Ameriprise 2007 Annual Report Download - page 94

92 Ameriprise Financial 2007 Annual Report
In developing the 2007 expected long term rate of return assump-
tion, management evaluated input from an external consulting firm,
including their projection of asset class return expectations, and long
term inflation assumptions. The Company also considered the histor-
ical returns on the plans’ assets.
The asset allocation for the Company’s pension plans at
September 30, 2007 and 2006, and the target allocation for 2008, by
asset category, are below. Actual allocations will generally be within
5% of these targets.
Target Percentage of
Allocation Plan Assets
2008 2007 2006
Equity securities 75% 73% 74%
Debt securities 23 25 24
Other 2 22
Total 100% 100% 100%
The Company invests in an aggregate diversified portfolio to minimize
the impact of any adverse or unexpected results from a security class on
the entire portfolio. Diversification is interpreted to include diversifica-
tion by asset type, performance and risk characteristics and number of
investments. Asset classes and ranges considered appropriate for invest-
ment of the plans’ assets are determined by each plan’s investment
committee. The asset classes typically include domestic and foreign
equities, emerging market equities, domestic and foreign investment
grade and high-yield bonds and domestic real estate.
The Company’s retirement plans expect to make benefit payments to
retirees as follows:
(in millions)
2008 $ 28
2009 26
2010 27
2011 31
2012 30
2013-2017 154
The Company expects to contribute $23 million to its pension plans
in 2008.
Other Postretirement Benefits
The Company sponsors defined benefit postretirement plans that
provide health care and life insurance to retired U.S. employees. Net
periodic postretirement benefit costs were $2 million in each of 2007,
2006 and 2005.
The following table provides a reconciliation of the changes in the
defined postretirement benefit plan obligation:
2007 2006
(in millions)
Benefit obligation, October 1 of prior year $30 $32
Interest cost 22
Benefits paid (7) (12)
Participant contributions 66
Actuarial (gain) loss (6) 2
Benefit obligation at September 30 $25 $30
The recognized liabilities for the Company’s defined postretirement
benefit plans are unfunded. At December 31, 2007 and 2006, the
recognized liabilities were $24 million and $30 million, respectively.
At December 31, 2007 and 2006, the funded status of the
Company’s postretirement benefit plans was equal to the net amount
recognized in the Consolidated Balance Sheet.
The amounts recognized in accumulated other comprehensive income
(net of tax) that arose as of December 31, 2007 but were not recog-
nized as components of net periodic benefit cost included an
unrecognized actuarial gain of $4 million and an unrecognized prior
service credit of $1 million. The estimated amount that will be
amortized from accumulated other comprehensive income (net of tax)
into net periodic benefit cost in 2008 is approximately $1 million.
The weighted average assumptions used to determine benefit obliga-
tions for other postretirement benefits were as follows:
2007 2006
Discount rates 6.2% 5.9%
Healthcare cost increase rates:
Following year 9.0 9.5
Decreasing to the year 2016 5.0 5.0
A one percentage-point change in the assumed healthcare cost trend
rates would not have a material effect on the Company’s postretire-
ment benefit obligation or net periodic postretirement benefit costs.
The defined postretirement benefit plans expect to make benefit
payments to retirees as follows:
(in millions)
2008 $ 3
2009 3
2010 3
2011 2
2012 2
2013-2017 11
The Company expects to contribute $3 million to its defined benefit
postretirement plans in 2008.
Defined Contribution Plan
In addition to the plans described previously, certain Company
employees participate in the Ameriprise Financial 401(k) Plan (the
“401(k) Plan”). The 401(k) Plan allows qualified employees to make
contributions through payroll deductions up to IRS limits and invest
their contributions in one or more of the 401(k) Plan investment
options, which include the Ameriprise Financial Stock Fund. The
Company matches 100% of the first 3% of base salary an employee
contributes on a pre-tax or Roth 401(k) basis each pay period. The
Company may also make annual discretionary variable match contri-
butions, which replaced the discretionary profit sharing contributions
effective January 1, 2007. The final profit sharing contribution was
made in March 2007 for the 2006 plan year. The variable match
contributions are based primarily on the performance of the
Company. In addition, the Company makes a contribution equal to
1% of base salary each pay period. This contribution is automatically
invested in the Ameriprise Financial Stock Fund, which invests