First Data 2007 Annual Report Download - page 138

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Amounts recorded in other comprehensive income represent unrecognized net gains and losses. The Company does not have prior year service costs or
credits or net transition assets or obligations.
The following table provides the components of net periodic benefit cost for the plans:
Successor Predecessor
Period from
September 25
through
December 31,
2007
Period from
January 1
through
September 24,
2007
Year Ended December 31,
(in millions) 2006 2005
Service costs $ 2.7 $ 8.0 $ 11.5 $ 10.4
Interest costs 10.8 27.4 32.4 32.3
Expected return on plan assets (11.1) (35.7) (33.4) (29.8)
Amortization — 7.7 9.1 10.9
Net periodic benefit expense $ 2.4 $ 7.4 $ 19.6 $ 23.8
Assumptions
The weighted-average rate assumptions used in the measurement of the Company's benefit obligation are as follows:
Successor Predecessor
Period from
September 25
through
December 31,
Period from
January 1
through
September 24, September 30,
2007 2007 2006
Discount rate 5.98% 5.95% 5.18%
Rate of compensation increase* 4.09% 4.09% 3.89%
The weighted-average rate assumptions used in the measurement of the Company's net cost are as follows:
Successor Predecessor
Period from
September 25
through
December 31,
Period from
January 1
through
September 24, Year ended December 31,
2007 2007 2006 2005
Discount rate 5.83% 5.36% 5.09% 5.60%
Expected long-term return on plan assets 7.07% 6.75% 6.96% 7.57%
Rate of compensation increase* 3.95% 3.82% 3.62% 3.77%
* Applies only to plans in the UK, Germany and Greece.
SFAS No. 87, "Employers' Accounting for Pensions" ("SFAS 87"), requires the sponsor of a defined benefit pension plan to measure the plan's
obligations and annual expense using assumptions that reflect best estimates and are consistent to the extent that each assumption reflects expectations of
future economic conditions. As the bulk of pension benefits will not be paid for many years, the computation of pension expenses and benefits is based on
assumptions about future interest rates, estimates of annual increases in compensation levels, and expected rates of return on plan assets. In general, pension
obligations are most sensitive to the discount rate assumption, and it is set based on the rate at which the pension benefits could be settled effectively.
Assumptions for the U.S. plans and the foreign plans are comparable in all of the above periods.
The Company employs a building block approach in determining the long-term rate of return for plan assets. Historical markets are studied and long-
term historical relationships between equities and fixed-income securities are preserved consistent with the widely accepted capital market principle that
assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-
term capital market assumptions are determined. The long-term portfolio return is established using a building block approach with proper consideration of
diversification and re-balancing. Peer data and historical returns are reviewed to check for reasonableness and appropriateness.
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