First Data 2007 Annual Report Download - page 207

Chase Paymentech
NOTES TO COMBINED FINANCIAL STATEMENTS – CONTINUED
For the years ended December 31, 2007 and 2006 and
the year ended December 31, 2005 (unaudited)
Weighted-average assumptions used to determine net periodic benefit cost for the Pension Plan and SERP for the years ended December 31, 2007, 2006, and
2005 were:
Pension Plan
2007 2006 2005
Discount rate 5.75% 5.50% 5.50%
Expected rate of increase in compensation levels 5.00% 5.00% 5.00%
Expected long-term rate of return on assets 8.50% 8.50% 8.50%
SERP
2007 2006 2005
Discount rate 5.75% 5.50% 5.50%
Expected rate of increase in compensation levels 5.00% 5.00% 5.00%
Future benefits are assumed to increase in a manner consistent with past experience of the Pension Plan and SERP, which includes assumed salary increases
as presented above. In developing these assumptions, the Company evaluated input from actuaries and plan asset managers, including their review of asset
class return expectations, historical average annual returns, and long-term inflation assumptions.
The Pension Plan weighted-average asset allocation and target allocation as of December 31, 2007 and 2006 presented as a percentage of total plan assets
were as follows:
Asset Allocation Target Allocation
2007 2006 2007 2006
Equity securities 69% 72% 70% 70%
Debt securities 29 23 25 25
Cash and cash equivalents 2 5 5 5
Total 100% 100% 100% 100%
It is the Company's policy to invest Pension Plan assets in a diversified portfolio utilizing the target asset allocation as a guide. Deviations from the target
allocation may be authorized by the Employee Benefits Committee. Investment risk is limited by diversification both within and between asset classes. The
investment objective for the Pension Plan is to earn long-term investment returns in excess of inflation and at least equal to the actuarial discount rate used to
calculate the Pension Plan's liability. Contributions to and disbursements from the fund are used to rebalance towards the target allocation to the extent
practical.
Pension Plan assets included shares of a money market fund managed by JPMorgan Asset Management, a subsidiary of JPMorgan Chase, with a fair value of
$445 thousand and $819 thousand, representing 2% and 5%, of total plan assets as of December 31, 2007 and 2006, respectively.
The Company expects to contribute approximately $8.0 million to the Pension Plan in 2008. As of December 31, 2007, the future benefit payments expected
to be paid by the Pension Plan and the SERP for each of the following years are as follows (in thousands):
Pension Plan SERP
2008 $ 1,945 $ 10
2009 2,215 19
2010 2,642 27
2011 2,820 34
2012 2,986 40
2013 through 2017 18,627 297
$ 31,235 $ 427
Defined Contribution Plans
The Company provides a Retirement Savings Plan (Savings Plan) for its eligible U.S. employees. The Savings Plan is a defined contribution plan under
sections 401(a) and 401(k) of the Internal Revenue Code which provides savings and investment opportunities. Pretax contributions of up to 6% of an eligible
employee's defined compensation are matched 50% by the Company. Salaries and employee benefits included $3.0 million, $2.2 million, and $1.7 million of
expense relating to the Savings Plan on the combined statements of income and comprehensive income for the years ended December 31, 2007, 2006, and
2005, respectively. Savings Plan assets included 31 thousand and 39 thousand shares of JPMorgan common stock, representing 2% and 3%, of plan assets as
of December 31, 2007 and 2006, respectively.
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