General Motors 2010 Annual Report Download - page 208

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Assumptions
Healthcare Trend Rate
As a result of modifications made to healthcare plans in connection with the 363 Sale, there are no significant uncapped U.S.
healthcare plans remaining, therefore, the healthcare cost trend rate does not have a significant effect on our U.S. plans.
Successor
December 31,
2010
December 31,
2009
Assumed Healthcare Trend Rates Non-U.S. Plans(a) Non-U.S. Plans
Initial healthcare cost trend rate ........................................................ 5.6% 5.4%
Ultimate healthcare cost trend rate ..................................................... 3.4% 3.3%
Number of years to ultimate trend rate .................................................. 8 8
(a) The implementation of the HCT in Canada is anticipated and will significantly reduce our exposure to changes in the healthcare
cost trend rate.
Healthcare trend rate assumptions are determined for inclusion in healthcare OPEB valuation at each remeasurement. The
healthcare trend rates are developed using historical cash expenditures and near-term outlook for retiree healthcare. This information
is supplemented with information gathered from actuarial based models, information obtained from healthcare providers and known
significant events.
The following table summarizes the effect of a one-percentage point change in the assumed healthcare trend rates (dollars in
millions):
Successor
Non-U.S. Plans (a)
Change in Assumption
Effect on 2011
Aggregate Service
and Interest Cost
Effect on
December 31, 2010
APBO
One percentage point increase ...................................................... +$31 +$491
One percentage point decrease ...................................................... -$25 -$392
(a) The implementation of the HCT in Canada is anticipated and will significantly reduce our exposure to changes in the healthcare
cost trend rate.
Investment Strategies and Long-Term Rate of Return
Detailed periodic studies conducted by outside actuaries and an internal asset management group, consisting of an analysis of
capital market assumptions and employing Monte-Carlo simulations, are used to determine the long-term strategic mix among asset
classes, risk mitigation strategies, and the expected return on asset assumptions for U.S. pension plans. The U.S. study includes a
review of alternative asset allocation and risk mitigation strategies, anticipated future long-term performance of individual asset
classes, risks evaluated using standard deviation techniques and correlations among the asset classes that comprise the plans’ asset
mix. Similar studies are performed for the significant non-U.S. pension plans with the assistance of outside actuaries and asset
managers. While the studies incorporate data from recent fund performance and historical returns, the expected return on plan asset
assumptions are determined based on long-term, prospective rates of return.
The strategic asset mix and risk mitigation strategies for the U.S. and non-U.S. pension plans are tailored specifically for each plan.
Individual plans have distinct liabilities, liquidity needs, and regulatory requirements. Consequently, there are different investment
policies set by individual plan fiduciaries. Although investment policies and risk mitigation strategies may differ among certain U.S.
and non-U.S. pension plans, each investment strategy is considered to be optimal in the context of the specific factors affecting each
plan.
206 General Motors Company 2010 Annual Report