MoneyGram 2011 Annual Report Download - page 115

Table of Contents
Supplemental Executive Retirement Plans — The Company has obligations under various Supplemental Executive Retirement Plans (“SERPs”), which are
unfunded non−qualified defined benefit pension plans providing postretirement income to their participants. As of December 31, 2011, all benefit accruals
under the SERPs are frozen with the exception of one plan for which service is frozen but future pay increases are reflected for active participants. It is the
Company’s policy to fund the SERPs as benefits are paid.
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. Effective July 1, 2011,
the plan was amended to eliminate eligibility for participants eligible for Medicare coverage. As a result of this plan amendment, the Company no longer
receives the Medicare retiree drug subsidy. 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 SERPs Postretirement Benefits
2011 2010 2009 2011 2010 2009 2011 2010 2009
Net periodic benefit cost:
Discount rate 5.30% 5.80% 6.30% 5.30% 5.80% 6.30% 5.30% 5.80% 6.30%
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 — — — — — — 9.00% 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
Projected benefit obligation:
Discount rate 4.90% 5.30% 5.80% 4.80% 5.30% 5.80% 4.90% 5.30% 5.80%
Rate of compensation increase — — — 5.75% 5.75% 5.75% — — —
Initial healthcare cost trend rate — — — — — — 8.50% 9.00% 9.50%
Ultimate healthcare cost trend rate — — — — — — 5.00% 5.00% 5.00%
Year ultimate healthcare cost trend rate is reached — — — — — — 2019 2019 2019
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 2011:
(Amounts in thousands) One Percentage Point Increase One Percentage Point Decrease
Effect on total of service and interest cost components $ 12 $ (10)
Effect on postretirement benefit obligation 238 (196)
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