Hess 2008 Annual Report Download - page 79

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The weighted-average actuarial assumptions used by the Corporation’s funded and unfunded pension plans
were as follows:
2008 2007 2006
Weighted-average assumptions used to determine benefit obligations at
December 31
Discount rate ................................................ 6.3% 6.3% 5.8%
Rate of compensation increase ................................... 4.4 4.4 4.4
Weighted-average assumptions used to determine net benefit cost for years
ended December 31
Discount rate ................................................ 6.3 5.8 5.5
Expected return on plan assets ................................... 7.5 7.5 7.5
Rate of compensation increase ................................... 4.4 4.4 4.3
The actuarial assumptions used by the Corporation’s postretirement medical plan were as follows:
2008 2007 2006
Assumptions used to determine benefit obligations at December 31
Discount rate .............................................. 6.3% 6.3% 5.8%
Initial health care trend rate ................................... 9.0% 9.0% 8.0%
Ultimate trend rate.......................................... 4.5% 4.5% 4.5%
Year in which ultimate trend rate is reached ....................... 2013 2013 2011
The assumptions used to determine net periodic benefit cost for each year were established at the end of each
previous year while the assumptions used to determine benefit obligations were established at each year-end. The
net periodic benefit cost and the actuarial present value of benefit obligations are based on actuarial assumptions
that are reviewed on an annual basis. The discount rate is developed based on a portfolio of high-quality, fixed-
income debt instruments with maturities that approximate the expected payment of plan obligations. The overall
expected return on plan assets is developed from the expected future returns for each asset category, weighted by the
target allocation of pension assets to that asset category.
The Corporation’s investment strategy is to maximize long-term returns at an acceptable level of risk through
broad diversification of plan assets in a variety of asset classes. Asset classes and target allocations are determined
by the Corporation’s investment committee and include domestic and foreign equities, fixed income securities, and
other investments, including hedge funds, real estate and private equity. Investment managers are prohibited from
investing in securities issued by the Corporation unless indirectly held as part of an index strategy. The majority of
plan assets are highly liquid, providing ample liquidity for benefit payment requirements.
The Corporation’s funded pension plan assets by asset category are as follows:
Asset Category
Target
Allocation 2008 2007
December 31,
Equity securities ............................................ 50% 48% 57%
Debt securities ............................................. 25 27 29
Other investments ........................................... 25 25 14
Total................................................... 100% 100% 100%
Asset allocations are rebalanced on a periodic basis throughout the year to bring assets to within an acceptable
range of target levels.
63
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)