MoneyGram 2007 Annual Report Download - page 61

Table of Contents
impairment charges for goodwill during 2006 and 2005. See Note 8 — Intangibles and Goodwill of the Notes to Consolidated Financial
Statements for further discussion.
Pension obligations — On December 31, 2006, MoneyGram adopted SFAS No. 158, Employers' Accounting for Defined Benefit Pension
and Other Postretirement Plans, which requires recognition of the funded status of pension plans in the balance sheet. Unrecognized
prior service costs and gains and losses are recorded to "Accumulated other comprehensive loss."
MoneyGram provides defined benefit pension plan coverage to certain employees of MoneyGram, as well as former employees of Viad
and of sold operations of Viad. Pension benefits and the related expense (income) are based upon actuarial assumptions regarding
mortality, discount rates, long-term return on assets and other factors.
MoneyGram's discount rate used in determining future pension obligations is measured on November 30 ("measurement date") and is
based on rates determined by actuarial analysis and management review. Effective January 1, 2008, the measurement date will be
changed to December 31 due to the measurement provision of SFAS No. 158. Following are the assumptions used to measure the
projected benefit obligation as of December 31, and the net periodic benefit cost for the year ended December 31:
2007 2006 2005
Net periodic benefit cost:
Discount rate 5.70% 5.90% 6.00%
Expected return on plan assets 8.00% 8.00% 8.50%
Rate of compensation increase 5.75% 5.75% 4.50%
Projected benefit obligation:
Discount rate 6.50% 5.70% 5.90%
Rate of compensation increase 5.75% 5.75% 5.75%
MoneyGram's pension expense for 2007, 2006 and 2005 was $8.8 million, $9.5 million and $9.4 million, respectively. Pension expense is
calculated in part based upon the actuarial assumptions shown above. At each measurement date, the discount rate is based on interest
rates for high-quality, long-term corporate debt securities with maturities comparable to our liabilities.
The expected return on pension plan assets is based on our historical experience, our pension plan investment strategy and our
expectations for long-term rates of return. Current market factors such as inflation and interest rates are evaluated before long-term
capital market assumptions are determined. Peer data and historical returns are reviewed for reasonableness and appropriateness. Our
pension plan investment strategy is reviewed annually and is based upon plan liabilities, an evaluation of market conditions, tolerance for
risk and cash requirements for benefit payments. MoneyGram's asset allocation at December 31, 2007 consists of approximately
62.8 percent in large capitalization and international equity stock funds, approximately 30.4 percent in fixed income securities, such as
global bond funds and corporate obligations, approximately 3.8 percent in a real estate limited partnership interest and approximately
3.0 percent in other securities. The investment portfolio contains a diversified blend of equity and fixed income securities. Investment risk
is measured and monitored on an ongoing basis through quarterly investment portfolio reviews and annual liability measurements.
Our assumptions reflect our historical experience and management's best judgment regarding future expectations. Some of these
assumptions require significant management judgment and could have a material impact on the measurement of our pension obligation.
Future actual pension income or expense will depend on future investment performance, changes in future rates and various other factors
related to the populations participating in MoneyGram's pension plans. The discount rates used to determine benefit obligation and
pension expense are reviewed on an annual basis. Lowering the discount rate by 50 basis points would have increased 2007 pension
expense by $0.5 million, while increasing the discount rate by 50 basis points would have decreased 2007 pension expense by
$0.7 million.
MoneyGram's pension assets are primarily invested in marketable securities that have readily determinable current market values.
MoneyGram's investments are rebalanced regularly to stay within the investment guidelines. MoneyGram reviews the expected rate of
return in connection with significant changes in the pension asset
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