Equifax 2006 Annual Report Download - page 78

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
76 EQUIFAX 2006 ANNUAL REPORT
An initial 9.0% annual rate of increase in the per capita
cost of covered healthcare benefi ts was assumed for 2007.
The rate was assumed to decrease gradually to an ultimate
rate of 5.0% by 2010. Assumed healthcare cost trend rates
have a signifi cant effect on the amounts reported for the
healthcare plan. A one-percentage point change in assumed
healthcare cost trend rates would have the following effects:
1-Percentage 1-Percentage
Point Point
(In millions) Increase Decrease
Effect on total service and
interest cost components $0.2 $(0.2)
Effect on accumulated
postretirement benefi t obligation $2.6 $(2.0)
We estimate that the future benefi ts payable for our
retirement and postretirement plans are as follows at
December 31, 2006:
Non-U.S. Other
U.S. Defi ned Defi ned Benefi t
(In millions) Benefi t Plans Benefi t Plans Plans
Years ending December 31,
2007 $ 36.7 $ 2.1 $ 3.5
2008 $ 37.3 $ 2.1 $ 3.6
2009 $ 37.7 $ 2.1 $ 3.7
2010 $ 37.9 $ 2.1 $ 3.6
2011 $ 38.3 $ 2.1 $ 3.5
Next fi ve fi scal years to
December 31, 2016 $196.5 $11.1 $15.1
USRIP and EIPP (the “Plans”) Investment and Asset
Allocation Strategies. The primary goal of the asset
allocation strategy of the Plans is to produce a total
investment return, employing the lowest possible level of
fi nancial risk, which will: (1) satisfy annual cash benefi ts
payments to the Plans’ participants and (2) maintain and
increase the total market value of the Plans’ assets, after
cash benefi ts payments, on a real (infl ation adjusted)
basis. Maximization of total investment return is not,
taken in isolation, a goal of the asset allocation strategies
of the Plans. Return maximization is pursued subject to
the asset allocation risk control constraints noted previously.
The Plan’s investment managers are required to abide by
the provisions of ERISA. Standards of performance for
each manager include an expected return versus an
assigned benchmark, a measure of volatility, and a time
period of evaluation.
The Plans’ asset allocation strategies are determined
based upon guidelines provided by our external advisor. This
forecasting process takes into account projected investment
returns by asset category, the correlation among those
returns, the standard deviation of those returns and the
future pattern of actuarial liabilities to which the plan is
obligated. Asset/liability forecasting is conducted at regular
intervals during the year, as needed, utilizing input from our
external consulting actuaries, and our external investment
advisor. The Plans’ asset targets and ranges are approved by
in-house Plan Administrators, who are Named Fiduciaries
under ERISA. Investment recommendations are made by
our external advisor, working in conjunction with our in-
house Investment Offi cer, who is also an ERISA Named
Fiduciary. The expected return on plan assets assumption of
8.00% and 8.25% for the USRIP and the EIPP, respectively,
in 2006 was based on the 50th percentile return from our
asset/liability forecasting process.
The Plans, in an effort to meet their asset allocation
objectives, utilize a variety of asset classes which have histor-
ically produced returns which are relatively uncorrelated to
those of the S&P 500. Asset classes included in this category
are alternative assets (hedge fund-of-funds), venture capital
(including secondary private equity) and real estate. The
primary benefi ts to the Plans of using these types of asset
classes are: (1) their non-correlated returns reduce the over-
all volatility of the Plans’ portfolio of assets, and (2) they
produce superior risk-adjusted returns. Additionally, the
Plans allow certain of their managers, subject to specifi c risk
constraints, to utilize derivative instruments, in order to
enhance asset return, reduce volatility or both. Derivatives
are primarily employed by the Plans in their fi xed income
portfolios and in the hedge fund-of-funds area.
The Plans are prohibited from investing additional
amounts in Equifax stock once the market value of stock held
by each plan exceeds 10% of the total market value of each
plan. At December 31, 2006 and 2005, the USRIP’s assets
included 0.9 million and 1.7 million shares, respectively, of
Equifax common stock, with a market value of $37.5 million
and $63.0 million, respectively. At December 31, 2006 and
2005, the EIPP’s assets included 0.1 million shares of Equifax
common stock for both periods, with a market value of
$4.3 million and $4.0 million, respectively. Not more
than 5% of the portfolio (at cost) shall be invested in the
securities of any one issuer, with the exceptions of
Equifax common stock, and U.S. Treasury and government
agency securities.