Fannie Mae 2010 Annual Report Download - page 351

However, we did make a discretionary contribution to our qualified pension plan of $42 million, $76 million
and $80 million during 2010, 2009 and 2008, respectively.
During 2010, we contributed $42 million to our qualified pension plan, $7 million to our nonqualified pension
plans and $6 million to our other postretirement benefit plan. During 2011, we anticipate contributing
$56 million to our benefit plans, consisting of $41 million to our qualified pension plan, $7 million to our
nonqualified pension plans and $8 million to our other postretirement plan.
The fair value of plan assets of our funded qualified pension plan was less than our accumulated benefit
obligation by $5 million as of December 31, 2010 and greater than our accumulated benefit obligation by
$14 million as of December 31, 2009. There were no plan assets returned to us as of February 24, 2011 and
we do not expect any plan assets to be returned to us during the remainder of 2011.
Assumptions
Pension and other postretirement benefit amounts recognized in our consolidated financial statements are
determined on an actuarial basis using several different assumptions that are measured as of December 31,
2010, 2009 and 2008. The following table displays the actuarial assumptions for our plans used in determining
the net periodic benefit costs and the projected accumulated benefit obligations as of December 31, 2010,
2009 and 2008.
2010 2009 2008 2010 2009 2008
Pension Benefits Postretirement Benefits
As of December 31,
Weighted-average assumptions used to determine net periodic
benefit costs:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.10% 6.15% 6.40% 5.75% 6.15% 6.40%
Average rate of increase in future compensation . . . . . . . . . . . . . . . . . 4.00 4.00 5.00
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.65% 6.10% 6.15% 5.40% 5.75% 6.15%
Average rate of increase in future compensation . . . . . . . . . . . . . . . . . 4.00 4.00 4.00
Health care cost trend rate assumed for next year:
Pre-65 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.00% 8.00% 8.00%
Post-65 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.00 8.00 8.00
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 . . . . . . . . . . . . . . . . . . . 2018 2018 2015
As of December 31, 2010, the effect of a 1% increase or decrease in the assumed health care cost trend rate
would change the accumulated postretirement benefit obligation by $1 million.
We review our pension and other postretirement benefit plan assumptions on an annual basis. We calculate the
net periodic benefit cost each year based on assumptions established at the end of the previous calendar year,
unless we remeasure as a result of a curtailment. In determining our net periodic benefit costs, we assess the
discount rate to be used in the annual actuarial valuation of our pension and other postretirement benefit
obligations at year-end. We consider the current yields on high-quality, corporate fixed-income debt
instruments with maturities corresponding to the expected duration of our benefit obligations and supported by
cash flow matching analysis based on expected cash flows specific to the characteristics of our plan
participants, such as age and gender. As of December 31, 2010, the discount rate used to determine our
obligation decreased by 45 basis points for pension and 35 basis points for postretirement, reflecting a
F-93
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)