Capital One 2014 Annual Report Download - page 244

The following table presents weighted-average assumptions used in the accounting for the plans:
Table 16.5: Assumptions Used in the Accounting for the Plans
December 31,
2014 2013 2014 2013
Defined Pension Other Postretirement
Benefits Benefits
Assumptions for benefit obligations at measurement date:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9% 4.6% 3.9% 4.6%
Assumptions for periodic benefit cost for the year ended:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6 3.7 4.6 3.7
Expected long-term rate of return on plan assets . . . . . . . . . . . . . . . . . . 6.5 6.5 6.5 6.5
Assumptions for year-end valuations:
Health care cost trend rate assumed for next year:
Pre-age 65 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A N/A 7.3 7.5
Post-age 65 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A N/A 7.4 7.7
Rate to which the cost trend rate is assumed to decline
(the ultimate trend rate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A N/A 4.5 4.5
Year the rate reaches the ultimate trend rate . . . . . . . . . . . . . . . . . . . . . N/A N/A 2028 2028
To develop the expected long-term rate of return on plan assets assumption, consideration was given to 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 return for each asset class was then weighted based on the target asset
allocation to develop the expected long-term rate of return on the plan assets assumption for the portfolio.
Assumed health care trend rates have a significant effect on the amounts reported for the other postretirement
benefit plans. A one-percentage point change in assumed health care cost trend rates would have the following
effects:
Table 16.6: Sensitivity Analysis
Year Ended December 31,
(Dollars in millions) 2014 2013
1% Increase 1% Decrease 1% Increase 1% Decrease
Effect on year-end postretirement benefit obligation . . . . . . . . $ 7 $ (6) $ 6 $ (5)
Effect on total service and interest cost components . . . . . . . . 00 00
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CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Capital One Financial Corporation (COF)