MoneyGram 2013 Annual Report Download - page 98

Table of Contents
Note 10 — Pension and Other Benefits
Pension Benefits
— The Pension Plan is a frozen non-
contributory funded defined benefit pension plan under which no new service or
compensation credits are accrued by the plan participants. Cash accumulation accounts continue to be credited with interest credits until
participants withdraw their money from the Pension Plan. It is the Company’
s policy to fund at least the minimum required contribution each
year plus additional discretionary amounts as available and necessary to minimize expenses of the plan.
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,
2013 , 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 . The following table is a summary of the weighted-
average actuarial assumptions used in calculating the benefit
obligation and net benefit cost as of and for the years ended December 31 :
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.
Pension Assets
—
The Company employs a total return investment approach whereby a mix of equity and fixed income securities are used to
maximize the long-
term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan
liabilities, plan funded status and corporate financial condition. The investment portfolio contains a diversified blend of equity and fixed income
securities. Furthermore, equity securities are diversified across U.S. and non-
U.S. stocks, as well as growth, value, and small and large
capitalizations. Other assets, such as real estate and short-
term investment funds, are used on a limited basis. The Company strives to maintain an
equity and fixed income securities allocation mix appropriate to its funded status. As of December 31, 2013, the funding mix was approximately
47 percent equity and 53 percent
fixed income. Investment risk is measured and monitored on an ongoing basis through quarterly investment
portfolio reviews and annual liability measurements.
F-29
Pension
SERPs Postretirement Benefits
2013
2012 2011 2013 2012 2011 2013 2012 2011
Net periodic benefit cost:
Discount rate
4.04
%
4.90
%
5.30
%
3.99
%
4.80
%
5.30
%
4.09
%
4.90
%
5.30
%
Expected return on plan assets
6.20
%
7.00
%
8.00
%
— —
—
—
— —
Rate of compensation increase
—
— —
5.75
%
5.75
%
5.75
%
—
— —
Initial healthcare cost trend rate
—
— — — —
—
8.00
%
8.50
%
9.00
%
Ultimate healthcare cost trend rate
—
— — — —
—
5.00
%
5.00
%
5.00
%
Year ultimate healthcare cost trend rate is
reached
—
— — — —
—
2019
2019
2019
Projected benefit obligation:
Discount rate
4.81
%
4.04
%
4.90
%
4.78
%
3.99
%
4.80
%
4.82
%
4.09
%
4.90
%
Rate of compensation increase
—
— —
5.75
%
5.75
%
5.75
%
—
— —
Initial healthcare cost trend rate
—
— — — —
—
7.00
%
8.00
%
8.50
%
Ultimate healthcare cost trend rate
—
— — — —
—
4.50
%
5.00
%
5.00
%
Year ultimate healthcare cost trend rate is
reached
—
— — — —
—
2023
2019
2019