OfficeMax 2005 Annual Report Download - page 93

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The following table presents the assumed healthcare cost trend rates used in measuring the
Company’s postretirement benefit obligations at December 31, 2005 and 2004:
United States Canada
2005 2004 2005 2004
Weighted average assumptions as of December 31:
Healthcare cost trend rate assumed for next year ........... 8.00% 8.00% 10.00% 8.00%
Rate to which the cost trend rate is assumed to decline (the
ultimate trend rate) ............................... 5.00% 5.00% 5.00% 6.00%
Year that the rate reaches the ultimate trend rate ........... 2009 2008 2015 2015
The assumed healthcare cost trend rates have a significant effect on the amounts reported for
the healthcare plans. A one-percentage-point change in the assumed healthcare cost trend rates
would have the following effects:
One-Percentage-Point One-Percentage-Point
Increase Decrease
(thousands)
Effect on total of service and interest cost ..... $ 343 $ (261)
Effect on postretirement benefit obligation ..... 3,141 (2,478)
Effective October 1, 2005, the healthcare cost trend rate assumptions for the U.S. plan were
reduced to zero following the adoption of plan changes that reduced the medical insurance subsidy
to retirees as discussed previously. As a result, the above amounts reflect the impact of changes in
trend rates for the Canadian plan only.
Plan Assets
The allocation of pension plan assets by category at December 31, 2005 and 2004 is as
follows:
Plan Assets at
December 31
Asset Category 2005 2004
U.S. equity securities ............................................. 51.5% 49.5%
International equity securities ....................................... 15.7% 13.5%
Fixed-income securities ........................................... 32.8% 28.0%
Other ........................................................ — 9.0%
100% 100%
The Company’s Retirement Funds Investment Committee is responsible for establishing and
overseeing the implementation of the investment policy for the Company’s pension plans. The
investment policy is structured to optimize growth of the pension plan trust assets, while minimizing
the risk of significant losses, in order to enable the plans to satisfy their benefit payment obligations
over time. Plan assets are invested primarily in U.S. equities, international equities and fixed-income
securities. The Company uses benefit payments and Company contributions as its primary
rebalancing mechanisms to maintain the asset class exposures within the guideline ranges
established under the investment policy.
The current asset allocation guidelines set forth a U.S. equity range of 45% to 55%, an
international equity range of 12.5% to 17.5% and a fixed-income range of 30% to 40%. Asset-class
positions within the ranges are continually evaluated and adjusted based on expectations for future
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