Visa 2008 Annual Report Download - page 146

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2008
(in millions, except as noted)
Actuarial Assumptions
Assumptions used in the accounting for the pension and other postretirement benefit plans on a weighted-average basis were as follows:
Fiscal
2008 2007 2006
Discount rate for benefit obligation
Pension 6.75% 6.00% 6.23%
Postretirement 6.24% 5.99% 6.16%
Net periodic benefit cost
Pension 6.00% 6.23% 5.30%
Postretirement 5.99% 6.16% 5.00%
Expected long-term rate of return on plan assets 7.50% 7.50% 7.50%
Rate of increase in compensation levels for:
Benefit obligation 5.50% 5.50% 5.50%
Net periodic benefit cost 5.50% 5.50% 5.50%
Two of the principal components of the net periodic pension calculation are the discount rate on future liabilities and the expected long-term rate of
return on plan assets.
The Company uses a "bond duration matching" methodology to calculate the discount rate. Under this approach, the discount rate is determined by
projecting the plans' expected future benefit payments, as defined for the projected benefit obligations, and by discounting those expected payments using an
average of yield curves constructed based on a large population of high-quality corporate bonds. The resulting discount rate reflects the matching of plan
liability cash flows to the yield curves.
The expected long-term rate of return on plan assets is primarily based on the long-term historical risk and returns associated with each asset class
within the portfolio. The expected return is weighted based on the targeted allocation and results in a return rate of 7.5%. The use of an expected long-term
rate of return on plan assets may result in pension income returns that are greater or less than the actual returns on plan assets in any given year.
The expected long-term rate of return is intended to approximate the actual long-term rate of return over time. The Company generally holds the
expected long-term rate of return constant so the pattern of income and expense recognition more closely matches the more stable pattern of services provided
by employees over the life of the Company's pension obligation. To determine whether the expected rate of return is reasonable, the Company considers such
factors as:
• The actual return earned on plan assets,
• Historical rates of return on the various asset classes in the plan portfolio,
• Projections of returns on various asset classes, and
• Current and prospective capital market conditions and economic forecasts.
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