Macy's 2009 Annual Report Download - page 89

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The estimated net actuarial gain of the postretirement obligations that will be amortized from accumulated
other comprehensive income into net postretirement benefit cost during 2010 is $(4) million.
As permitted under ASC Subtopic 715-60, “Defined Benefit Plans – Other Postretirement,” the amortization
of any prior service cost is determined using a straight-line amortization of the cost over the average remaining
service period of employees expected to receive the benefits under the plans.
The following weighted average assumptions were used to determine the accumulated postretirement
benefit obligations at January 30, 2010 and January 31, 2009:
2009 2008
Discount rate ........................................................... 5.65% 7.45%
The following weighted average assumptions were used to determine the net postretirement benefit costs for
the postretirement obligations:
2009 2008 2007
Discount rate prior to change in measurement date ................................. – – 5.85%
Discount rate subsequent to change in measurement date ............................ 7.45% 6.25% 5.95%
The postretirement benefit obligation assumptions are evaluated annually and updated as necessary.
The discount rate used to determine the present value of the Company’s accumulated postretirement benefit
obligations is based on a yield curve constructed from a portfolio of high quality corporate debt securities with
various maturities. Each year’s expected future benefit payments are discounted to their present value at the
appropriate yield curve rate, thereby generating the overall discount rate for the accumulated postretirement
benefit obligations.
The future medical benefits provided by the Company for certain employees are based on a fixed amount
per year of service, and the accumulated postretirement benefit obligation is not affected by increases in health
care costs. However, the future medical benefits provided by the Company for certain other employees are
affected by increases in health care costs.
The following provides the assumed health care cost trend rates related to the Company’s accumulated
postretirement benefit obligations at January 30, 2010 and January 31, 2009:
2009 2008
Health care cost trend rates assumed for next year .......... 8.69% – 10.54% 7.17% – 11.57%
Rates to which the cost trend rate is assumed to decline
(the ultimate trend rate) ............................. 5.0% 5.0%
Year that the rate reaches the ultimate trend rate ........... 2022 2022
The assumed health care cost trend rates have a significant effect on the amounts reported for the
accumulated postretirement benefit obligations. A one-percentage-point change in the assumed health care cost
trend rates would have the following effects:
1 – Percentage
Point Increase
1 – Percentage
Point Decrease
(millions)
Effect on total of service and interest cost ....................... $ 1 $ (1)
Effect on accumulated postretirement benefit obligations ........... $14 $(12)
F-41