Western Union 2015 Annual Report Download - page 181

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Pension Plan
We have a frozen defined benefit pension plan ("Plan"), for which we had a recorded unfunded pension obligation of $69.3
million and $74.9 million as of December 31, 2015 and 2014, respectively. During the years ended December 31, 2015 and 2014,
we made contributions of $6.7 million and $13.2 million, respectively, to the Plan. We are not required to make any contributions
to the Plan in 2016.
Our most recent measurement date for our pension plan was December 31, 2015. The calculation of the funded status and net
periodic benefit cost is dependent upon three primary assumptions: 1) expected long-term return on plan assets; 2) discount rate;
and 3) life expectancy trends.
The expected long-term return on plan assets is 7.00% for 2016. As of our December 31, 2015 measurement date, pension
plan target allocations were approximately 60% in debt securities, 20% in equity investments, and 20% in alternative investment
strategies (e.g. hedge funds, royalty rights and private equity funds). Hedge fund strategy types include, but are not limited to:
equity long-short, commodities/currencies, relative value, event driven and multi-strategy. The Plan holds interest rate derivative
contracts directly, including interest rate futures that are based on U.S. Treasury bond rates. The Plan may also hold interest rate
swaps, under which the Plan is committed to pay or receive a short-term LIBOR-based variable interest rate in exchange for a
fixed interest rate. Additionally, derivatives are held indirectly through funds in which the Plan is invested. Derivatives are used
by the Plan to help reduce the Plan's exposure to interest rate volatility and to provide an additional source of return. Investment
risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements,
and periodic asset and liability studies.
The discount rate assumption is set based on the rate at which the pension benefits could be settled effectively. The discount
rate is determined by matching the timing and amount of anticipated payouts under the Plan to the rates from an AA spot rate yield
curve. The curve is derived from AA bonds of varying maturities. The discount rate assumption for our benefit obligation was
3.52% and 3.27% as of December 31, 2015 and 2014, respectively. A 100 basis point change to both the discount rate and long-
term rate of return on plan assets would not have a material impact to our annual pension expense.
The assumptions related to life expectancy are used to estimate the expected period over which pension benefits will be
required to be paid. Projections used for life expectancy are based on mortality tables and mortality improvement tables, which
are statistical tables of expected annual mortality rates and expected future mortality improvements, respectively. We utilize a
mortality table that we believe best aligns with the underlying demographics and census data of the Plan participants.
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