TCF Bank 2011 Annual Report Download - page 106

Prior service credits of the Postretirement Plan totaling
$29 thousand are included within accumulated other
comprehensive income at December 31, 2011 and are
expected to be recognized as components of net periodic
benefit cost during 2012.
The actuarial assumptions used in the Pension Plan
valuation are reviewed annually. The expected long-term
rate of return on plan assets is determined by reference
to historical market returns and future expectations. The
10-year average return of the index consistent with the
Pension Plan’s current investment strategy was 3.9%, net
of administrative expenses. Although past performance is
no guarantee of the future results, TCF is not aware of any
reasons why it should not be able to achieve the assumed
future average long-term annual returns of 1.5%, net of
administrative expenses, on plan assets over complete
market cycles. A 1% difference in the expected return on
plan assets would result in a $550 thousand change in net
periodic benefit cost.
The discount rate used to determine TCF’s Pension
Plan and Postretirement Plan benefit obligations as of
December 31, 2011 and December 31, 2010, was determined
by matching estimated benefit cash flows to a yield
curve derived from corporate bonds rated AA by Moody’s.
Bonds containing call or put provisions were excluded.
The average estimated duration of TCF’s Pension and
Postretirement Plans varied between seven and eight years.
Included within the net periodic benefit plan cost for the
Pension Plan are recognized actuarial gains and losses.
The decrease in the discount rate from 4.75% at December
31, 2010 to 4% at December 31, 2011 increased net periodic
pension cost by $2.4 million during 2011. The reduction of
the interest crediting rate from 4.5% at December 31, 2010
to 3.5% at December 31, 2011 and other interest crediting
assumption changes reduced net periodic pension cost
for 2011 by $3.7 million. Various plan participant census
changes decreased the 2011 net periodic pension cost by
$400 thousand.
Included in the net periodic benefit plan cost for the
Postretirement Plan are recognized actuarial gains and
losses. The Postretirement Plan change in actuarially
estimated cost per participant as of December 31, 2011
reduced net periodic benefit cost by $1.3 million. Actual
claims paid during 2011 totaled $453 thousand less than
expected, reducing net periodic benefit cost. The decrease
in the discount rate from 4.75% at December 31, 2010 to
4% at December 31, 2011 increased net periodic benefit
cost by $410 thousand. Various plan demographic changes
decreased the net periodic pension cost by $72 thousand.
For 2011, TCF is eligible to contribute up to $18 million
to the Pension Plan until the 2011 federal income tax return
extension due date under various IRS funding methods.
During 2011, TCF made no cash contributions to the Pension
Plan. TCF does not expect to be required to contribute
to the Pension Plan in 2012. TCF expects to contribute
$823 thousand to the Postretirement Plan in 2012. TCF
contributed $526 thousand and $528 thousand to the
Postretirement Plan for the years ended December 31, 2011
and 2010, respectively. TCF currently has no plans to pre-
fund the Postretirement Plan in 2012.
The following are expected future benefit payments
used to determine projected benefit obligations.
(In thousands)
Pension
Plan
Postretirement
Plan
2012 $ 4,288 $ 823
2013 3,646 799
2014 4,097 770
2015 3,182 738
2016 3,201 705
2017-2021 14,773 2,984
The following table presents assumed health care cost
trend rates for the Postretirement Plan at December 31,
2011 and 2010.
2011 2010
Health care cost trend rate assumed for next year 6.75% 7.50%
Final health care cost trend rate 5% 5%
Year that final health care trend rate is reached 2023 2023
Assumed health care cost trend rates have an effect on
the amounts reported for the Postretirement Plan. A 1%
change in assumed health care cost trend rates would have
the following effects.
1-Percentage-Point
(In thousands) Increase Decrease
Effect on total service and
interest cost components $ 19 $ (18)
Effect on postretirement
benefits obligations 354 (321)
88 TCF Financial Corporation and Subsidiaries