Morgan Stanley 2009 Annual Report Download - page 210

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other changes in plan assets and benefit obligations recognized in other comprehensive loss (income) on a
pre-tax basis in 2009, fiscal 2008 and the one month ended December 31, 2008 are as follows:
Pension Postretirement
2009
Fiscal
2008
One Month
Ended
December 31,
2008 2009
Fiscal
2008
One Month
Ended
December 31,
2008
(dollars in millions)
Net loss (gain) ................................ $509 $(330) $282 $ (25) $ (11) $ 50
Prior service credit ............................ (16) — — — — —
Amortization of prior service credit ............... 9 8 1 1 2 —
Amortization of net loss ........................ (41) (31) — (3) (1) —
Total recognized in other comprehensive loss
(income) .................................. $461 $(353) $283 $ (27) $ (10) $ 50
The Company amortizes (as a component of pension and postretirement expense) unrecognized net gains and
losses over the average future service of active participants (5 to 20 years depending upon the plan) to the extent
that the gain/loss exceeds 10% of the greater of the projected benefit obligation or the market-related value of
plan assets.
The following table presents the weighted average assumptions used to determine net periodic benefit costs for
2009, fiscal 2008, fiscal 2007 and the one month ended December 31, 2008:
Pension Postretirement
2009
Fiscal
2008
Fiscal
2007
One Month
Ended
December 31,
2008 2009
Fiscal
2008
Fiscal
2007
One Month
Ended
December 31,
2008
Discount rate ...................... 5.75% 6.17% 5.79% 7.23% 5.78% 6.34% 5.97% 7.47%
Expected long-term rate of return on plan
assets .......................... 5.21 6.46 6.65 5.17 n/a n/a n/a n/a
Rate of future compensation increases . . 5.12 5.08 4.40 5.09 n/a n/a n/a n/a
The expected long-term rate of return on plan assets represents the Company’s best estimate of the long-term
return on plan assets. For the U.S. Qualified Plan, the expected long-term rate of return was estimated by
computing a weighted average return of the underlying long-term expected returns on the plan’s fixed income
assets based on the investment managers’ target allocations within this asset class. The expected long-term return
on assets is a long-term assumption that generally is expected to remain the same from one year to the next
unless there is a significant change in the target asset allocation, the fees and expenses paid by the plan or market
conditions. To better align the duration of plan assets with the duration of plan liabilities, in fiscal 2007, the U.S.
Qualified Plan’s target asset allocation policy was changed from 45%/55% equity/fixed income to 30%/70%
equity/fixed income. In late 2008, the U.S. Qualified Plan transitioned to 100% investment in fixed income
securities and related derivative securities, including interest rate swap contracts. This asset allocation is expected
to help protect the plan’s funded status and limit volatility of the Company’s contributions. Total U.S. Qualified
Plan portfolio performance is assessed by comparing actual investment performance with changes in the
estimated present value of the U.S. Qualified Plan’s liability.
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