FairPoint Communications 2011 Annual Report Download - page 110
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Table of Contents
Assumptions
The weighted average assumptions used in determining projected benefit obligations are as follows:
Qualified Pension
Discount rate 4.63% 5.75% 5.56%
Rate of future increases in compensation (a) 3.00% 3.00% 3.00%
Post-retirement Healthcare
Discount rate 4.66% 5.85% 5.65%
Rate of future increases in compensation (a) 4.00% 4.00% 4.00%
(a) Assumption only applies to the plans for represented employees as plans for non-represented employees are frozen.
The weighted average assumptions used in determining net periodic cost are as follows:
Qualified Pension
Discount rate 5.75% 5.56% 6.00% 5.94%
Expected return on plan assets 8.32% 8.32% 8.32% 8.32%
Rate of compensation increase (a) 3.00% 3.00% 4.00% 4.00%
Post-retirement Healthcare
Discount rate 5.85% 5.65% 6.13% 5.95%
Rate of compensation increase (a) 4.00% 4.00% 4.00% 4.00%
Healthcare cost trend rate assumed for participants under 65 next
year 8.40% 7.50% 7.70% 8.00%
Healthcare cost trend rate assumed for participants over 65 next
year 8.40% 7.90% 8.20% 8.50%
Rate that the cost trend rates ultimately declines to 4.50% 4.00% 4.00% 4.00%
Year that the rates reach the terminal rate 2030 2029 2029 2029
(a) Assumption only applies to the plans for represented employees as plans for non-represented employees are frozen.
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 20% equity and 80% fixed income securities for the non-represented employees plan and 70% equity and 30% fixed
income securities for the represented employees plan. The asset allocation at December 31, 2011 (Successor Company) for the Company’s qualified pension
plan assets was as follows:
Cash and cash equivalents (b) 1.4% 7.6% 6.1%
Equity securities 22.9% 63.1% 53.4%
Fixed income securities 75.7% 29.3% 40.5%
100.0% 100.0% 100.0%
(b) 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.
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