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present values and increase subsequent-year pension costs; higher discount rates decrease present values and
decrease subsequent-year pension costs. The Company’s discount rate at December 31, 2015, 2014 and 2013,
was 4.3%, 4.0% and 4.8%, respectively, reflecting market interest rates.
Changes in key assumptions for the Company’s pension plan would have had the following effects on the 2015
pension credit, excluding curtailment gain, settlement loss and special termination benefits:
• Expected return on assets – A 1% increase or decrease to the Company’s assumed expected return on
plan assets would have increased or decreased the pension credit by approximately $20.0 million.
• Discount rate – A 1% decrease to the Company’s assumed discount rate would have decreased the
pension credit by approximately $7.9 million. A 1% increase to the Company’s assumed discount rate
would have increased the pension credit by approximately $18.3 million.
The Company’s net pension (credit) cost includes an expected return on plan assets component, calculated using the
expected return on plan assets assumption applied to a market-related value of plan assets. The market-related value
of plan assets is determined using a five-year average market value method, which recognizes realized and
unrealized appreciation and depreciation in market values over a five-year period. The value resulting from applying
this method is adjusted, if necessary, such that it cannot be less than 80% or more than 120% of the market value of
plan assets as of the relevant measurement date. As a result, year-to-year increases or decreases in the market-
related value of plan assets impact the return on plan assets component of pension (credit) cost for the year.
At the end of each year, differences between the actual return on plan assets and the expected return on plan assets
are combined with other differences in actual versus expected experience to form a net unamortized actuarial gain
or loss in accumulated other comprehensive income. Only those net actuarial gains or losses in excess of the
deferred realized and unrealized appreciation and depreciation are potentially subject to amortization.
The types of items that generate actuarial gains and losses that may be subject to amortization in net periodic
pension (credit) cost include the following:
• Asset returns that are more or less than the expected return on plan assets for the year;
• Actual participant demographic experience different from assumed (retirements, terminations and
deaths during the year);
• Actual salary increases different from assumed; and
• Any changes in assumptions that are made to better reflect anticipated experience of the plan or to
reflect current market conditions on the measurement date (discount rate, longevity increases, changes
in expected participant behavior and expected return on plan assets).
Amortization of the unrecognized actuarial gain or loss is included as a component of pension (credit) expense
for a year if the magnitude of the net unamortized gain or loss in accumulated other comprehensive income
exceeds 10% of the greater of the benefit obligation or the market-related value of assets (10% corridor). The
amortization component is equal to that excess divided by the average remaining service period of active
employees expected to receive benefits under the plan. At the end of 2012, the Company had net unamortized
actuarial losses in accumulated other comprehensive income potentially subject to amortization that were outside
the 10% corridor that resulted in amortized losses of $5.6 million being included in the pension cost for the first
nine months of 2013. As a result of the sale of the newspaper publishing businesses, the Company remeasured
the accumulated and projected benefit obligation as of October 1, 2013, and recorded a curtailment gain and
settlement loss. During the first nine months of 2013, there were significant pension asset gains and an increase
in the discount rate, which resulted in net unamortized actuarial gains in accumulated other comprehensive
income subject to amortization outside the corridor as of the remeasurement date, and therefore, an amortized
gain amount of $2.8 million was included in the pension cost for the last three months of 2013. Overall, the
Company recorded an amortized loss amount of $2.8 million for 2013. During the last three months of 2013,
there were additional pension asset gains. As a result of the pension asset gains in 2013, the Company had net
67 GRAHAM HOLDINGS COMPANY