OfficeMax 2005 Annual Report Download - page 92

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Assumptions
The assumptions used in accounting for the Company’s plans are estimates of factors
including, among other things, the amount and timing of future benefit payments. The following
table presents the key assumptions used in the measurement of the Company’s benefit obligations:
Pension Benefits Other Benefits
United States Canada
2005 2004 2003 2005 2004 2003 2005 2004 2003
Weighted average assumptions
as of December 31:
Discount rate .............. 5.60% 5.60% 6.25% 5.20% 5.60% 6.25% 5.10% 6.00% 6.25%
Rate of compensation increase . — — 4.25% ——————
The following table presents the assumptions used in the measurement of net periodic benefit
cost:
Pension Benefits Other Benefits
United States Canada
2005 2004 2003 2005 2004 2003 2005 2004 2003
Weighted average assumptions:
Discount rate .............. 5.60% 5.75% 6.75% 5.48% 5.75% 6.75% 6.00% 6.25% 6.75%
Expected return on plan assets . 8.00% 8.25% 8.50% ——————
Rate of compensation increase . — 4.25% 4.50% ——————
For the period from January 1 through October 28, 2004, the discount rate assumption used in
the measurement of net periodic pension benefit cost was 6.25%. As a result of the Sale, the
pension and postretirement benefit obligations for those individuals who became employees of
Boise Cascade, L.L.C. were settled. The settlement triggered a new measurement of the discount
rate and, as a result, on October 29, 2004, the Company changed the discount rate assumption to
5.75%. The revised rate was used to measure net periodic benefit cost for the period from
October 29 through December 31, 2004.
The Company bases its discount rate assumption on the rates of return available on
high-quality bonds with maturities approximating the expected period over which the pension
benefits will be paid.
The expected long-term rate of return on plan assets assumption is based on the weighted
average of expected returns for the major asset classes in which the plans’ assets are held. Asset-
class expected returns are based on long-term historical returns, inflation expectations, forecasted
gross domestic product and earnings growth, as well as other economic factors. The weights
assigned to each asset class are based on the Company’s investment strategy. The weighted-
average expected return on plan assets used in the calculation of net periodic pension benefit cost
for 2006 is 8.00%.
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