The weighted average rate assumptions used to determine net periodic benefit cost for the defined benefit plan and SERP are as follows: Defined Benefit Plan
SERP
December 31,
December 31,
2017
2016
2015
2017
2016
2015
4.30%
4.55%
4.10%
4.30%
4.55%
4.10%
Expected return on plan assets 6.00%
6.63%
7.25%
N/A
N/A
N/A
Rate of compensation increase 4.35%
4.75%
4.75%
4.00%
4.00%
4.00%
Discount rate
The discount rates are calculated using a spot yield curve method developed by an independent actuary. The approach maps a high-quality bond yield curve to the duration of the plans’ liabilities, thus approximating each cash flow of the liability stream to be discounted at an interest rate specifically applicable to its respective period in time. Plan Assets The asset allocation target ranges for the defined benefit plan follows the investment policy adopted by our retirement trust committee. This policy provides for a certain level of trustee flexibility in selecting target allocation percentages. The actual asset allocations at December 31, 2017, 2016, and 2015 are shown in the following table, along with the adopted range for target allocation percentages by asset class. The actual allocation percentages reflect the quoted market values at year-end and may vary during the course of the year. Plan assets are generally rebalanced to a level within the target range each year at the direction of the trustees. We establish the expected rate of return on plan assets based on a review of past and anticipated future returns on plan assets. The expected rate of return on plan assets assumption also matches the pension plans’ long-term interest rate assumption used for funding purposes. Total
Percentage of Plan
Allocation
Assets at December 31,
Range
2017
2016
2015
Asset Category Domestic Equity
40-50 %
41 %
45 %
45 %
Domestic Fixed Income
35-50
35
35
36
0-10
12
10
9
0-10
7
5
5
0-5
5
5
5
100 %
100 %
100 %
International Equity Emerging Markets Equity and Fixed Income Real Assets: Gold Fund Total
100 %
The assets of the defined benefit plan consist primarily of investments in various domestic equity, international equity and bond funds. These funds do not contain any significant investments in a single entity, industry, country or commodity, thereby mitigating concentration risk. No CoBank stock or debt, or that of any other System institution, is included in these investments.
Farm Credit Financial Partners, Inc. Farm Credit Financial Partners, Inc.
2017 Annual Report 2017 Annual Report
47
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