DuPont 2007 Annual Report Download - page 95

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postretirement survivor benefits for these employees will not continue to grow after December 31, 2007. Covered
employees hired after December 31, 2006 will not participate in the principal U.S. pension plan. As a result of this
plan amendment, the company was required to remeasure its pension expense for the remainder of 2006, reflecting
plan assets and benefit obligations as of the remeasurement date. Better than expected return on plan assets and a
higher discount rate of 6.00 percent decreased pretax pension expense for 2006 by $72. For 2007, the plan
amendment resulted in a reduction in pretax pension expense of about $40.
The company utilizes published long-term high quality corporate bond indices to determine the discount rate at
measurement date. Where commonly available, the company considers indices of various durations to reflect the
timing of future benefit payments.
The long-term rate of return on assets in the U.S. was selected from within the reasonable range of rates determined
by (a) historical real returns (net of inflation) for the asset classes covered by the investment policy and (b) projections
of inflation over the long-term period during which benefits are payable to plan participants. For non-U.S. plans,
assumptions reflect economic assumptions applicable to each country.
Assumed health care cost trend rates at December 31, 2007 2006
Health care cost trend rate assumed for next year 9% 10%
Rate to which the cost trend rate is assumed to decline (the ultimate trend
rate) 5% 5%
Year that the rate reaches the ultimate trend rate 2012 2012
Assumed health care cost trend rates have a modest effect on the amount reported for the health care plan. A one-
percentage point change in assumed health care cost trend rates would have the following effects:
1-Percentage
Point Increase
1-Percentage
Point Decrease
Effect on total of service and interest cost $ 6 $ (4)
Effect on postretirement benefit obligation 83 (57)
Plan Assets
The strategic asset allocation targets of the company’s pension plans as of December 31, 2007, and the weighted
average asset allocation of these plans at December 31, 2007, and 2006, by asset category were as follows:
Asset Category
Strategic
Target 2007 2006
Plan Assets at
December 31,
Equity securities 57% 55% 57%
Debt securities 30% 30% 29%
Real estate 5% 5% 5%
Other * 8% 10% 9%
Total 100% 100% 100%
* Mainly private equity and private debt.
Essentially all pension plan assets in the U.S. are invested through a single master trust fund. The strategic asset
allocation for this trust fund is selected by management, reflecting the results of comprehensive asset liability
modeling. The general principles guiding investment of U.S. pension assets are those embodied in the Employee
Retirement Income Security Act of 1974 (ERISA). These principles include discharging the company’s investment
responsibilities for the exclusive benefit of plan participants and in accordance with the “prudent expert” standard
and other ERISA rules and regulations. The company establishes strategic asset allocation percentage targets and
appropriate benchmarks for significant asset classes with the aim of achieving a prudent balance between return
F-38
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)