Time Warner Cable 2009 Annual Report Download - page 101

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The components of net periodic benefit costs are as follows (in millions):
2009 2008 2007
Year Ended December 31,
Service cost . ....................................................... $ 100 $ 96 $ 75
Interest cost . ....................................................... 88 79 68
Expected return on plan assets .......................................... (93) (102) (90)
Amounts amortized .................................................. 66 18 11
Settlement loss ..................................................... 1 — —
Net periodic benefit costs .............................................. $ 162 $ 91 $ 64
The estimated amounts that will be amortized from accumulated other comprehensive loss, net, into net periodic benefit costs in
2010 include an actuarial loss of $31 million.
In addition, certain employees of TWC participate in multi-employer pension plans, not included in the net periodic costs above, for
which the expense was $33 million in 2009, $31 million in 2008 and $28 million in 2007.
Weighted-average assumptions used to determine benefit obligations at December 31, 2009, 2008 and 2007 are as follows:
2009 2008 2007
Year Ended December 31,
Discount rate ....................................................... 6.16% 6.17% 6.00%
Rate of compensation increase .......................................... 4.25% 4.00% 4.50%
Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31, 2009, 2008 and 2007
are as follows:
2009 2008 2007
Year Ended December 31,
Discount rate ....................................................... 6.17% 6.00% 6.00%
(a)
Expected long-term return on plan assets .................................. 8.00% 8.00% 8.00%
Rate of compensation increase .......................................... 4.00% 4.50% 4.50%
(a)
In connection with the Adelphia/Comcast Transactions, the TWC Pension Plans were remeasured on August 1, 2007 using a discount rate of 6.25%.
In 2009 and 2008, the discount rate was determined by the matching of plan liability cash flows to a pension yield curve constructed of
a large population of high-quality corporate bonds. In 2007, the discount rate was determined by comparison against the Moody’s Aa
Corporate Index rate, adjusted for coupon frequency and duration of the obligation, which was consistent with prior periods. The resulting
discount rate was supported by periodic matching of plan liability cash flows to a pension yield curve constructed of a large population of
high-quality corporate bonds. A decrease in the discount rate of 25 basis points, from 6.17% to 5.92%, while holding all other assumptions
constant, would have resulted in an increase in the Company’s pension expense of approximately $15 million in 2009.
In developing the expected long-term rate of return on assets, the Company considered the pension portfolio’s composition, past
average rate of earnings and discussions with portfolio managers. The expected long-term rate of return was based on the 2008 asset
allocation targets. A decrease in the expected long-term rate of return of 25 basis points, from 8.00% to 7.75%, while holding all other
assumptions constant, would have resulted in an increase in the Company’s pension expense of approximately $3 million in 2009.
Pension Assets
Effective October 31, 2008, the assets of the TWC Pension Plans held in a master trust with the plan assets of other Time Warner
defined benefit pension plans (the “Time Warner Master Trust”) were transferred to a new master trust established to hold the assets of the
TWC Pension Plans (the “TWC Master Trust”). As of December 31, 2008, the TWC Master Trust’s assets included 565,000 shares of
Time Warner common stock, after giving effect to the Time Warner Reverse Stock Split, with a total value of $17 million (approximately
2% of total plan assets held in the TWC Master Trust). In March 2009, the TWC Master Trust received 142,000 shares of TWC Common
Stock in connection with the Distribution. During December 2009, the TWC Common Stock and Time Warner common stock held in the
TWC Master Trust were sold. As of December 31, 2009, there were no shares of TWC Common Stock or Time Warner common stock
held in the TWC Master Trust.
The Company’s investment policy for the TWC Pension Plans is to maximize the long-term rate of return on plan assets within a
prudent level of risk and diversification while maintaining adequate funding levels. The Company uses a mix of equity and fixed-income
89
TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)