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INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Assumptions
Weighted average actuarial assumptions used to determine benefit obligations for the plans at the end of each period were as
follows:
U.S. Pension Benefits
Non-U.S. Pension
Benefits
U.S. Postretirement
Medical Benefits
Dec 27,
2014
Dec 28,
2013
Dec 27,
2014
Dec 28,
2013
Dec 27,
2014
Dec 28,
2013
Discount rate ............................... 3.8% 4.8% 2.7% 4.0% 4.1% 4.6%
Rate of compensation increase ................. 3.8% 3.8% 4.0% 3.9% n/a n/a
Weighted average actuarial assumptions used to determine costs for the plans for each period were as follows:
U.S. Pension Benefits Non-U.S. Pension Benefits
U.S. Postretirement
Medical Benefits
2014 2013 2012 2014 2013 2012 2014 2013 2012
Discount rate ....................... 4.6% 3.9% 4.7% 4.0% 4.2% 5.0% 4.6% 4.2% 4.6%
Expected long-term rate of return on plan
assets .......................... 5.4% 4.5% 5.0% 5.7% 5.2% 5.9% 7.4% 7.7% 3.0%
Rate of compensation increase ......... 3.8% 4.1% 4.5% 4.1% 4.3% 4.1% 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
analyze 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
In 2014, the net periodic benefit cost for U.S. pension benefits, non-U.S. pension benefits, and U.S. postretirement medical
benefits was $36 million ($230 million in 2013 and $210 million in 2012), $165 million ($116 million in 2013 and $88 million in
2012) and $17 million ($77 million in 2013 and $50 million in 2012), respectively.
The decrease in the U.S. net periodic pension benefit cost compared to 2013 is primarily attributed to the one-time curtailment
gain related to the freeze of future benefit accruals and lower recognized net actuarial losses.
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 55% for equity investments and 45% for
fixed-income investments in 2014. The expected long-term rate of return for the U.S. Intel Minimum Pension Plan assets is 6.1%.
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