Huntington National Bank 2003 Annual Report Download - page 128

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23. Benefit Plans
Huntington sponsors the Huntington Bancshares Retirement Plan (the Plan), a non-contributory defined benefit pension plan
covering substantially all employees. The Plan provides benefits based upon length of service and compensation levels. The funding
policy of Huntington is to contribute an annual amount that is at least equal to the minimum funding requirements but not more than
that deductible under the Internal Revenue Code.
In addition, Huntington has an unfunded defined benefit post-retirement plan that provides certain healthcare and life insurance
benefits to retired employees who have attained the age of 55 and have at least 10 years of vesting service under this plan. For any
employee retiring on or after January 1, 1993, post-retirement healthcare benefits are based upon the employee’s number of months of
service and are limited to the actual cost of coverage. Life insurance benefits are a percentage of the employee’s base salary at the time
of retirement, with a maximum of $50,000 of coverage.
The following table shows the weighted-average assumptions used to determine the benefit obligation at December 31, 2003 and 2002,
and the net periodic benefit cost for the years then ended. Huntington’s actuary has used September 30, 2003, as the measurement date
for all calculations.
Pension Benefits Post-Retirement Benefits
2003 2002 2003 2002
Weighted-average assumptions used to determine benefit obligations
at December 31
Discount rate 6.00% 6.75% 6.00% 6.75%
Rate of compensation increase 5.00 5.00 N/A N/A
Weighted-average assumptions used to determine net periodic
benefit cost for the years ended December 31
Discount rate 6.75% 7.50% 6.75% 7.50%
Expected return on plan assets 8.50 9.75 N/A N/A
Rate of compensation increase 5.00 5.00 N/A N/A
The investment objective of the Plan is to maximize the return on Plan assets over a long time horizon, while meeting the Plan
obligations. At September 30, 2003, Plan assets were invested 71% in equity investments and 29% in bonds, with an average duration
of five years on bond investments. The estimated life of benefit obligations was 14 years. Management believes that this mix is
appropriate for the current economic environment. For 2004, Huntington lowered its assumptions for the expected return on Plan
assets and discount rate. A 7% expected return on Plan assets was estimated based upon the current mix and duration of Plan assets. A
6% assumed discount rate was based upon the Moody’s daily long-term corporate Aa bond yield as of the Plan’s measurement date.
The impact of lowering these assumptions will increase Huntington’s 2004 pension expense. Partially offsetting this increase, is a
modification made to the assumed rate of compensation increase. Although the assumption remains at 5%, it is now based upon the
demographics of the employees covered by the plan and considers an age-based salary scale ranging from 3% to 9%, resulting in an
average increase of 5%. In the past, Huntington has utilized a flat percentage increase for all employees.
126 HUNTINGTON BANCSHARES INCORPORATED