ADP 2010 Annual Report Download - page 77

The pension plans ’ assets are currently invested in various asset classes with differing expected rates of return, correlations and
volatilities, including large capitalization and small capitalization U.S. equities, international equities, and U.S. fixed income securities
and cash.
The target asset allocation ranges are as follows:
The pension plans
’ fixed income portfolio is designed to match the duration and liquidity characteristics of the pension plans ’
liabilities. In addition, the pension plans invest only in investment - grade debt securities to ensure preservation of capital. The
pension plans
’ equity portfolios are subject to diversification guidelines to reduce the impact of losses in single investments.
Investment managers are prohibited from buying or selling commodities and from the short selling of securities.
None of the pension plans
’ assets are directly invested in the Company ’ s stock, although the pension plans may hold a minimal
amount of Company stock to the extent of the Company
’ s participation in the S&P 500 Index.
Plan investments included in Level 1 are valued using closing prices for identical instruments that are traded on active exchanges.
Plan investments included in Level 2 are valued utilizing inputs obtained from an independent pricing service, which are reviewed by
the Company for reasonableness. To determine the fair value of our Level 2 plan assets, a variety of inputs are utilized, including
benchmark yields, reported trades, non
- binding broker/dealer quotes, issuer spreads, two - sided markets, benchmark securities, bids,
offers, reference data, new issue data, and monthly payment information. The Plan has no Level 3 investments at June 30, 2010.
The following table presents the investments of the pension plans measured at fair value at June 30, 2010:
In addition to the investments of the pension plans of $961.3 million in the above table, the Company held cash and cash equivalents
of the pension plans of $20.4 million as of June 30, 2010.
Contributions
During July 2010, the Company contributed $150.0 million to the pension plans. In addition to this contribution, the Company
expects to contribute approximately $7.6 million to the pension plans during fiscal 2011.
Estimated Future Benefit Payments
The benefits expected to be paid in each year from fiscal 2011 to 2015 are $55.0 million, $55.5 million, $62.2 million, $67.7 million and
$75.3 million, respectively. The aggregate benefits expected to be paid in the five fiscal years from 2016 to 2020 are $509.1 million. The
expected benefits to be paid are based on the same assumptions used to measure the Company
’ s pension plans ’ benefit obligation
at June 30, 2010 and includes estimated future employee service.
C. Retirement and Savings Plan. The Company has a 401(k) retirement and savings plan, which allows eligible employees to
contribute up to 35% of their compensation annually and allows highly compensated employees to contribute up to 10% of their
compensation annually. The Company matches a portion of employee contributions, which amounted to approximately $55.8 million,
$52.1 million, and $49.0 million for calendar years ended December 31, 2009, 2008 and 2007, respectively.
60
United States Fixed Income Securities
35 – 45%
United States Equity Securities
37 – 50%
International Equity Securities
12 – 20%
Level 1
Level 2
Level 3
Total
Comingled trusts
$
-
$
357.1
$
-
$
357.1
U.S. Government securities
-
191.3
-
191.3
Mutual funds
252.1
-
-
252.1
Corporate and municipal bonds
-
160.1
-
160.1
Mortgage - backed security bonds
-
0.7
-
0.7
Total pension assets
$
252.1
$
709.2
$
-
$
961.3