McKesson 2016 Annual Report Download - page 111

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Weighted-average assumptions used to estimate the net periodic pension expense and the actuarial present
value of benefit obligations were as follows:
U.S. Plans Non-U.S. Plans
Years Ended March 31, Years Ended March 31,
2016 2015 2014 2016 2015 2014
Net periodic pension expense
Discount rates 3.36% 3.74% 3.39% 2.36% 3.85% 3.95%
Rate of increase in compensation 4.00 4.00 4.00 2.80 3.11 2.66
Expected long-term rate of return on plan assets 6.75 7.25 7.25 4.87 5.39 5.71
Benefit obligation
Discount rates 3.27% 3.18% 3.58% 2.84% 2.50% 3.92%
Rate of increase in compensation 4.00 4.00 4.00 2.98 3.24 3.27
Our defined benefit pension plan liabilities are valued using a discount rate based on a yield curve
developed from a portfolio of high quality corporate bonds rated AA or better whose maturities are aligned with
the expected benefit payments of our plans. For March 31, 2016, our U.S. defined benefit liabilities are valued
using a weighted average discount rate of 3.27%, which represents an increase of 9 basis points from our 2015
weighted-average discount rate of 3.18%. Our non-U.S defined benefit pension plan liabilities are valued using a
weighted-average discount rate of 2.84%, which represents an increase of 34 basis points from our 2015
weighted-average discount rate of 2.50%.
Sensitivity to changes in the weighted-average discount rate for our pension plans is as follows:
U.S. Plans Non-U.S. Plans
(In millions)
One Percentage
Point Increase
One Percentage
Point Decrease
One Percentage
Point Increase
One Percentage
Point Decrease
Increase (decrease) on projected benefit
obligation $ (35) $ 41 $(85) $101
Increase (decrease) on net periodic pension cost — — (4) 6
Plan Assets
Investment Strategy: The overall objective for U. S. pension plan assets is to generate long-term investment
returns consistent with capital preservation and prudent investment practices, with a diversification of asset types
and investment strategies. Periodic adjustments are made to provide liquidity for benefit payments and to
rebalance plan assets to their target allocations.
The target allocations for U.S. plan assets at March 31, 2016 and 2015 are 50% equity investments, 45%
fixed income investments including cash and cash equivalents and 5% real estate. Equity investments include
common stock, preferred stock, and equity commingled funds. Fixed income investments include corporate
bonds, government securities, mortgage-backed securities, asset-backed securities, other directly held fixed
income investments, and fixed income commingled funds. The real estate investment is in a commingled real
estate fund.
For both U.S. and non-U.S. plan assets, the investment strategies are subject to local regulations and the
asset/liability profiles of the plans in each individual country. Plan assets of the non-U.S. plans are broadly
105