into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003. As permitted by the FASB, the Companies have elected not to defer recognition of this Act. See Note V. To reflect the effect of the Act on the plans, the 2003 year-end accumulated postretirement benefit obligations were reduced for Con Edison, Con Edison of New York and O&R by $128 million, $114 million and $14 million, respectively, and the 2004 after-tax postretirement benefit costs are estimated to be reduced by $10 million for Con Edison, $9 million for Con Edison of New York and $1 million for O&R. The Companies will recognize the 28% subsidy (reflected as an unrecognized net gain to each plan) as an offset to plan costs. The 28% sub- sidy is expected to reduce prescription drug plan costs by about 25%. The Companies’ actuaries have determined that each prescription drug plan provides a benefit that is at least actuarially equivalent to the Medicare prescription drug plan and projections indicate that this will be the case for 20 years. (For a small number of pension recipients, whose benefits total less than $12,000 per year, this will be the case indefinitely.) 

When the plans’ benefits are no longer actuarially equivalent to the Medicare plan, 25% of the retirees in each plan are assumed to begin to decline participation in the Companies’ pr escription programs. Specific authoritative guidance on the accounting for the federal subsidy is pending and guidance, when issued, could require a change to previously reported information. 

