DELPHI 2015 Annual Report Download - page 84

Table of Contents
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consultation with and input from our actuaries and asset managers. Refer to Note 12. Pension Benefits to the audited
consolidated financial statements included herein for additional details. The key factors which impact our estimates are
(1) discount rates; (2) asset return assumptions; and (3) actuarial assumptions such as retirement age and mortality which are
determined as of the current year measurement date. We review our actuarial assumptions on an annual basis and make
modifications to the assumptions based on current rates and trends when appropriate. Experience gains and losses, as well as
the effects of changes in actuarial assumptions and plan provisions are recognized in other comprehensive income. Cumulative
actuarial gains and losses in excess of 10% of the projected benefit obligation (“PBO”) for a particular plan are amortized over
the average future service period of the employees in that plan.
The principal assumptions used to determine the pension expense and the actuarial value of the projected benefit
obligation for the U.S. and non-U.S. pension plans were:
Assumptions used to determine benefit obligations at December 31:
Pension Benefits
U.S. Plans Non-U.S. Plans
2015 2014 2015 2014
Weighted-average discount rate................................................................................... 2.70% 2.50% 3.81% 3.67%
Weighted-average rate of increase in compensation levels......................................... N/A N/A 3.67% 3.65%
Assumptions used to determine net expense for years ended December 31:
Pension Benefits
U.S. Plans Non-U.S. Plans
2015 2014 2013 2015 2014 2013
Weighted-average discount rate ............................................... 2.50% 3.00% 2.40% 3.67% 4.58% 4.41%
Weighted-average rate of increase in compensation levels...... N/A N/A N/A 3.65% 3.85% 3.50%
Weighted-average expected long-term rate of return on plan
assets......................................................................................... N/A N/A N/A 6.34% 6.35% 6.44%
We select discount rates by analyzing the results of matching each plan’s projected benefit obligations with a portfolio of
high-quality fixed income investments rated AA- or higher by Standard and Poor’s.
Delphi does not have any U.S. pension assets; therefore no U.S. asset rate of return calculation was necessary for 2015,
2014 or 2013. The primary funded non-U.S. plans are in the United Kingdom and Mexico. For the determination of 2015
expense, we assumed a long-term expected asset rate of return of approximately 6.25% and 7.50% for the United Kingdom and
Mexico, respectively. We evaluated input from local actuaries and asset managers, including consideration of recent fund
performance and historical returns, in developing the long-term rate of return assumptions. The assumptions for the United
Kingdom and Mexico are primarily conservative long-term, prospective rates. To determine the expected return on plan assets,
the market-related value of approximately 50% of our plan assets is actual fair value. The expected return on the remainder of
our plan assets is determined by applying the expected long-term rate of return on assets to a calculated market-related value of
these plan assets, which recognizes changes in the fair value of the plan assets in a systematic manner over five years.
Our pension expense for 2016 is determined at the December 31, 2015 measurement date. For purposes of analysis, the
following table highlights the sensitivity of our pension obligations and expense to changes in key assumptions:
Change in Assumption
Impact on Pension
Expense Impact on PBO
25 basis point (“bp”) decrease in discount rate................................................................. + $8 million + $88 million
25 bp increase in discount rate.......................................................................................... - $6 million - $81 million
25 bp decrease in long-term expected return on assets..................................................... + $3 million —
25 bp increase in long-term expected return on assets...................................................... - $3 million —
The above sensitivities reflect the effect of changing one assumption at a time. It should be noted that economic factors
and conditions often affect multiple assumptions simultaneously and the effects of changes in key assumptions are not
necessarily linear. The above sensitivities also assume no changes to the design of the pension plans and no major restructuring
programs.