Energy Transfer 2012 Annual Report Download - page 202

F - 57
The weighted-average assumptions used in determining net periodic benefit cost for the periods presented are shown in the
table below:
December 31, 2012
Pension Benefits
Other
Postretirement
Benefits
Discount rate 2.37% 2.43%
Expected return on assets:
Tax exempt accounts 7.63% 7.00%
Taxable accounts N/A 4.50%
Rate of compensation increase 3.02% N/A
The long-term expected rate of return on plan assets was estimated based on a variety of factors including the historical
investment return achieved over a long-term period, the targeted allocation of plan assets and expectations concerning future
returns in the marketplace for both equity and fixed income securities. Current market factors such as inflation and interest
rates are evaluated before long-term market assumptions are determined. Peer data and historical returns are reviewed to
ensure reasonableness and appropriateness.
The assumed health care cost trend rates used to measure the expected cost of benefits covered by Southern Union and Sunoco’s
other postretirement benefit plans are shown in the table below:
December 31, 2012
Health care cost trend rate assumed for next year 7.78%
Rate to which the cost trend is assumed to decline (the ultimate trend rate) 5.32%
Year that the rate reaches the ultimate trend rate 2018
Changes in the health care cost trend rate assumptions are not expected to have a significant impact on postretirement benefits.
Plan Assets
For the Southern Union plans, the overall investment strategy is to maintain an appropriate balance of actively managed
investments with the objective of optimizing longer-term returns while maintaining a high standard of portfolio quality and
achieving proper diversification. To achieve diversity within its pension plan asset portfolio, Southern Union has targeted
the following asset allocations: equity of 25% to 70%, fixed income of 15% to 35%, alternative assets of 10% to 35% and
cash of 0% to 10%. To achieve diversity within its other postretirement plan asset portfolio, Southern Union has targeted the
following asset allocations: equity of 25% to 35%, fixed income of 65% to 75% and cash and cash equivalents of 0% to 10%.
The investment strategy of Sunoco funded defined benefit plans is to achieve consistent positive returns, after adjusting for
inflation, and to maximize long-term total return within prudent levels of risk through a combination of income and capital
appreciation. The objective of this strategy is to reduce the volatility of investment returns, maintain a sufficient funded status
of the plans and limit required contributions. Sunoco has targeted the following asset allocations: equity of 35%, fixed income
of 55%, and private equity investments of 10%. Sunoco anticipates future shifts in targeted asset allocation from equity
securities to fixed income securities if funding levels improve due to asset performance or Sunoco contributions.
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