McKesson 2008 Annual Report Download - page 89

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
82
Weighted average asset allocations of the investment portfolio for our pension plans at December 31 and target
allocations are as follows:
Percentage of Fair Value of Total
Plan Assets
Target
Allocation 2008 2007
Assets Category
U.S. equity securities 44% 42% 44%
International equity securities 15% 14% 16%
Fixed income 33% 35% 29%
Other 8% 9% 11%
Total 100% 100% 100%
We develop our expected long-term rate of return assumption based on the historical experience of our portfolio
and the review of projected returns by asset class on broad, publicly traded equity and fixed-income indices. Our
target asset allocation was determined based on the risk tolerance characteristics of the plan and, at times, may be
adjusted to achieve our overall investment objective.
Weighted-average assumptions used to estimate the net periodic pension expense and the actuarial present value
of benefit obligations were as follows:
2008 2007 2006
Net periodic expense
Discount rates 5.33% 5.35% 5.75%
Rate of increase in compensation 3.85 3.83 4.00
Expected long-term rate of return on plan assets 7.53 7.47 8.23
Benefit obligation
Discount rates 6.18% 5.70% 5.56%
Rate of increase in compensation 4.01 3.97 3.97
Expected long-term rate of return on plan assets 8.04 8.09 8.11
Other Defined Benefit Plans
Under various U.S. bargaining unit labor contracts, we make payments into multi-employer pension plans
established for union employees. We are liable for a proportionate part of the plans’ unfunded vested benefits
liabilities upon our withdrawal from the plan, however information regarding the relative position of each employer
with respect to the actuarial present value of accumulated benefits and net assets available for benefits is not
available. Contributions to the plans and amounts accrued were not material for the years ended March 31, 2008,
2007 and 2006.
Defined Contribution Plans
We have a contributory profit sharing investment plan (“PSIP”) for U.S. employees not covered by collective
bargaining arrangements. Eligible employees may contribute into the PSIP through an individual retirement savings
account up to 20% of their monthly eligible compensation for pre-tax deferrals and up to 67% of compensation for
catch-up contributions not to exceed Internal Revenue Service (“IRS”) limits. The Company makes matching
contributions in an amount equal to 100% of the employee’ s first 3% of pay deferred and 50% of the employee’ s
deferral for the next 2% of pay deferred. The Company also may make an additional annual matching contribution
for each plan year to enable participants to receive a full match based on their annual limit, effective 2008. The
Company has historically provided for the PSIP contributions primarily with its common shares through its
leveraged ESOP.