Entergy 2009 Annual Report Download - page 55

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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
51
Entergy's funding and reported costs for these benefits. In addition, these trends have caused Entergy to make a
number of adjustments to its assumptions.
In selecting an assumed discount rate to calculate benefit obligations, Entergy reviews market yields on high-
quality corporate debt and matches these rates with Entergy's projected stream of benefit payments. Based on recent
market trends, Entergy decreased the discount rate used to calculate its qualified pension benefit obligation from an
average rate of 6.75% in 2008 to specific rates by plan ranging from 6.10% to 6.30% in 2009. The discount rate
used to calculate its other postretirement benefit obligation was also decreased from 6.7% in 2008 to 6.10% in 2009.
Entergy's assumed discount rate used to calculate the 2007 pension and other postretirement benefit obligations was
6.50%.
Entergy reviews actual recent cost trends and projected future trends in establishing health care cost trend
rates. Based on this review, Entergy's health care cost trend rate assumption used in calculating the December 31,
2009 accumulated postretirement benefit obligation was a 7.5% increase in health care costs in 2010 gradually
decreasing each successive year, until it reaches a 4.75% annual increase in health care costs in 2016 and beyond.
In determining its expected long-term rate of return on plan assets, Entergy reviews past long-term
performance, asset allocations, and long-term inflation assumptions. Entergy targets an asset allocation for its
qualified pension plan assets of roughly 65% equity securities and 35% fixed-income securities. The target
allocations for Entergy's non-taxable postretirement benefit assets are 55% equity securities and 45% fixed-income
securities and, for its taxable other postretirement benefit assets, 35% equity securities and 65% fixed-income
securities. Entergy's expected long-term rate of return on qualified pension assets and non-taxable other
postretirement assets used to calculate 2009, 2008, and 2007 qualified pension and other postretirement benefits
costs was 8.5%. Entergy's expected long-term rate of return on taxable other postretirement assets was 6% in 2009
and 5.5% in 2008 and 2007.
The assumed rate of increase in future compensation levels used to calculate benefit obligations was 4.23%
in 2009, 2008, and 2007.
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost to changes in certain actuarial
assumptions (dollars in thousands):
Actuarial Assumption
Change in
Assumption
Impact on 2009
Qualified Pension
Cost
Impact on Qualified
Projected
Benefit Obligation
Increase/(Decrease)
Discount rate (0.25%) $12,192 $117,856
Rate of return on plan assets (0.25%) $7,331 -
Rate of increase in compensation 0.25% $6,311 $30,817
The following chart reflects the sensitivity of postretirement benefit cost to changes in certain actuarial
assumptions (dollars in thousands):
Actuarial Assumption
Change in
Assumption
Impact on 2009
Postretirement Benefit Cost
Impact on Accumulated
Postretirement Benefit
Obligation
Increase/(Decrease)
Health care cost trend 0.25% $6,073 $31,981
Discount rate (0.25%) $4,109 $37,324
Each fluctuation above assumes that the other components of the calculation are held constant.
53