Windstream 2008 Annual Report Download - page 155

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Employee Benefit Plans and Postretirement Benefits, Continued:
Actuarial assumptions used to calculate the projected benefit obligations were as follows for the years ended
December 31:
Pension Benefits Postretirement Benefits
2008 2007 2008 2007
Discount rate 6.18% 6.36% 6.11% 6.38%
Expected return on plan assets 8.00% 8.00% - -
Rate of compensation increase 3.44% 3.00% - -
In developing the expected long-term rate of return assumption, Windstream considered its historical rate of return
of 9.45 percent since 1975 including periods in which it was sponsored by Alltel, as well as 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 includes a targeted asset allocation of 52.5
percent to equities, 37.5 percent to fixed income securities, and 10.0 percent to alternative investments, with an
aggregate expected long-term rate of return of approximately 8.0 percent. The asset allocation at December 31,
2008 and 2007 for the Company’s pension plan by asset category were as follows:
Target Allocation Percentage of Plan Assets
Asset Category 2009 2008 2007
Equity securities 45.0 % - 60.0% 47.8% 73.0%
Fixed income securities 31.0% - 44.0% 50.4% 23.6%
Alternative investments 0.0% - 17.0% - -
Money market and other short-term interest bearing
securities 0.0% - 3.0% 1.8% 3.4%
100.0% 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. Alternative investments include real estate and private equity investments. 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. Given the cessation of future benefit accruals for all
eligible nonbargaining employees covered by the pension plan as of December 31, 2005 (December 31, 2010 for
employees who had attained age 40 with two years of service as of December 31, 2005), in December 2007, the
Company revised its asset allocation targets to lower overall risk resulting in a lower target allocation for equity
securities and a higher target allocation for fixed income assets.
Information regarding the healthcare cost trend rate was as follows for the years ended December 31:
2008 2007
Healthcare cost trend rate assumed for next year 8.50% 9.00%
Rate that the cost trend ultimately declines to 5.00% 5.00%
Year that the rate reaches the terminal rate 2014 2014
For the year ended December 31, 2008, a one percent increase in the assumed healthcare cost trend rate would
increase the postretirement benefit cost by approximately $1.0 million, while a one percent decrease in the rate
would reduce the postretirement benefit cost by approximately $0.9 million. As of December 31, 2008, a one
percent increase in the assumed healthcare cost trend rate would increase the postretirement benefit obligation by
approximately $4.3 million, while a one percent decrease in the rate would reduce the postretirement benefit
obligation by approximately $4.0 million.
F-67