Freddie Mac 2010 Annual Report Download - page 249

quoted prices in active markets that we have the ability to access on the measurement date. Our other Pension Plan assets are
measured using net asset values and are classified as Level 2. The net asset value is calculated by aggregating the fair value
of the assets held by the fund as of the measurement date divided by the number of ownership units in the fund and
represents our exit price.
Valuation Methods and Assumptions for Pension Plan Assets Subject to the Fair Value Hierarchy
Our Pension Plan assets are invested in various combinations of equity, fixed income, and other types of investments.
Equity investments are diversified across U.S. and non-U.S. companies with small and large capitalizations. Fixed income
securities include corporate bonds of companies from diversified industries, mortgage-backed securities, and U.S. treasury
securities. The following is a description of the major asset categories and the significant investment strategies for the
investment funds in which our Pension Plan’s assets are invested, and that are subject to the fair value hierarchy:
Equity
•U.S. Large Cap: Investments in this category consist of an S&P 500 equity index fund, measured at the net asset
value of the fund shares held by the Pension Plan.
•U.S. Small/Mid Cap: Investments in this category include separately managed portfolios that invest in stocks of
small- and mid-capitalization U.S. companies, which are measured at the closing price reported on nationally-
recognized exchanges.
•International Equity: Investments in this category include commingled as well as mutual fund products. These
strategies invest in stocks of companies located in developed and emerging market countries, whether traded on
U.S. or international exchanges. These investments are measured at the net asset value of fund shares held by the
Pension Plan.
Fixed Income
•Government/Corporate Bonds: Investments in this category consist of a passively managed bond fund constructed to
correspond to the characteristics of the Barclays Capital Government/Credit index. These investments are measured at
the net asset value of fund shares held by the Pension Plan.
•Synthetic Fixed Income: Investments in this category include commingled funds of fixed income and derivative
instruments designed to provide protection against interest rate exposure arising from expected liability payments.
These investments are measured at the net asset value of fund shares held by the Pension Plan.
Other Types of Investments
•Asset Allocation Funds: This category comprises commingled funds and mutual funds that invest in multiple asset
classes, including U.S. and international equities, bonds and real estate assets. These investments are measured at the
net asset value of fund shares held by the Pension Plan.
Cash Flows Related to Defined Benefit Plans
Our general practice is to contribute to our Pension Plan an amount equal to at least the minimum required contribution,
if any, but no more than the maximum amount deductible for federal income tax purposes each year. During 2010, we made
a contribution to our Pension Plan of $33 million. We made a contribution to our Pension Plan of $74 million during 2009 in
an effort to fully fund the Pension Plan’s projected benefit obligation. We have not yet determined whether a contribution to
our Pension Plan is required in 2011.
In addition to the Pension Plan contributions noted above, we paid $4 million during 2010 and $6 million during 2009
in benefits under our SERP. Allocations under our SERP, as well as our Retiree Health Plan, are in the form of benefit
payments, as these plans are unfunded.
Table 15.9 sets forth estimated future benefit payments expected to be paid for our defined benefit plans. The expected
benefits are based on the same assumptions used to measure our benefit obligation at December 31, 2010.
Table 15.9 — Estimated Future Benefit Payments
Pension Benefits
Postretirement
Health Benefits
(in millions)
2011 . . ........................................................................ $ 15 $ 4
2012 . . ........................................................................ 16 4
2013 . . ........................................................................ 18 5
2014 . . ........................................................................ 20 5
2015 . . ........................................................................ 23 6
Years 2016-2020 . . . ............................................................... 157 40
246 Freddie Mac