Delta Airlines 2008 Annual Report Download - page 119

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Table of Contents
Index to Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Assumptions
We used the following actuarial assumptions to determine our benefit obligations at December 31, 2008, December 31, 2007 and April 30, 2007 and
our net periodic (benefit) cost for the periods presented:
Successor Predecessor
Benefit Obligations(1)
December 31,
2008
December 31,
2007
April 30,
2007
Weighted average discount rate 6.49% 6.37% 5.96%
Rate of increase in future compensation levels(2) 3.00% 2.21% 2.21%
Assumed healthcare cost trend rate(3) 8.00% 8.00% 8.50%
Successor Predecessor
Net Periodic Benefit Cost(4)
Year
Ended
December 31,
2008
Eight Months
Ended
December 31,
2007
Four Months
Ended April 30,
2007
Year Ended
December 31,
2006
Weighted average discount rate—pension benefit 7.19% 6.01% 5.99% 5.67%
Weighted average discount rate—other postretirement benefit 6.46% 5.63% 5.63% 5.65%
Weighted average discount rate—other postemployment benefit 6.95% 6.00% 5.63% 5.72%
Rate of increase (decrease) in future compensation levels(2) 2.53% 2.49% 2.57% 0.72%
Weighted average expected long-term rate of return on plan assets 8.96% 8.97% 8.96% 8.87%
Assumed healthcare cost trend rate(3) 8.00% 8.50% 8.50% 9.50%
(1) Our 2008 and 2007 benefit obligations are measured using the RP 2000 combined healthy mortality table projected to 2013 and 2010, respectively.
(2) Not applicable to frozen defined benefit pension plans or other postretirement benefit plans.
(3) The assumed healthcare cost trend rate at December 31, 2008 is assumed to decline gradually to 5.00% by 2015 and remain level thereafter.
(4) Our 2008, 2007 and 2006 assumptions reflect various remeasurements of certain portions of our obligations and represent the weighted average of the assumptions used for each
measurement date.
Assumed healthcare cost trend rates have an effect on the amounts reported for the other postretirement benefit plans. A 1% change in the healthcare
cost trend rate used in measuring the accumulated plan benefit obligation ("APBO") for these plans at December 31, 2008, would have the following effects:
(in millions)
1%
Increase
1%
Decrease
Increase (decrease) in total service and interest cost $ 3 $ (4)
Increase (decrease) in the APBO 62 (75)
The expected long-term rate of return on plan assets was based on plan-specific investment studies using historical market return and volatility data
with forward looking estimates based on existing financial market conditions and forecasts. Modest excess return expectations versus some market indices
were incorporated into the return projections based on the actively managed structure of the investment programs and their records of achieving such returns
historically. We review our rate of return on plan asset assumptions annually. These assumptions are largely based on the asset category rate-of-return
assumptions developed annually with our pension investment advisors. The advisors' asset category return assumptions are based in part on a review of
historical asset returns, but also emphasize current market conditions to develop estimates of future risk and return.
F-49