Neiman Marcus 2005 Annual Report Download - page 113

A summary of expected benefit payments related to our Pension Plan, SERP Plan and Postretirement Plan is as follows:
(in thousands)
Pension
Plan
SERP
Plan
Postretirement
Plan
Fiscal year 2007 $ 10,583 $ 2,870 $ 1,547
Fiscal year 2008 11,561 2,899 1,639
Fiscal year 2009 12,646 3,323 1,697
Fiscal year 2010 13,766 3,765 1,728
Fiscal year 2011 14,939 4,050 1,774
Fiscal years 2012-2016 $ 99,509 $ 25,855 $ 9,681
Purchase Accounting Adjustments. The obligations and assets related to our benefit plans were valued at fair value as of the
date of the Acquisition as follows:
(in thousands) Pension Plan SERP Plan
Postretirement
Plan
Benefit obligations at fair value (5.75% discount rate) $ 354,807 $ 76,806 $ 15,281
Assets held by defined benefit pension plan, at fair value 287,871 — —
Excess of benefit obligations over assets 66,936 76,806 15,281
Less: previously recorded benefit plan obligations recorded by Predecessor (19,655 )(63,540 )(18,205 )
Adjustment to increase (decrease) benefit plan obligations $ 47,281 $ 13,266 $ (2,924 )
Actuarial Assumptions. Significant assumptions related to the calculation of our obligations pursuant to our employee benefit
plans include the discount rate used to calculate the actuarial present value of benefit obligations to be paid in the future, the expected
long-term rate of return on assets held by the Pension Plan, the average rate of compensation increase by Pension Plan and SERP Plan
participants and the health care cost trend rate for the Postretirement Plan. We review these actuarial assumptions annually based upon
currently available information. The assumptions we utilized in calculating the projected benefit obligations and periodic expense of our
Pension Plan, SERP Plan and Postretirement Plan are as follows:
August 1,
2006
October 1,
2005
August 1,
2005
August 1,
2004
Pension Plan:
Discount rate 6.25 % 5.75 % 5.50 % 6.25 %
Expected long-term rate of return on plan assets 8.00 % 8.00 % 8.00 % 8.00 %
Rate of future compensation increase 4.50 % 4.50 % 4.50 % 4.50 %
SERP Plan:
Discount rate 6.25 % 5.75 % 5.50 % 6.25 %
Rate of future compensation increase 4.50 % 4.50 % 4.50 % 4.50 %
Postretirement Plan:
Discount rate 6.25 % 5.75 % 5.50 % 6.25 %
Initial health care cost trend rate 8.00 % 8.00 % 9.00 % 10.00 %
Ultimate health care cost trend rate 5.00 % 5.00 % 5.00 % 5.00 %
Discount rate. The assumed discount rate utilized is based, in part, upon the Moody's Aa corporate bond yield as of the
measurement date and the expected timing of cash outlays for plan benefits. The discount rate is utilized principally in calculating the
actuarial present value of our obligations and periodic expense pursuant to our employee benefit plans. At August 1, 2006, the discount
rate was 6.25%. As a result of the increase in the discount rate from 5.75% at the Acquisition date to 6.25% at August 1, 2006, the
projected benefit obligations related to our employee benefit plans decreased $37.4 million.
The estimated effect of a 0.25% decrease in the discount rate would increase the Pension Plan obligation by $15.7 million and
increase annual Pension Plan expense by $0.9 million. The estimated effect of a 0.25% decrease in the discount rate would increase the
SERP Plan obligation by $2.7 million and increase the SERP Plan annual expense by $0.1 million. The estimated effect of a 0.25%
decrease in the discount rate would increase the Postretirement Plan obligation by $0.3 million and increase the Postretirement Plan
annual expense by an immaterial amount.
F-34