Huntington National Bank 2006 Annual Report Download - page 115

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HUNTINGTON BANCSHARES INCORPORATED
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 health care 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 health-care 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, 2006 and
2005, and the net periodic benefit cost for the years then ended. Huntington selected September 30, 2006 as the measurement
date for all calculations and contracted an actuary to provide measurement services.
Post-Retirement
Pension Benefits Benefits
2006 2005 2006 2005
Weighted-average assumptions used to determine benefit obligations at December 31
Discount rate 5.74% 5.43% 5.74% 5.43%
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 5.43% 5.81% 5.43% 5.81%
Expected return on plan assets 8.00 7.00 N/A N/A
Rate of compensation increase 5.00 5.00 N/A N/A
N/A, Not Applicable
The expected long-term rate of return on plan assets is an assumption reflecting the average rate of earnings expected on the
funds invested or to be invested to provide for the benefits included in the projected benefit obligation. The expected long-term
rate of return is established at the beginning of the plan year based upon historical returns and projected returns on the
underlying mix of invested assets. For the year ended December 31, 2006, the long-term rate of return assumption to determine
the net periodic benefit cost was raised one percentage point to 8.00% due to favorable historical and expected future results.
The following table reconciles the beginning and ending balances of the benefit obligation of the Plan and the post-retirement
benefit plan with the amounts recognized in the consolidated balance sheets at December 31:
Post-Retirement
Pension Benefits Benefits
(in thousands of dollars) 2006 2005 2006 2005
Projected benefit obligation at beginning of measurement year (September 30) $ 418,091 $336,007 $ 43,616 $ 55,504
Changes due to:
Service cost 17,262 13,936 1,302 1,377
Interest cost 22,157 19,016 2,332 2,903
Benefits paid (7,491) (6,897) (3,540) (3,738)
Settlements (11,523) (9,375) ——
Plan amendments ——1,700 —
Actuarial assumptions and gains and losses (12,792) 65,404 2,811 (12,430)
Total changes 7,613 82,084 4,605 (11,888)
Projected benefit obligation at end of measurement year (September 30) $ 425,704 $418,091 $ 48,221 $ 43,616
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, 2006, Plan assets were invested 72% in equity investments and 28% in bonds, with an average
duration of 3.7 years on bond investments. The estimated life of benefit obligations was 12 years. Management believes that this
mix is appropriate for the current economic environment.
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