Aetna 2009 Annual Report Download - page 75

The weighted average assumptions used to determine net periodic benefit cost (income) in 2009, 2008 and 2007 for the
pension and OPEB plans were as follows:
2009 2008 2007 2009 2008 2007
Discount rate 6.89% 6.57% 5.91% 6.92% 6.35% 5.82%
Expected long-term return on plan assets 8.50 8.50 8.50 5.50 5.50 5.50
Rate of increase in future compensation levels 4.51 4.51 4.51 - - -
Pension Plans OPEB Plans
We assume different health care cost trend rates for medical costs and prescription drug costs in estimating the expected
costs of our OPEB plans. The assumed medical cost trend rate for 2010 is 9%, decreasing gradually to 5% by 2014.
The assumed prescription drug cost trend rate for 2010 is 14%, decreasing gradually to 5% by 2019. These assumptions
reflect our historical as well as expected future trends for retirees. In addition, the trend assumptions reflect factors
specific to our retiree medical plan, such as plan design, cost-sharing provisions, benefits covered and the presence of
subsidy caps.
Our current funding strategy is to fund an amount at least equal to the minimum funding requirement as determined
under applicable regulatory requirements with consideration of factors such as the maximum tax deductibility of such
amounts. We may elect to voluntarily contribute amounts to our tax-qualified pension plan. We do not have any
regulatory contribution requirements for 2010; however, we intend to make a voluntary contribution of approximately
$45 million to the Aetna Pension Plan in 2010. Employer contributions related to the supplemental pension plan and
OPEB plans represent payments to retirees for current benefits. We have no plans to return any pension or OPEB plan
assets to the Company in 2010.
Expected benefit payments, which reflect future employee service, as appropriate, of the pension and OPEB plans to be
paid for each of the next five years and in the aggregate for the next five years thereafter, at December 31, 2009 were as
follows:
(Millions)
2010 313.6$ 28.7$
2011 315.5 28.4
2012 319.0 27.6
2013 324.0 26.9
2014 458.4 26.6
2015-2019 1,873.3 123.2
Pension Plans OPEB Plans
Assets of the Aetna Pension Plan
The assets of the Aetna Pension Plan (“Pension Assets”) include debt and equity securities, common/collective trusts
and real estate investments. The valuation methodologies used to price these assets are similar to the methodologies
described beginning on pages 63 and 66, respectively. Pension assets also include investments in other assets that are
carried at fair value. The following is a description of the valuation methodology used to price these additional
investments, including the general classification pursuant to the valuation hierarchy.
Other Assets – Other assets consist of derivatives and private equity and hedge fund limited partnerships.
Derivatives are either valued using models that primarily use market observable inputs and therefore are
classified as Level 2 because they are traded in markets where quoted market prices are not readily available or
are classified as Level 1 because they are traded in markets where quoted market prices are readily available.
The fair value of private equity and hedge fund limited partnerships are estimated based on the net asset value
of the investment fund provided by the general partner or manager of the investments, the financial statements
of which generally are audited. Management considers observable market data, valuation procedures in place,
contributions and withdrawal restrictions collectively in validating the appropriateness of using the net asset
value as a fair value measurement. Therefore, these investments are classified as Level 3.
Annual Report – Page 69