TCF Bank 2006 Annual Report Download - page 85

2006 Form10-K 65
The measurement dates used for determining the Pension Plan and the Postretirement Plan projected and accumulated
benefit obligations and the date used to value plan assets were September 30, 2006 and 2005. The discount rate and rate of
increase in future compensation used to measure the benefit obligation were as follows.
Pension Plan Postretirement Plan
Year Ended December 31, Year Ended December 31,
Assumptions used to determine benefit obligations 2006 2005 2006 2005
Discount rate 5.5% 5.25% 5.5% 5.25%
Rate of compensation increase N.A. 4.0 N.A. N.A.
N.A. Not Applicable.
Net periodic benefit cost included in compensation and employee benefits expense consists of the following.
Pension Plan Postretirement Plan
Year Ended December 31, Year Ended December 31,
(In thousands) 2006 2005 2004 2006 2005 2004
Service cost $ 1,421 $ 5,303 $ 4,632 $26 $ 35 $ 53
Interest cost 3,109 3,428 3,164 433 552 672
Expected return on plan assets (5,023) (5,727) (5,955) –– –
Amortization of transition obligation –––101 131 210
Amortization of prior service cost (21) (249) (233) –––
Recognized actuarial loss 4,072 1,050 – 119 139 215
Plan amendment/curtailment gain (400) –––––
Net periodic benefit cost $ 3,158 $ 3,805 $ 1,608 $679 $857 $1,150
The discount rate, the expected long-term rate of return on plan assets and the rate of increase in future compensation used
to determine the net benefit cost were as follows.
Pension Plan Postretirement Plan
Assumptions used to Year Ended December 31, Year Ended December 31,
determine net benefit cost 2006 2005 2004 2006 2005 2004
Discount rate 5.25/5.5%(1) 6.0% 6.0% 5.25% 6.0% 6.0%
Expected long-term rate of return
on plan assets 8.75 8.75 8.5 N.A. N.A. N.A.
Rate of compensation increase 4.0 4.0 4.5 N.A. N.A. N.A.
(1) Due to a curtailment and liability remeasurement as of February 1, 2006 for the Pension Plan, the discount rate used to determine net benefit cost was increased from 5.25%
for the period ending February 1, 2006 to 5.5% for the period ended December 31, 2006.
N.A. Not Applicable.
TCF’s Pension Plan assets are invested in index mutual
funds that are designed to mirror the performance of the
Standard and Poor’s 500 and the Morgan Stanley Capital
International U.S. Mid-Cap 450 indexes, at targeted weight-
ings of 75% and 25%, respectively. Prior to December 2004,
the assets were managed by external investment managers
on a discretionary basis subject to certain restrictions and
limitations.
The actuarial assumptions used in the Pension Plan
valuation are reviewed annually. The expected long-term
rate of return on plan assets is determined by reference
to historical market returns and future expectations. The
10-year weighted-average return of the indexes consistent
with the Plan’s current investment strategy was 9.6%, net
of administrative expenses. Although past performance is
no guarantee of the future results, TCF is not aware of any
reasons why it should not be able to achieve the assumed
future (beginning 2007) average long term annual returns
of 8.5%, net of administrative expenses, on plan assets over
complete market cycles. A 1% difference in the expected
return on plan assets would result in a $581 thousand change
in net periodic pension expense.