Union Pacific 2012 Annual Report Download - page 64

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64
assumed the rate will decrease gradually to an ultimate rate of 4.5% in 2028 and will remain at that level.
A one-percentage point change in the assumed health care cost trend rates would have the following
effects on OPEB:
Millions One % pt.
Increase One % pt.
Decrease
Effect on total service and interest cost components $ 1 $ (1)
Effect on accumulated benefit obligation 18 (15)
Cash Contributions
The following table details our cash contributions for the qualified pension plans and the benefit payments
for the non-qualified (supplemental) pension and OPEB plans:
Pension
Millions Qualifie
d
Non-qualifie
d
OPEB
2011 $ 200 15 24
2012 200 15 24
Our policy with respect to funding the qualified plans is to fund at least the minimum required by law and
not more than the maximum amount deductible for tax purposes. All contributions made to the qualified
pension plans in 2012 were voluntary and were made with cash generated from operations.
The non-qualified pension and OPEB plans are not funded and are not subject to any minimum regulatory
funding requirements. Benefit payments for each year represent supplemental pension payments and
claims paid for medical and life insurance. We anticipate our 2013 supplemental pension and OPEB
payments will be made from cash generated from operations.
Benefit Payments
The following table details expected benefit payments for the years 2013 through 2022:
Millions Pension OPEB
2013 $ 165 $ 27
2014 169 27
2015 174 27
2016 179 26
2017 184 26
Years 2018 - 2022 988 119
Asset Allocation Strategy
Our pension plan asset allocation at December 31, 2012 and 2011, and target allocation for 2013, are
as follows:
Target
Allocation 2013
Percentage of Plan Assets
December 31,
2012 2011
Equity securities 60% to 70% 65% 58%
Debt securities 20% to 30% 25 32
Real estate 2% to 8% 5 5
Commodities 4% to 6% 5 5
Total 100% 100%
The investment strategy for pension plan assets is to maintain a broadly diversified portfolio designed to
achieve our target average long-term rate of return of 7.5%. While we believe we can achieve a long-term
average rate of return of 7.5%, we cannot be certain that the portfolio will perform to our expectations.
Assets are strategically allocated among equity, debt, and other investments in order to achieve a