Raytheon 2015 Annual Report Download - page 121

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
111
Based upon our application of the building block approach and our review of the resulting assumption against the 35th to
65th reasonable range and an analysis of our historical results, we have established a 2015 long-term ROA assumption of
8.0% and have determined that the new assumption is reasonable and consistent with the provisions of ASOP 27.
Our domestic pension plans’ actual rates of return were approximately 0%, 6% and 15% for 2015, 2014 and 2013, respectively.
The difference between the actual rate of return and our long-term ROA assumption is included in deferred losses.
The long-term ROA assumptions for foreign Pension Benefits plans are based on the asset allocations and the economic
environment prevailing in the locations where the Pension Benefits plans reside. Foreign pension assets do not make up a
significant portion of the total assets for all of our Pension Benefits plans.
For purposes of determining pension expense under U.S. GAAP, a “corridor” approach may be elected and applied in the
recognition of asset and liability gains or losses which limits expense recognition to the net outstanding gains and losses in
excess of the greater of 10% of the projected benefit obligation or the calculated "market-related value" of assets. We do not
use a “corridor” approach in the calculation of FAS expense.
The effect of a 1% increase or decrease in the assumed health care trend rate for each future year for the aggregate of service
cost and interest cost is less than $1 million and for the accumulated postretirement benefit obligation is a $6 million increase
or decrease.
Plan Assets
Substantially all our domestic Pension Benefits Plan (Plan) assets, which consist of investments in cash and cash equivalents,
publicly traded U.S. and international equity securities, private equity funds, private real estate funds, fixed-income securities,
commingled funds and other investments such as insurance contracts and derivatives, are held in a master trust, which was
established for the investment of assets of our Company-sponsored retirement plans. The assets of the master trust are overseen
by our Investment Committee comprised of members of senior management drawn from appropriate diversified levels of the
executive management team.
The Investment Committee is responsible for setting the policy that provides the framework for management of the Plan
assets. In accordance with its responsibilities and charter, the Investment Committee meets on a regular basis to review the
performance of the Plan assets and compliance with the investment policy. The policy sets forth an investment structure for
managing Plan assets, including setting the asset allocation ranges, which are expected to provide an appropriate level of
overall diversification and total investment return over the long term while maintaining sufficient liquidity to pay the benefits
of the Plan. In developing the asset allocation ranges, third-party asset allocation studies are periodically performed that
consider the current and expected positions of the plan assets and funded status. Based on these studies and other appropriate
information, the Investment Committee establishes asset allocation ranges taking into account acceptable risk targets and
associated returns.
The investment policy asset allocation ranges for the Plan, as set by the Investment Committee, for the year ended December 31,
2015 were as follows:
Asset Category
Global equity (combined U.S. and international equity) 40%–60%
U.S. equities 25%–40%
International equities 15%–25%
Fixed-income securities 25%–40%
Cash and cash equivalents 1%–10%
Private equity and private real estate 5%–22%
Other (including absolute return funds) 5%–20%
The Investment Committee appoints the investment fiduciary, who is responsible for making investment decisions within the
framework of the Investment Policy, setting the long-term target allocation within the investment policy asset allocation ranges
and for supervising the internal pension investment team. The pension investment team is comprised of experienced investment