United Airlines 2007 Annual Report Download - page 121
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UAL Corporation and Subsidiary Companies
Combined Notes to Consolidated Financial Statements (Continued)
(9) Retirement and Postretirement Plans (Continued)
The assumptions below are based on country-specific bond yields and other economic data. The weighted-average assumptions used for the benefit plans
were as follows:
Pension Benefits
Other Benefits
Weighted-average
assumptions used to
determine benefit
obligations
At December 31,
At December 31,
At January 31,
2006
At January 31,
2006
2007
2006
2007
2006
Discount rate 4.16% 3.88% 3.63% 6.27% 5.93% 5.84%
Rate of
compensation
increase 3.22% 3.15% 2.50% — — —
Weighted-average
assumptions used to
determine net expense
Year Ended
December 31,
2007
Period from
February 1 to
December 31,
2006
Period from
January 1 to
January 31,
2006
Year Ended
December 31,
2007
Period from
February 1 to
December 31,
2006
Period from
January 1 to
January 31,
2006
Discount rate 3.88% 3.63% 3.56% 5.93% 5.84% 5.68%
Expected return on
plan assets 6.38% 6.49% 6.49% 6.50% 8.00% 8.00%
Rate of compensation
increase 3.15% 2.50% 2.47% — — —
The expected return on plan assets is based on an evaluation of the historical behavior of the broad financial markets and the Company's investment
portfolio.
2007
2006
Health care cost trend rate assumed for next year 8.50% 8.50%
Rate to which the cost trend rate is assumed to decline (ultimate trend rate in 2012) 4.50% 4.50%
Assumed health care cost trend rates have a significant effect on the amounts reported for the Other Benefits plan. A 1% change in the assumed health care
trend rate for the Successor Company would have the following additional effects:
(In millions)
1% Increase
1% Decrease
Effect on total service and interest cost for the year ended December 31, 2007 $ 20 $ (15)
Effect on postretirement benefit obligation at December 31, 2007 $ 236 $ (162)
The weighted-average asset allocations for the plans at December 31, 2007 and 2006, by asset category are as follows:
Pension Assets
at December 31
Other
Benefit Assets
at December 31
Asset Category
2007
2006
2007
2006
Equity securities 70% 71% —% —%
Fixed income 25 28 100 100
Other 5 1 — —
Total 100% 100% 100% 100%
112
Source: UNITED AIR LINES INC, 10-K, February 29, 2008