Energy Transfer 2013 Annual Report Download - page 208

Table of Contents
The weighted-average assumptions used in determining net periodic benefit cost for the periods presented are shown in the table below:
December 31, 2013
December 31, 2012
Pension Benefits
Other Postretirement
Benefits
Pension Benefits
Other Postretirement
Benefits
Discount rate 3.50%
2.68%
2.37%
2.43%
Expected return on assets:
Tax exempt accounts 7.50%
6.95%
7.63%
7.00%
Taxable accounts N/A
4.42%
N/A
4.50%
Rate of compensation increase N/A
N/A
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,
2013
2012
Health care cost trend rate assumed for next year
7.57%
7.78%
Rate to which the cost trend is assumed to decline (the ultimate trend rate)
5.42%
5.32%
Year that the rate reaches the ultimate trend rate
2018
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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