Jack In The Box 2007 Annual Report Download - page 74

The assumed discount rate was determined by considering the average of pension yield curves constructed of a
population of high-quality bonds with a Moody’s or Standard and Poor’s rating of “AA” or better meeting certain
other criteria. The resulting discount rate reflects the matching of plan liability cash flows to the yield curves.
The assumed expected long-term rate of return on assets is the weighted average rate of earnings expected on
the funds invested or to be invested to provide for the pension obligations. The long-term rate of return on assets was
determined taking into consideration our projected asset allocation and economic forecasts prepared with the
assistance of our actuarial consultants.
The assumed average rate of compensation increase is the average annual compensation increase expected
over the remaining employment periods for the participating employees.
For measurement purposes, the weighted-average assumed health care cost trend rates for our postretirement
health plans were as follows for each fiscal year:
2007 2006
Health care cost trend rate for next year:
Participants under age 65 ........................................... 8.33% 9.12%
Participants age 65 or older ......................................... 8.50% 9.50%
Rate to which the cost trend rate is assumed to decline ....................... 4.92% 4.94%
Year the rate reaches the ultimate trend rate ............................... 2013 2014
The assumed health care cost trend rate represents our estimate of the annual rates of change in the costs of the
health care benefits currently provided by our postretirement plans. The health care cost trend rate implicitly
considers estimates of health care inflation, changes in health care utilization and delivery patterns, technological
advances and changes in the health status of the plan participants. The health care cost trend rate assumption has a
significant effect on the amounts reported. For example, increasing the assumed health care cost trend rates by 1.0%
in each year would increase the postretirement benefit obligation as of September 30, 2007 by $2.4 million and the
aggregate of the service and interest cost components of net periodic benefit cost for 2007 by $0.2 million. If the
assumed health care cost trend rates decreased by 1.0% in each year, the postretirement benefit obligation would
decrease by $2.0 million as of September 30, 2007, and the aggregate of the service and interest components of net
periodic benefit cost for 2007 would decrease by $0.2 million.
Plan assets — We regularly monitor our asset allocation and senior financial management and the Finance
Committee of the Board of Directors review performance results at least semi-annually. In May 2007, we adjusted
our target asset allocation for our qualified pension plans to the following: 40% U.S. equities, 30% debt securities,
15% international equities, 5% balanced fund and 10% real estate. We plan to reallocate our plan assets over a
period of time, as deemed appropriate by senior financial management, to achieve our new target asset allocation.
The qualified pension plans had the following asset allocations at June 30, 2007 and June 30, 2006:
2007 2006
U.S. equities ........................................................ 42% 41%
Debt securities ...................................................... 37 38
International equities .................................................. 15 15
Balanced fund....................................................... 6 6
100% 100%
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JACK IN THE BOX INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)