Express Scripts 2012 Annual Report Download - page 90

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Express Scripts 2012 Annual Report88
Actuarial assumptions. The Company has elected an accounting policy that measures the pension plan’s
benefit obligation as if participants were to separate immediately. As a result, a discount rate is not used to value the
pension benefit obligation. Also, since both the pension and other postretirement benefit plans are frozen, a rate of
compensation increase is not applicable.
Other
Postretirement
Benefits
Weighted-average assumptions used to determine
benefit obligations at fiscal year-end:
Discount rate
2.48%
Weighted-average assumptions used to determine
net cost for the fiscal year ended:
Discount rate
3.30%
Our return on plan assets is calculated based on the actual fair value of plan assets. We recognize actual
gains and losses on pension plan assets immediately in our operating results. Amounts are recorded each period
based on estimates, and adjusted annually when actual results of the plan are measured at December 31st.
For the other postretirement benefit plan, the discount rate is determined annually and is evaluated and
modified to reflect, at the end of our fiscal year, the prevailing market rate of a portfolio of high-quality corporate
bond investments that would provide the future cash flows needed to settle benefit obligations as they come due.
Future costs of the amended postretirement benefit healthcare plan are being capped based on 2004 costs.
As a result, employer liability is not affected by healthcare cost trend. Additionally, the salary growth rate
assumption is not applicable for determination of the benefit obligation at December 31, 2012 as a result of the plan
freeze.
Pension plan assets. The Company believes the oversight of the investments held under its pension plans
is rigorous and the investment strategies are prudent. Beginning in 2013, we have adopted a dynamic asset allocation
policy. The intent of this policy is to allocate funds to investments with lower expected risk profiles as the funded
ratio of the pension plan improves. The investment objectives of the Company’s qualified pension plan are designed
to provide liquidity to meet benefit payments and expenses payable from the plan to offer a reasonable probability of
achieving asset growth to reduce the underfunded status of the plan and to manage the plan’s assets in a liability
framework. The precise amount for which the benefit obligations will be settled depends on future events, including
interest rates and the life expectancy of the plan’s members. The obligations are estimated using actuarial
assumptions based on the current economic environment.