Medtronic 2009 Annual Report Download - page 92

88 Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
The estimated amounts that will be amortized from accumulated other comprehensive (loss)/income into net periodic benefit cost,
before tax, in fiscal year 2010 are as follows:
(in millions)
U.S. Pension
Benefits
Non-U.S.
Pension Benefits
Post-Retirement
Benefits
Amortization of prior service cost $(1) $— $—
Amortization of net actuarial loss 21 2
$ 1 $ 1 $ 2
The actuarial assumptions were as follows:
U.S. Pension Benefits
Non-U.S.
Pension Benefits Post-Retirement Benefits
Fiscal Year Fiscal Year Fiscal Year
2009 2008 2007 2009 2008 2007 2009 2008 2007
Weighted average assumptions—projected benefit obligation:
Discount rate 8.25% 6.75% 6.00% 5.41% 5.37% 4.42% 8.25% 6.75% 6.00%
Rate of compensation increase 4.00% 4.24% 4.24% 2.90% 3.10% 3.09% N/A N/A N/A
Healthcare cost trend rate N/A N/A N/A N/A N/A N/A 8.50% 9.00% 10.00%
Weighted average assumptions—net periodic benefit cost:
Discount rate 6.75% 6.00% 6.00% 5.37% 4.42% 4.34% 6.75% 6.00% 6.00%
Expected return on plan assets 8.75% 8.75% 8.75% 5.97% 5.76% 5.59% 8.75% 8.75% 8.75%
Rate of compensation increase 4.24% 4.24% 4.24% 3.10% 3.09% 3.07% N/A N/A N/A
Healthcare cost trend rate N/A N/A N/A N/A N/A N/A 9.00% 10.00% 9.00%
The Company’s discount rates are determined by considering
current yield curves representing high quality, long-term fixed
income instruments. The resulting discount rates are consistent
with the duration of plan liabilities.
The expected long-term rate of return on plan assets
assumptions is determined using a building block approach,
considering historical averages and real returns of each asset
class. In certain countries, where historical returns are not
meaningful, consideration is given to local market expectations of
long-term returns.
Retirement Benefit Plan Investment Strategy The Company has
an account that holds the assets for both the U.S. pension plan
and other post-retirement benefits, primarily retiree medical. For
investment purposes, the plans are managed in an identical way,
as their objectives are similar.
The Company has a Qualified Plan Committee (the Plan
Committee) that sets investment guidelines with the assistance
of an external consultant. These guidelines are established based
on market conditions, risk tolerance, funding requirements and
expected benefit payments. The Plan Committee also oversees
the investment allocation process, selects the investment
managers and monitors asset performance. As pension liabilities
are long-term in nature, the Company employs a long-term total
return approach to maximize the long-term rate of return on plan
assets for a prudent level of risk. An annual analysis on the risk
versus the return of the investment portfolio is conducted to
justify the expected long-term rate of return assumption.
The investment portfolio contains a diversified portfolio of
investment categories, including equities, fixed income securities,
hedge funds and private equity. Securities are also diversified in
terms of domestic and international securities, short- and long-
term securities, growth and value styles, large cap and small cap
stocks, active and passive management and derivative-based
styles. The Plan Committee believes with prudent risk tolerance
and asset diversification, the account should be able to meet its
pension and other post-retirement obligations in the future.
Plan assets also include investments in the Company’s common
stock of $38 million and $62 million at April 24, 2009 and April 25,
2008, respectively.