FairPoint Communications 2010 Annual Report Download - page 108
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Table of Contents
In developing the expected long-term rate-of-return assumption, the Company evaluated historical investment performance and input from its investment
advisors. Projected returns by such advisors were based on broad equity and bond indices. The expected long-term rate-of-return on qualified pension plan
assets is based on target allocations of 50% equity and 50% fixed income securities for the management plan and 70% equity and 30% fixed income securities
for the associate plan. The asset allocation at December 31, 2010 for the Company’s qualified pension plan assets was as follows:
Cash and cash equivalents (1) 1.3% 0.8% 0.9%
Equity securities 41.9% 69.8% 63.1%
Fixed income securities 56.8% 29.4% 36.0%
100.0% 100.0% 100.0%
(1) Cash and cash equivalents includes only those amounts that are held in the respective plans’ trusts as cash and cash equivalent instruments. Amounts
pending purchase or settlement of equity or fixed income securities are classified within equity securities or fixed income securities, as appropriate.
For the years ended December 31, 2010 and 2009, the actual return on the pension plan assets was approximately 11.2% and 17.3%, respectively. Net
periodic benefit cost for 2010 assumes a weighted average annualized expected return on plan assets of approximately 8.3%. Should the Company’s actual
return on plan assets become significantly lower than the expected return assumption, the net periodic benefit cost may increase in future periods and the
Company may be required to contribute additional funds to its pension plans.
A 1% change in the medical trend rate assumed for post-retirement healthcare benefits would have the following effects at December 31, 2010:
1% increase in the medical trend rate:
Effect on total service cost and interest cost components $ 7,278
Effect on benefit obligation $ 80,342
1% decrease in the medical trend rate:
Effect on total service cost and interest cost components $ (5,589)
Effect on benefit obligation $ (61,572)
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