Delta Airlines 2015 Annual Report Download - page 87

TableofContents
ExpectedLong-TermRateofReturn.Ourexpectedlong-termrateofreturnonplanassetsisbasedprimarilyonplan-specificinvestmentstudiesusinghistorical
marketreturnandvolatilitydata.Modestexcessreturnexpectationsversussomepublicmarketindicesareincorporatedintothereturnprojectionsbasedonthe
activelymanagedstructureoftheinvestmentprogramsandtheirrecordsofachievingsuchreturnshistorically.Wealsoexpecttoreceiveapremiumforinvesting
inlessliquidprivatemarkets.Wereviewourrateofreturnonplanassetsassumptionsannually.Ourannualinvestmentperformanceforoneparticularyeardoes
not,byitself,significantlyinfluenceourevaluation.Theinvestmentstrategyforourdefinedbenefitpensionplanassetsistoearnalong-termreturnthatmeetsor
exceedsourannualizedreturntargetwhiletakinganacceptablelevelofriskandmaintainingsufficientliquiditytopaycurrentbenefitsandothercashobligations
oftheplan.Thisisachievedbyinvestinginagloballydiversifiedmixofpublicandprivateequity,fixedincome,realassets,hedgefundsandotherassetsand
instruments.Ourexpectedlong-termrateofreturnonassetsfornetperiodicpensionbenefitcostfortheyearendedDecember31,2015was9%.
LifeExpectancy.WehavehistoricallyutilizedtheSocietyofActuaries'("SOA")publishedmortalitydataindevelopingabestestimateoflifeexpectancy.
During2014,theSOApublishedupdatedmortalitytablesforU.S.plansandanupdatedimprovementscale,whichbothreflectimprovedlongevity.Basedonan
evaluationofthesenewtablesandourperspectiveoffuturelongevity,weupdatedthemortalityassumptionsin2014forpurposesofmeasuringpensionandother
postretirementandpostemploymentbenefitobligations.Theimprovementinlifeexpectancyincreasesourbenefitobligationsandfutureexpenseasbenefit
paymentsarepaidoveranextendedperiodoftime.In2015,wereviewedthemortalityassumptionsandconcludedthattheassumptionsusedin2014continueto
representourbestestimateoflong-termlifeexpectancy.Wewillcontinuetoreviewourassumptionsonanannualbasis.
Benefit Payments
Benefitpaymentsinthetablebelowarebasedonthesameassumptionsusedtomeasuretherelatedbenefitobligations.Actualbenefitpaymentsmayvary
significantlyfromtheseestimates.Benefitsearnedunderourpensionplansandcertainpostemploymentbenefitplansareexpectedtobepaidfromfundedbenefit
plantrusts,whileourotherpostretirementbenefitsarefundedfromcurrentassets.
Thefollowingtablesummarizes,thebenefitpaymentsthatarescheduledtobepaidintheyearsendingDecember31:
(inmillions) PensionBenefits
OtherPostretirementand
PostemploymentBenefits
2016 $ 1,154 $ 286
2017 1,158 281
2018 1,180 271
2019 1,199 267
2020 1,219 268
2021-2025 6,343 1,335
Plan Assets
Wehaveadoptedandimplementedinvestmentpoliciesforourdefinedbenefitpensionplansthatincorporatestrategicassetallocationmixesintendedtobest
meettheplans’long-termobligations,whilemaintaininganappropriatelevelofriskandliquidity.Theseassetportfoliosemployadiversifiedmixofinvestments,
whicharereviewedperiodically.Activemanagementstrategiesareutilizedwherefeasibleinanefforttorealizeinvestmentreturnsinexcessofmarket
indices.Derivativesintheplansareprimarilyusedtomanageriskandgainassetclassexposurewhilestillmaintainingliquidity.Aspartofthesestrategies,the
plansarerequiredtoholdcashcollateralassociatedwithcertainderivatives.Ourinvestmentstrategiestargetamixof40-50%growth-seekingassets,20-30%
income-generatingassetsand25-30%risk-diversifyingassets.Riskdiversifyingassetsincludehedgedmandatesimplementinglong-short,marketneutraland
relativevaluestrategiesthatinvestprimarilyinpublicly-tradedequity,fixedincome,foreigncurrencyandcommoditysecuritiesandderivativesandareusedto
improvetheimpactofactivemanagementontheplans.
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