Emerson 2015 Annual Report Download - page 49

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2015 Annual Report | 47
Future benefit payments by U.S. plans are estimated to be $221 in 2016, $213 in 2017, $223 in 2018, $233 in 2019,
$242 in 2020 and $1,310 in total over the five years 2021 through 2025. Based on foreign currency exchange rates
as of September 30, 2015, future benefit payments by non-U.S. plans are estimated to be $45 in 2016, $46 in 2017,
$48 in 2018, $54 in 2019, $55 in 2020 and $333 in total over the five years 2021 through 2025. The Company
expects to make contributions to retirement plans in 2016 at levels similar to the prior year.
The weighted-average assumptions used in the valuation of pension benefits follow:
U.S. PLANS NON-U.S. PLANS
2013 2014 2015 2013 2014 2015
Net pension expense:
Discount rate 4.00% 4.75% 4.25% 4.1% 4.2% 3.6%
Expected return on plan assets 7.75% 7.50% 7.50% 5.5% 6.6% 6.6%
Rate of compensation increase 3.25% 3.25% 3.25% 3.4% 3.2% 3.4%
Benefit obligations:
Discount rate 4.75% 4.25% 4.35% 4.2% 3.6% 3.3%
Rate of compensation increase 3.25% 3.25% 3.25% 3.2% 3.4% 3.4%
The discount rate for the U.S. retirement plans was 4.35 percent as of September 30, 2015. An actuarially developed,
company-specific yield curve is used to determine the discount rate. The expected return on plan assets assumption is
determined by reviewing the investment returns of the plans for the past 10 years plus longer-term historical returns
of an asset mix approximating the Company’s asset allocation targets, and periodically comparing these returns to
expectations of investment advisors and actuaries to determine whether long-term future returns are expected to differ
significantly from the past.
The Company’s asset allocations at September 30, 2015 and 2014, and weighted-average target allocations follow:
U.S. PLANS NON-U.S. PLANS
2014 2015 TARGET 2014 2015 TARGET
Equity securities 65% 65% 60-70% 55% 55% 50-60%
Debt securities 26 30 25-35 32 32 25-35
Other 9 5 3-10 13 13 10-20
Total 100% 100% 100% 100% 100% 100%
The primary objective for the investment of pension assets is to secure participant retirement benefits by earning a
reasonable rate of return. Plan assets are invested consistent with the provisions of the prudence and diversification
rules of ERISA and with a long-term investment horizon. The Company continuously monitors the value of assets
by class and routinely rebalances to remain within target allocations. The strategy for equity assets is to minimize
concentrations of risk by investing primarily in companies in a diversified mix of industries worldwide, while
targeting neutrality in exposure to market capitalization levels, growth versus value profile, global versus regional
markets, fund types and fund managers. The approach for bonds emphasizes investment-grade corporate and
government debt with maturities matching a portion of the longer duration pension liabilities. The bonds strategy
also includes a high-yield element which is generally shorter in duration. For diversification, a small portion of U.S.
plan assets is allocated to private equity partnerships and real asset fund investments, providing opportunities
for above market returns. Leveraging techniques are not used and the use of derivatives in any fund is limited and
inconsequential.