Sears 2006 Annual Report Download - page 82

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SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
The plan’s target allocation is determined taking into consideration the amounts and timing of projected
liabilities, the Company’s funding policies and expected returns on various asset classes. At December 31, 2006,
the plan’s target asset allocation was 43% equity, 50% fixed income, and 7% other, which is comprised of
alternative investments that incorporate absolute return investment strategies. To develop the expected long-term
rate of return on assets assumption, the Company considered the historical returns and the future expectations for
returns for each asset class, as well as the target asset allocation of the pension portfolio.
Postretirement Obligations
2006 2005
millions
Sears
Domestic
Sears
Canada Total
Sears
Domestic
Sears
Canada Total
Change in projected benefit obligation:
Beginning balance ........................... $409 $349 $758 $457 $267 $724
Benefits earned during the period ........... — 7 7 — 4 4
Interest cost ............................ 21 17 38 20 13 33
Plan participants’ contributions ............. 16 — 16 75 — 75
Actuarial (gain)/loss ...................... (8) (10) (18) 1 66 67
Benefits paid ........................... (71) (14) (85) (144) (10) (154)
Other .................................. — (1) (1) — 9 9
Balance as of the measurement date ............. $367 $348 $715 $409 $349 $758
Change in plan assets at fair value:
Beginning of year balance ..................... $— $ 87 $ 87 $— $ 73 $ 73
Actual return on plan assets ................ — 12 12 — 7 7
Company contributions ................... 55 15 70 69 15 84
Plan participants’ contributions ............. 16 — 16 75 — 75
Benefits paid ........................... (71) (14) (85) (144) (10) (154)
Other .................................. — (1) (1) — 2 2
Balance as of the measurement date ................. $— $ 99 $ 99 $— $ 87 $ 87
Funded status ................................... $(367) $(249) $(616) $(409) $(262) $(671)
Employer contributions after measurement date and on or
before fiscal year-end ........................... 3 — 3 15 — 15
Unrecognized net loss ............................ — — — 1 108 109
Net amount recognized ........................... $(364) $(249) $(613) $(393) $(154) $(547)
Weighted-average assumptions used to determine plan obligations are as follows:
2006 2005
Kmart
Sears
Domestic
Sears
Canada Kmart
Sears
Domestic
Sears
Canada 2004
Pension benefits:
Discount Rate ......................... 5.90% 5.90% 5.25% 5.50% 5.50% 5.00% 5.75%
Rate of compensation increases ........... N/A N/A 4.00% N/A N/A 4.00% N/A
Postretirement benefits:
Discount Rate ......................... N/A 5.90% 5.25% N/A 5.50% 5.00% N/A
Rate of compensation increases ........... N/A N/A 4.00% N/A N/A 4.00% N/A
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