Target 2013 Annual Report Download - page 64

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Defined Benefit Pension Plan Information
(millions) 2013 2012
Accumulated benefit obligation (ABO) for all plans (a) $ 3,149 $ 3,140
Projected benefit obligation for pension plans with an ABO in excess of plan assets (b) 54 59
Total ABO for pension plans with an ABO in excess of plan assets 48 53
(a) The present value of benefits earned to date assuming no future salary growth.
(b) The present value of benefits earned to date by plan participants, including the effect of assumed future salary increases.
Assumptions
Benefit Obligation Weighted Average Assumptions Pension Benefits Postretirement
Health Care Benefits
2013 2012 2013 2012
Discount rate 4.77% 4.40% 3.30% 2.75%
Average assumed rate of compensation increase 3.00 3.00 n/a n/a
Net Periodic Benefit Expense Weighted Average
Assumptions Pension Benefits Postretirement Health Care Benefits
2013 2012 2011 2013 2012 2011
Discount rate 4.40% 4.65% 5.50% 2.75% 3.60% 4.35%
Expected long-term rate of return on plan assets 8.00 8.00 8.00 n/a n/a n/a
Average assumed rate of compensation increase 3.00 3.50 4.00 n/a n/a n/a
The weighted average assumptions used to measure net periodic benefit expense each year are the rates as of the
beginning of the year (i.e., the prior measurement date). Based on a stable asset allocation, our most recent compound
annual rate of return on qualified plans' assets was 10.4 percent, 8.3 percent, 7.2 percent, and 9.2 percent for the 5-
year, 10-year, 15-year and 20-year time periods, respectively.
The market-related value of plan assets, which is used in calculating expected return on assets in net periodic benefit
cost, is determined each year by adjusting the previous year's value by expected return, benefit payments and cash
contributions. The market-related value is adjusted for asset gains and losses in equal 20 percent adjustments over
a five-year period.
We review the expected long-term rate of return on an annual basis, and revise it as appropriate. Additionally, we
monitor the mix of investments in our portfolio to ensure alignment with our long-term strategy to manage pension cost
and reduce volatility in our assets. Our expected annualized long-term rate of return assumptions as of February 1,
2014 were 8.0 percent for domestic and international equity securities, 5.0 percent for long-duration debt securities,
8.0 percent for balanced funds and 9.5 percent for other investments. These estimates are a judgmental matter in
which we consider the composition of our asset portfolio, our historical long-term investment performance and current
market conditions.
An increase in the cost of covered health care benefits of 7.5 percent was assumed for 2013 and 7.0 percent is assumed
for 2014. The rate will be reduced to 5.0 percent in 2019 and thereafter.
Health Care Cost Trend Rates – 1% Change
(millions) 1% Increase 1% Decrease
Effect on total of service and interest cost components of net periodic postretirement
health care benefit expense $ 1 $ (1)
Effect on the health care component of the accumulated postretirement benefit
obligation 5 (5)