MoneyGram 2009 Annual Report Download - page 61

Table of Contents
weighted-average actuarial assumptions used in calculating the benefit obligation as of each measurement date and the net periodic
benefit cost for the year ended December 31:
2009 2008 2007
Net periodic benefit cost:
Discount rate 6.30% 6.50% 5.70%
Expected return on plan assets 8.00% 8.00% 8.00%
Rate of compensation increase 5.75% 5.75% 5.75%
Projected benefit obligation:
Discount rate 5.80% 6.30% 6.50%
Rate of compensation increase 5.75% 5.75% 5.75%
At each measurement date, the discount rate is based on the then current interest rates for high-quality, long-term corporate debt securities
with maturities comparable to our obligations. The rate of compensation increase is based on historical compensation patterns for the plan
participants and management's expectations for future compensation patterns. Effective December 31, 2009, benefit accruals under all of
the supplemental executive retirement plans are frozen. Accordingly, the rate of compensation increase will not impact pension
obligations measured subsequent to December 31, 2009, nor will it impact net periodic benefit cost subsequent to the year ending
December 31, 2010.
Our pension assets are primarily invested in marketable securities that have readily determinable current market values. Our investments
are periodically realigned in accordance with the investment guidelines. The expected return on pension plan assets is based on our
historical market experience, our pension plan investment strategy and our expectations for long-term rates of return. We also consider
peer data and historical returns to assess the reasonableness and appropriateness of our expected return. Our pension plan investment
strategy is reviewed annually and is based upon plan obligations, an evaluation of market conditions, tolerance for risk and cash
requirements for benefit payments. At December 31, 2009, the pension assets are composed of approximately 56 percent in United States
domestic and international equity stock funds, approximately 35 percent in fixed income securities such as global bond funds and
corporate obligations, approximately 5 percent in a real estate limited partnership interest and approximately 4 percent in other securities.
The actual rate of return on average pension assets in 2009 was 4.5 percent, as compared to a 26 percent decline in 2008 from the
substantial disruption in the market and the global economic conditions. We believe the 2009 returns indicate some stabilization in the
markets, and anticipate a return to historical long-term norms in the future. This is consistent with the widely accepted capital market
principle that assets with higher volatility generate greater long-term returns and the historical cyclicality of the investment markets.
Accordingly, we do not believe that the actual return for 2009 is significantly different from the long-term expected return used to
estimate the benefit obligation. In addition, the participants of our plans are relatively young, providing the plan assets with sufficient
time to recover to historical return rates.
Our assumptions reflect our historical experience and management's best judgment regarding future expectations. Certain of the
assumptions, particularly the discount rate and expected return on plan assets, require significant judgment and could have a material
impact on the measurement of our pension obligation. Changing the discount rate by 50 basis points would have increased/decreased
2009 pension expense by $0.3 million. Changing the expected rate of return by 50 basis points would have increased/decreased 2008
pension expense by $0.6 million.
Income Taxes — We are subject to income taxes in the United States and various foreign jurisdictions. In determining taxable income,
income or losses before taxes are adjusted for various differences between local tax laws and generally accepted accounting principles.
The determination of taxable income in any jurisdiction requires the interpretation of the related tax laws and regulations and the use of
estimates and assumptions regarding significant future events, such as the amount, timing and character of deductions and the sources and
character of income and tax credits. Changes in tax laws, regulations, agreements and treaties, foreign currency exchange restrictions or
our level of operations or profitability in each taxing jurisdiction could have an impact on the amount of income taxes that we provide
during any given year.
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