Neiman Marcus 2008 Annual Report Download - page 125

Table of Contents
Assumptions. Significant assumptions related to the calculation of our obligations pursuant to our employee benefit plans
include the discount rate used to calculate the present value of benefit obligations to be paid in the future, the expected long-term rate
of return on assets held by the Pension Plan, the average rate of compensation increase by Pension Plan and SERP Plan participants
and the health care cost trend rate for the Postretirement Plan. We review these assumptions annually based upon currently available
information. The assumptions we utilized in calculating the projected benefit obligations and periodic expense of our Pension Plan,
SERP Plan and Postretirement Plan are as follows:
July 31,
2009
July 31,
2008
July 31,
2007
Pension Plan:
Discount rate 5.90 % 6.75 % 6.25 %
Expected long-term rate of return on
plan assets 8.00 % 8.00 % 8.00 %
Rate of future compensation increase 4.50 % 4.50 % 4.50 %
SERP Plan:
Discount rate 5.90 % 6.75 % 6.25 %
Rate of future compensation increase 4.50 % 4.50 % 4.50 %
Postretirement Plan:
Discount rate 5.80 % 6.75 % 6.25 %
Initial health care cost trend rate 8.00 % 8.00 % 8.00 %
Ultimate health care cost trend rate 8.00 % 8.00 % 8.00 %
Discount rate. The assumed discount rate utilized is based on a broad sample of Moody's high quality corporate bond yields
as of the measurement date. The projected benefit payments are matched with the yields on these bonds to determine an appropriate
discount rate for the plan. The discount rate is utilized principally in calculating the present values of our benefit obligations and
related expenses.
Expected long-term rate of return on plan assets. 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 by the Pension Plan to provide for the plan's obligations.
During fiscal year 2009, we utilized 8.0% as the expected long-term rate of return on plan assets. We periodically evaluate the
allocation between investment categories of the assets held by the Pension Plan. We estimate the expected average long-term rate of
return on assets based on our future asset performance expectations using currently available market and other data and the counsel of
our outside actuaries and advisors. This rate is utilized primarily in calculating the expected return on plan assets component of the
annual pension expense. To the extent the actual rate of return on assets realized over the course of a year is greater than the assumed
rate, that year's annual pension expense is not affected. Rather this gain reduces future pension expense over a period of approximately
10 to 16 years. To the extent the actual rate of return on assets is less than the assumed rate, that year's annual pension expense is
likewise not affected. Rather this loss increases pension expense over approximately 10 to 16 years.
Rate of future compensation increase. The assumed average rate of compensation increase is the average annual
compensation increase expected over the remaining employment periods for the participating employees. We utilized a rate of 4.5%
for fiscal year 2009. This rate is utilized principally in calculating the obligation and annual expense for the Pension and SERP Plans.
Health care cost trend rate. 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 the Postretirement Plan. 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.
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