Fannie Mae 2007 Annual Report Download - page 256

The following table displays information pertaining to the projected benefit obligation, accumulated benefit
obligation and fair value of plan assets for our pension plans as of December 31, 2007 and 2006.
Qualified
Non-
Qualified Qualified
Non-
Qualified
Pension Plans
2007
Pension Plans
2006
As of December 31,
(Dollars in millions)
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . $744 $148 $770 $161
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . 604 127 564 121
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 788 — 769 —
Our current funding policy for the qualified pension plan is to contribute an amount at least equal to the
minimum required contribution under ERISA as well as to maintain a 105% current liability funded status as
of January 1 of every year. The plan assets of our funded qualified pension plan were greater than our
accumulated benefit obligation by $184 million and $205 million as of December 31, 2007 and 2006,
respectively.
The pension and postretirement benefit amounts recognized in the consolidated financial statements are
determined on an actuarial basis using several different assumptions that are measured as of December 31, 2007,
2006 and 2005. The following table displays the actuarial assumptions for our principal plans used in
determining the net periodic benefit cost for the years ended December 31, 2007, 2006 and 2005 and the
projected and accumulated benefit obligations as of December 31, 2007, 2006 and 2005.
2007 2006 2005 2007 2006 2005
Pension Benefits Postretirement Benefits
As of December 31,
Weighted average assumptions used to determine net periodic
benefit costs:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.20%
(1)
5.75% 5.75% 6.20%
(1)
5.75% 5.75%
Average rate of increase in future compensation . . . . . . . . . . . . . . . . 5.75 5.75 5.75
Expected long-term weighted average rate of return on plan assets . . . 7.50 7.50 7.50
Weighted average assumptions used to determine benefit
obligation at year-end:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.40% 6.00% 5.75% 6.40% 6.00% 5.75%
Average rate of increase in future compensation . . . . . . . . . . . . . . . . 5.00 5.75 5.75
Health care cost trend rate assumed for next year:
Pre-65 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.00% 9.00% 10.00%
Post-65. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.00 9.00 10.00
Rate that cost trend rate gradually declines to and remains at . . . . 5.00 5.00 5.00
Year that rate reaches the ultimate trend rate. . . . . . . . . . . . . . . . . . . 2014 2011 2011
(1)
The pension and postretirement benefit plans were remeasured as of August 31, 2007 and November 30, 2007. As a
result, a discount rate of 6.00% was used for the period January 1 through August 31, a discount rate of 6.35% was
used for the period September 1 through November 30, and a discount of 6.20% was used for the period December 1
through December 31.
As of December 31, 2007, the effect of a 1% increase in the assumed health care cost trend rate would
increase the accumulated postretirement benefit obligation by $3 million and the net periodic postretirement
benefit cost by $1 million. The effect of a 1% decrease in this rate would decrease the accumulated
postretirement benefit obligation by $4 million and the net periodic postretirement benefit cost by $1 million.
F-68
FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)