Windstream 2006 Annual Report Download - page 156

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Employee Benefit Plans and Postretirement Benefits, Continued:
The total accumulated benefit obligation for the defined benefit pension plans was $855.0 million at December 31,
2006. For the supplemental retirement pension plans with accumulated benefit obligations in excess of plan assets,
the projected benefit obligation and accumulated benefit obligation were $11.0 million and $10.5 million at
December 31, 2006, respectively.
Actuarial assumptions used to calculate the projected benefit obligations were as follows for the years ended
December 31:
Pension Benefits Postretirement Benefits
2006 2006 2005
Discount rate 5.92% 5.90% 5.70%
Expected return on plan assets 8.50% - -
Rate of compensation increase 3.50% - -
In developing the expected long-term rate of return assumption, Windstream evaluated historical investment
performance and input from its investment advisors. Projected returns by such advisors were based on broad equity
and bond indices. The expected long-term rate of return on qualified pension plan assets is based on a targeted
asset allocation of 70 percent to equities, with an expected long-term rate of return of 10 percent, and 30 percent to
fixed income assets, with an expected long-term rate of return of 5 percent. The asset allocation at December 31,
2006 for the Company’s qualified defined benefit pension plan by asset category were as follows:
Asset Category Percentage of Plan Assets
Equity securities 73.4%
Fixed income securities 25.1%
Money market and other short-term interest bearing securities 1.5%
100.0%
None of the qualified pension plan assets are invested in Windstream common stock. The Company’s investment
strategy is to maintain a diversified asset portfolio expected to provide long-term asset growth. Investments are
generally restricted to marketable securities. Equity securities include stocks of both large and small capitalization
domestic and international companies. Fixed income securities include securities issued by the U.S. Government
and other governmental agencies, asset-backed securities and debt securities issued by domestic and international
companies. Investments in money market and other short-term interest bearing securities are maintained to provide
liquidity for benefit payments with protection of principal being the primary objective.
Information regarding the healthcare cost trend rate was as follows for the years ended December 31:
2006 2005
Healthcare cost trend rate assumed for next year 10.00% 10.00%
Rate that the cost trend rate ultimately declines to 5.00% 5.00%
Year that the rate reaches the terminal rate 2012 2011
For the year ended December 31, 2006, a one percent increase in the assumed healthcare cost trend rate would
increase the postretirement benefit cost by approximately $0.7 million, while a one percent decrease in the rate
would reduce the postretirement benefit cost by approximately $0.6 million. As of December 31, 2006, a one
percent increase in the assumed healthcare cost trend rate would increase the postretirement benefit obligation by
approximately $26.3 million, while a one percent decrease in the rate would reduce the postretirement benefit
obligation by approximately $22.1 million.
F-55