TCF Bank 2012 Annual Report Download - page 108

Prior service credits of TCF’s Postretirement Plan
totaling $46 thousand are included within accumulated
other comprehensive income at December 31, 2012 and
are expected to be recognized as components of net
periodic benefit cost during 2013.
The actuarial assumptions used in the Pension Plan
valuation are reviewed annually. The expected long-term
rate of return on plan assets is determined by reference
to historical market returns and future expectations. The
10-year average return of the index consistent with the
Pension Plan’s current investment strategy was 2.9%, net of
administrative expenses. A 1% difference in the expected
return on plan assets would result in a $517 thousand
change in net periodic pension expense.
The discount rate used to determine TCF’s pension and
postretirement benefit obligations as of December 31,
2012 and December 31, 2011 was determined by matching
estimated benefit cash flows to a yield curve derived from
corporate bonds rated AA by either Moody’s or Standard and
Poor’s. Bonds containing call or put provisions were excluded.
The average estimated duration of TCF’s Pension Plan and
Postretirement Plan varied between seven and eight years.
Included within the net periodic benefit cost for the
Pension Plan are recognized actuarial gains and losses.
The decrease in the discount rate from 4% at December 31,
2011 to 3% at December 31, 2012 increased net periodic
benefit cost by $3 million during 2012. The reduction of the
interest crediting rate from 3.5% at December 31, 2011 to
a select and ultimate assumption starting at 1% in 2013
and phasing to 3.5% starting in 2017 and other interest
crediting assumption changes reduced net periodic benefit
cost for 2012 by $2.8 million. Various plan participant
census changes increased the 2012 net periodic benefit
cost by $121 thousand.
Included in the net periodic benefit cost for the
Postretirement Plan are recognized actuarial gains and
losses. The Postretirement Plan change in actuarially
estimated cost per participant as of December 31, 2012
reduced net periodic benefit cost by $842 thousand. Actual
claims paid during 2012 totaled $345 thousand less than
expected, reducing net periodic benefit cost. The decrease
in the discount rate from 4% at December 31, 2011 to 2.75%
at December 31, 2012 increased net periodic benefit cost
by $577 thousand. Various plan demographic changes
decreased the net periodic pension cost by $111 thousand.
For 2012, TCF was eligible to contribute up to $11.6
million to the Pension Plan until the 2012 federal income
tax return extension due date under various IRS funding
methods. During 2012, TCF made no cash contributions
to the Pension Plan. TCF does not expect to be required
to contribute to the Pension Plan in 2013. TCF expects to
contribute $678 thousand to the Postretirement Plan in
2013. TCF contributed $478 thousand to the Postretirement
Plan for the year ended December 31, 2012. TCF currently
has no plans to pre-fund the Postretirement Plan in 2013.
The following are expected future benefit payments used
to determine projected benefit obligations.
(In thousands) Pension Plan Postretirement Plan
2013 $ 3,895 $ 678
2014 3,875 655
2015 3,117 629
2016 2,750 601
2017 2,727 571
2018–2022 13,433 2,380
The following table presents assumed health care cost
trend rates for the Postretirement Plan at December 31,
2012 and 2011.
(In thousands) 2012 2011
Health care cost trend rate assumed
for next year 6.5% 6.75%
Final health care cost trend rate 5% 5%
Year that final health care trend rate
is reached 2023 2023
Assumed health care cost trend rates have an effect
on the amounts reported for the Postretirement Plan.
A 1% change in assumed health care cost trend rates
would have the following effects.
1-Percentage-Point
(In thousands) Increase Decrease
Effect on total service and interest
cost components $ 14 $ (13)
Effect on postretirement benefits
obligations 297 (268)
{ 92 } { TCF Financial Corporation and Subsidiaries }