Assurant 2014 Annual Report Download - page 142

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ASSURANT, INC. – 2014 Form 10-KF-54
21 Retirement and Other Employee Benefi ts
Determination of the net periodic benefi t cost was based on the following weighted-average assumptions for the years
ended December 31:
Qualifi ed Pension Benefi ts Nonqualifi ed Pension Benefi ts Retirement Health Benefi ts
2014 2013 2012 2014 2013 2012 2014 2013 2012
Discount rate 4.98% 4.12% 4.59% 4.64% 3.71% 4.40% 4.99% 4.12% 4.64%
Expected long-term return on plan
assets 6.75% 6.75% 6.75% — — — 6.75% 6.75% 6.75%
* Assumed rates of compensation increases are also used to determine net periodic benefit cost. Assumed rates varied by age and ranged from 3.25%
to 9.30% for the Pension Benefits for the years ended December 31, 2014, 2013 and 2012.
The selection of our discount rate assumption refl ects the rate
at which the Plans’ obligations could be effectively settled
at December 31, 2014, 2013 and 2012. The methodology for
selecting the discount rate was to match each Plan’s cash
fl ows to that of a yield curve that provides the equivalent
yields on zero-coupon corporate bonds for each maturity. The
yield curve utilized in the cash fl ow analysis was comprised
of 651 bonds rated AA by either Moody’s or Standard & Poor’s
with maturities between zero and thirty years. The discount
rate for each Plan is the single rate that produces the same
present value of cash fl ows.
To develop the expected long-term rate of return on assets
assumption, the Company considered the current level
of expected returns on risk free investments (primarily
government bonds), the historical level of the risk premium
associated with the other asset classes in which the portfolio
is invested and the expectations for future returns of each
asset class. The expected long-term rate of return on plan
assets refl ects the average rate of earnings expected on the
funds invested or to be invested. The expected return for
each asset class was then weighted based on the targeted
asset allocation to develop the expected long-term rate of
return on asset assumptions for the portfolio. The Company
believes the current assumption refl ects the projected return
on the invested assets, given the current market conditions
and the modifi ed portfolio structure. Actual return on plan
assets was 13.0% and 9.0% for the years ended December
31, 2014 and 2013, respectively.
The assumed health care cost trend rates used in measuring the accumulated postretirement benefi t obligation and net
periodic benefi t cost were as follows:
Retirement Health Benefi ts
2014 2013 2012
Health care cost trend rate assumed for next year:
Pre-65 Non-reimbursement Plan 8.1%8.7% 9.2%
Post-65 Non-reimbursement Plan 8.0% 8.5% 9.0%
Pre-65 Reimbursement Plan 8.1% 8.7% 9.2%
Post-65 Reimbursement Plan 8.1% 8.7% 9.2%
Rate to which the cost trend rate is assumed to decline
(the ultimate trend rate) 4.5% 4.5% 4.5%
Year that the rate reaches the ultimate trend rate
Pre-65 Non-reimbursement Plan 2028 2028 2028
Post-65 Non-reimbursement Plan 2028 2028 2028
Pre-65 Reimbursement Plan 2028 2028 2028
Post-65 Reimbursement Plan 2028 2028 2028
Assumed health care cost trend rates have a signifi cant effect on the amounts reported for the health care plans. A one-
percentage point change in assumed health care cost trend rates would have the following effects:
Retirement Health Benefi ts
2014
2013
2012
One percentage point increase in health care cost trend rate
Effect on total of service and interest cost components $ 39 $ 43 $ 44
Effect on postretirement benefi t obligation 646 601 727
One percentage point decrease in health care cost trend rate
Effect on total of service and interest cost components $ (60) $ (66) $ (66)
Effect on postretirement benefi t obligation (933) (884) (1,031)
The assets of the Plans are managed to maximize their long-
term pre-tax investment return, subject to the following
dual constraints: minimization of required contributions and
maintenance of solvency requirements. It is anticipated that
periodic contributions to the Plans will, for the foreseeable
future, be suffi cient to meet benefi t payments thus allowing
the balance to be managed according to a long-term approach.
The Investment Committee for the Plans meets on a quarterly
basis and reviews the re-balancing of existing fund assets and
the asset allocation of new fund contributions.