E-Z-GO 2007 Annual Report Download - page 85

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Notes to the Consolidated Financial Statements
64
Assumptions
The weighted-average assumptions we use for our postretirement plans are as follows:
Postretirement Benefi ts
Pension Benefi ts Other than Pensions
2007 2006 2005 2007 2006 2005
Net periodic benefi t cost (income):
Discount rate 5.59% 5.55% 5.69% 5.68% 5.66% 5.78%
Expected long-term rate of return on assets 8.53% 8.54% 8.57% — — —
Rate of compensation increase 4.33% 4.36% 4.35% — — —
Benefi t obligations at year-end:
Discount rate 5.97% 5.57% 5.55% 6.02% 5.67% 5.66%
Rate of compensation increases 4.33% 4.38% 4.36% — — —
We estimate an initial medical rate of 8% in 2007, which we assume will decrease by 5% by 2015 and then remain at that level. We estimate an
initial prescription drug rate of 12% in 2007, which we assume will decrease by 5% by 2015 and then remain at that level.
Assumed healthcare cost trend rates have a signifi cant effect on the amounts reported for the postretirement benefi ts other than pensions. A one-
percentage-point change in assumed healthcare cost trend rates would have the following effects:
One- One-
Percentage- Percentage-
Point Point
(In millions) Increase Decrease
Effect on total of service and interest cost components $ 4 $ (4)
Effect on postretirement benefi t obligations other than pensions 48 (41)
Pension Benefi ts
The accumulated benefi t obligation for all defi ned benefi t pension plans was $5.1 billion at December 29, 2007 and $4.9 billion at December 30,
2006. Pension plans with accumulated benefi t obligations exceeding the fair value of plan assets were as follows:
(In millions) 2007 2006
Projected benefi t obligation $ 591 $ 862
Accumulated benefi t obligation 517 737
Fair value of plan assets 198 433
In addition to the plans in the above table, we have plans with the projected benefi t obligation in excess of the fair value of plan assets at year-end
as follows:
(In millions) 2007 2006
Projected benefi t obligation $ 1,926 $ 1,449
Accumulated benefi t obligation 1,734 1,336
Fair value of plan assets 1,812 1,350
Pension Assets
We invest our pension assets with the objective of achieving a total rate of return, over the long term, suffi cient to fund future pension obligations
and to minimize future pension contributions. We are willing to tolerate a commensurate level of risk to achieve this objective based on the funded
status of the plans and the long-term nature of our pension liability. Risk is controlled by maintaining a portfolio of assets that is diversifi ed across
a variety of asset classes, investment styles and investment managers. All of the assets are managed by external investment managers, and the
majority of the assets are actively managed. Where possible, investment managers are prohibited from owning our stock in the portfolios that they
manage on our behalf.