Sears 2006 Annual Report Download - page 83

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SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
Weighted-average assumptions used to determine net cost for years ended are as follows:
2006 2005
Kmart
Sears
Domestic
Sears
Canada Kmart
Sears
Domestic
Sears
Canada 2004
Pension benefits:
Discount Rate ......................... 5.50% 5.50% 5.00% 5.75% 5.75% 6.00% 6.00%
Return of plan assets .................... 8.00% 8.00% 7.00% 8.00% 8.00% 7.00% 8.00%
Rate of compensation increases ........... N/A N/A 4.00% N/A 4.25% 4.25% N/A
Postretirement benefits:
Discount Rate ......................... N/A 5.50% 5.00% N/A 5.75% 6.25% N/A
Return of plan assets .................... N/A N/A 7.00% N/A N/A 7.00% N/A
Rate of compensation increases ........... N/A N/A 4.00% N/A N/A 4.25% N/A
The components of net periodic benefit cost are as follows:
2006 2005
millions Kmart
Sears
Domestic
Sears
Canada Total Kmart
Sears
Domestic
Sears
Canada Total 2004
Pension benefits:
Benefits earned during the
period .................... $— $— $34 $ 34 $— $ 54 $ 22 $ 76 $—
Interest cost .................. 150 172 63 385 151 152 50 353 154
Expected return on plan assets . . . (156) (179) (84) (419) (140) (156) (60) (356) (138)
Recognized net loss (gain) ...... — — 5 5 — — — — —
Other ....................... — (13) 4 (9) — — — — —
Net periodic benefit cost
(benefit) ................... $ (6) $ (20) $ 22 $ (4) $ 11 $ 50 $ 12 $ 73 $ 16
Postretirement benefits:
Benefits earned during the
period .................... $— $— $ 7 $ 7 $— $— $ 4 $ 4
Interest cost .................. — 21 17 38 — 20 13 33
Expected return on assets ....... — — (6) (6) — — (4) (4)
Recognized net loss (gain) ...... — — 7 7 — — — —
Net periodic benefit cost
(benefit) ................... $— $ 21 $25 $ 46 $— $ 20 $ 13 $ 33
For 2007 and beyond, the domestic weighted-average health care cost trend rates used in measuring the
postretirement benefit expense are a 9.3% trend rate in 2007 to an ultimate trend rate of 8.0% in 2011. A one–
percentage-point change in the assumed health care cost trend rate would have the following effects on the
postretirement liability:
millions
1 percentage-point
Increase
1 percentage-point
Decrease
Effect on total service and interest cost
components ................................ $ 3 $ (2)
Effect on postretirement benefit obligation ......... $37 $(32)
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