MoneyGram 2010 Annual Report Download - page 118

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Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Postretirement Benefits Other Than Pensions — The Company has unfunded defined benefit postretirement plans that provide medical
and life insurance for its participants. The Company amended the postretirement benefit plan to close it to new participants as of
December 31, 2009. In November 2010, the Board of Directors approved a change to the plan whereby participants eligible for Medicare
coverage will no longer be eligible for coverage under the plan effective July 1, 2011. The Company has determined that its
postretirement benefit plan is actuarially equivalent to the Medicare Act and its application for determination of actuarial equivalence has
been approved by the Medicare Retiree Drug Subsidy program. The Company's funding policy is to make contributions to the
postretirement benefits plans as benefits are paid.
Actuarial Valuation Assumptions — The measurement date for the Company's defined benefit pension plan, SERPs and postretirement
benefit plans is December 31. Following are the weighted-average actuarial assumptions used in calculating the benefit obligation and net
benefit cost as of and for the years ended December 31:
Pension and SERPs Postretirement Benefits
2010 2009 2008 2010 2009 2008
Net periodic benefit cost:
Discount rate 5.80% 6.30% 6.50% 5.80% 6.30% 6.50%
Expected return on plan assets 8.00% 8.00% 8.00% — — —
Rate of compensation increase 5.75% 5.75% 5.75% — — —
Initial healthcare cost trend rate — — — 9.50% 8.50% 9.00%
Ultimate healthcare cost trend rate — — — 5.00% 5.00% 5.00%
Year ultimate healthcare cost trend rate is reached — — — 2019 2013 2013
Projected benefit obligation:
Discount rate 5.30% 5.80% 6.30% 5.30% 5.80% 6.30%
Rate of compensation increase 5.75% 5.75% 5.75% — — —
Initial healthcare cost trend rate — — — 9.00% 9.50% 8.50%
Ultimate healthcare cost trend rate — — — 5.00% 5.00% 5.00%
Year ultimate healthcare cost trend rate is reached — — — 2019 2019 2013
The Company utilizes a building-block approach in determining the long-term expected rate of return on plan assets. Historical markets
are studied and long-term historical relationships between equity securities and fixed income securities are preserved consistent with the
widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market
factors, such as inflation and interest rates, are evaluated before long-term capital market assumptions are determined. The long-term
portfolio return also takes proper consideration of diversification and rebalancing. Peer data and historical returns are reviewed for
reasonableness and appropriateness.
A one-percentage point change in assumed health care trends would have the following effects for 2010:
One Percentage One Percentage
(Amounts in thousands) Point Increase Point Decrease
Effect on total of service and interest cost components $ 6 $ (5)
Effect on postretirement benefit obligation 106 (90)
F-33