Pitney Bowes 2009 Annual Report Download - page 102

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PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)
84
Other changes in plan assets and benefit obligations for defined benefit pension plans recognized in other comprehensive income are
as follows:
United States Foreign
2009 2008 2009 2008
Curtailments effects and settlements $ (28,404) $ - $ - $ -
Net actuarial loss (gain) (38,407) 523,650 44,124 49,007
Prior service cost (credit) (353) - - -
Amortization of net actuarial (loss) gain (26,063) (18,944) (2,059) (2,823)
Amortization of prior service (cost) credit 2,547 2,560 (512) (448)
Net transitional obligation (asset) - - (99) (96)
Total recognized in other
comprehensive income $ (90,680) $ 507,266 $ 41,454 $ 45,640
Weighted average assumptions used to determine net periodic benefit costs:
United States Foreign
2009 2008 2007 2009 2008 2007
Discount rate 6.05% 6.15% 5.85% 2.25% - 6.60% 2.25% - 5.80% 2.25% - 5.30%
Expected return on
plan assets 8.00% 8.50% 8.50% 4.49% - 7.75% 3.50% - 7.75% 3.50% - 7.75%
Rate of compensation
increase 4.25% 4.50% 4.50% 2.50% - 5.10% 2.50% - 5.50% 2.50% - 5.30%
The expected return on plan assets is based on historical and projected rates of return for current and planned asset classes in the
plans’ investment portfolio after analyzing historical experience and future expectations of the returns and volatility of the various
asset classes. The overall expected rate of return for the portfolio was determined based on the target asset allocations for each asset
class, adjusted for historical and expected experience of active portfolio management results, when compared to the benchmark
returns. When assessing the expected future returns for the portfolio, management placed more emphasis on the expected future
returns than historical returns.
U.S. Pension Plans’ Investment Strategy and Asset Allocation
Our U.S. pension plans’ investment strategy supports the objectives of the plans, which are to maximize returns within reasonable and
prudent levels of risk, to achieve and maintain full funding of the accumulated benefit obligations and the actuarial liabilities, and to
earn a nominal rate of return of at least 8.0%. The fund has established a strategic asset allocation policy to achieve these objectives.
Investments are diversified across asset classes and within each class to reduce the risk of large losses and are periodically rebalanced.
Derivatives, such as swaps, options, forwards and futures contracts may be used for market exposure, to alter risk/return
characteristics and to manage foreign currency exposure. Investments within the private equity and real estate portfolios are
comprised of limited partnership units in primary and secondary fund of funds and units in open-ended commingled real estate funds,
respectively. These types of investment vehicles are used in an effort to gain greater asset diversification. We have no hedge fund
investments. We do not have any significant concentrations of credit risk within the plan assets. The pension plans’ liabilities,
investment objectives and investment managers are reviewed periodically.