Sears 2007 Annual Report Download - page 81

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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, our funding policies and expected returns on various asset classes. At December 31, 2007, 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, we 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
millions
2007 2006
Sears
Domestic
Sears
Canada Total
Sears
Domestic
Sears
Canada Total
Change in projected benefit obligation:
Beginning balance ........................... $367 $348 $715 $409 $349 $758
Benefits earned during the period ........... — 2 2 — 7 7
Interest cost ............................ 21 16 37 21 17 38
Plan participants’ contributions ............. 12 — 12 16 — 16
Actuarial gain ........................... (12) (15) (27) (8) (10) (18)
Benefits paid ........................... (54) (15) (69) (71) (14) (85)
Curtailment gain ......................... — (74) (74) — — —
Foreign currency exchange rate impact and
other ................................ — 46 46 — (1) (1)
Balance as of the measurement date ............. $334 $308 $642 $367 $348 $715
Change in plan assets at fair value:
Beginning of year balance ..................... $— $ 99 $ 99 $— $ 87 $ 87
Actual return on plan assets ................ — (2) (2) — 12 12
Company contributions ................... 42 15 57 55 15 70
Plan participants’ contributions ............. 12 — 12 16 — 16
Benefits paid ........................... (54) (15) (69) (71) (14) (85)
Foreign currency exchange rate impact and
other ................................ — 19 19 — (1) (1)
Balance as of the measurement date ............. $— $116 $116 $— $ 99 $ 99
Funded status ................................... $(334) $(192) $(526) $(367) $(249) $(616)
Employer contributions after measurement date and on or
before fiscal year end ........................... 4 — 4 3 — 3
Net amount recognized ........................... $(330) $(192) $(522) $(364) $(249) $(613)
Weighted-average assumptions used to determine plan obligations are as follows:
2007 2006 2005
Kmart
Sears
Domestic
Sears
Canada Kmart
Sears
Domestic
Sears
Canada Kmart
Sears
Domestic
Sears
Canada
Pension benefits:
Discount Rate .................. 6.45% 6.45% 5.50% 5.90% 5.90% 5.25% 5.50% 5.50% 5.00%
Rate of compensation increases .... N/A N/A 4.00% N/A N/A 4.00% N/A N/A 4.00%
Postretirement benefits:
Discount Rate .................. N/A 6.45% 5.50% N/A 5.90% 5.25% N/A 5.50% 5.00%
Rate of compensation increases .... N/A N/A 4.00% N/A N/A 4.00% N/A N/A 4.00%
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