Intel 2012 Annual Report Download - page 84

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Weighted average actuarial assumptions used to determine costs for the plans were as follows:
U.S. Pension Benefits
Non-U.S. Pension Benefits
U.S. Postretirement
Medical Benefits
2012
2011
2010
2012
2011
2010
2012
2011
2010
Discount rate ...........................
4.7%
5.8%
6.1%
5.0%
5.3%
5.6%
4.6%
5.6%
6.3%
Expected long-term
rate of return on
plan assets ..........................
5.0%
5.5%
4.5%
5.9%
6.3%
6.2%
3.0%
3.0%
n/a
Rate of compensation
increase...............................
4.5%
4.7%
5.1%
4.1%
4.3%
3.6%
n/a
n/a
n/a
For the U.S. plans, we developed the discount rate by calculating the benefit payment streams by year to determine when
benefit payments will be due. We then matched the benefit payment streams by year to the AA corporate bond rates to
match the timing and amount of the expected benefit payments and discounted back to the measurement date to
determine the appropriate discount rate. For the non-U.S. plans, we used two approaches to develop the discount rate. In
certain countries, we used a model consisting of a theoretical bond portfolio for which the timing and amount of cash flows
approximated the estimated benefit payments of our pension plans. In other countries, we analyzed current market long-
term bond rates and matched the bond maturity with the average duration of the pension liabilities. The expected long-
term rate of return on plan assets assumptions takes into consideration both duration and risk of the investment portfolios,
and is developed through consensus and building-block methodologies. The consensus methodology includes unadjusted
estimates by the fund manager on future market expectations by broad asset classes and geography. The building-block
approach determines the rates of return implied by historical risk premiums across asset classes. In addition, we analyzed
rates of return relevant to the country where each plan is in effect and the investments applicable to the plan, expectations
of future returns, local actuarial projections, and the projected long-term rates of return from external investment
managers. The expected long-term rate of return on plan assets shown for the non-U.S. plan assets is weighted to reflect
each country’s relative portion of the non-U.S. plan assets.
Net Periodic Benefit Cost
The net periodic benefit cost for the plans included the following components:
U.S. Pension Benefits
Non-U.S. Pension Benefits
U.S. Postretirement
Medical Benefits
(In Millions)
2012
2011
2010
2012
2011
2010
2012
2011
2010
Service cost..............................................
$ 98
$ 51
$ 38
$ 64
$ 63
$ 40
$ 30
$ 18
$ 16
Interest cost ..............................................
69
42
34
52
52
35
17
16
14
Expected return on plan assets................
(31)
(31)
(18)
(42)
(47)
(34)
(4)
(2)
—
Amortization of prior service cost .............
—
—
—
(2)
(1)
1
7
8
6
Recognized net actuarial loss
(gain) ....................................................
74
26
18
16
11
5
—
(1)
(1)
Recognized curtailment gains ..................
—
—
—
—
(4)
—
—
—
—
Recognized settlement losses..................
—
—
—
—
6
—
—
—
—
Net periodic benefit cost........................
$ 210
$ 88
$ 72
$ 88
$ 80
$ 47
$ 50
$ 39
$ 35
U.S. Pension Plan Assets
In general, the investment strategy for U.S. Intel Minimum Pension Plan assets is to maximize risk-adjusted returns,
taking into consideration the investment horizon and expected volatility, to ensure that there are sufficient assets available
to pay pension benefits as they come due. The allocation to each asset class will fluctuate with market conditions, such as
volatility and liquidity concerns, and will typically be rebalanced when outside the target ranges, which are 80% to 90% for
fixed-income debt instrument investments and 10% to 20% for hedge fund investments. The expected long-term rate of
return for the U.S. Intel Minimum Pension Plan assets is 4.5%.