PBI » Topics » Pension Benefits

This excerpt taken from the PBI 10-K filed Feb 26, 2009.

Pension benefits

Assumptions and estimates

The valuation and calculation of our net pension expense, assets and obligations are dependent on various assumptions and estimates. We make assumptions relating to discount rate, rate of compensation increase, expected return on plan assets and other factors. These assumptions are evaluated and updated annually and are described in further detail in Note 13 to the Consolidated Financial Statements. The following assumptions relate to our U.S. qualified pension plan, which is our largest plan. We determine our discount rate for the U.S. retirement benefit plan by using a model that discounts each year’s estimated benefit payments by an applicable spot rate. These spot rates are derived from a yield curve created from a large number of high quality corporate bonds. Accordingly, our discount rate assumption was 6.05% at December 31, 2008 and 6.15% at December 31, 2007. The rate of compensation increase assumption reflects our actual experience and best estimate of future increases. Our estimate of the rate of compensation increase was 4.25% at December 31, 2008 and 4.5% at December 31, 2007. Our expected return on plan assets is determined based on historical portfolio results, the plan’s asset mix and future expectations of market rates of return on the types of assets in the plan. Our expected return on plan assets assumption was 8.0% in 2008 and 8.5% at December 31, 2007.

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Sensitivity to changes in assumptions:

U.S. Pension Plan

 

 

 

 

Discount rate – a 0.25% increase in the discount rate would decrease annual pension expense by approximately $2.8 million and would lower the projected benefit obligation by $39.8 million.

 

 

 

 

Rate of compensation increase – a 0.25% increase in the rate of compensation increase would increase annual pension expense by approximately $2.5 million.

 

 

 

 

Expected return on plan assets – a 0.25% increase in the expected return on assets of our principal plans would decrease annual pension expense by approximately $3.8 million.

The following assumptions relate to our U.K. qualified pension plan, which is our largest foreign plan. We determine our discount rate for the U.K. retirement benefit plan by using a model that discounts each year’s estimated benefit payments by an applicable spot rate. These spot rates are derived from a yield curve created from a large number of high quality corporate bonds. Accordingly, our discount rate assumption was 6.3% at December 31, 2008 and 5.8% at December 31, 2007. The rate of compensation increase assumption reflects our actual experience and best estimate of future increases. Our estimate of the rate of compensation increase was 4.3% at December 31, 2008 and 4.7% at December 31, 2007. Our expected return on plan assets is determined based on historical portfolio results, the plan’s asset mix and future expectations of market rates of return on the types of assets in the plan. Our expected return on plan assets assumption was 7.25% in 2008 and 7.75% at December 31, 2007.

U.K. Pension Plan

 

 

 

 

Discount rate – a 0.25% increase in the discount rate would decrease annual pension expense by approximately $2.0 million and would lower the projected benefit obligation by $12.3 million.

 

 

 

 

Rate of compensation increase – a 0.25% increase in the rate of compensation increase would increase annual pension expense by approximately $0.7 million.

 

 

 

 

Expected return on plan assets – a 0.25% increase in the expected return on assets of our principal plans would decrease annual pension expense by approximately $0.9 million.

Delayed recognition principles

In accordance with SFAS No. 87, Employers’ Accounting for Pensions, actual pension plan results that differ from our assumptions and estimates are accumulated and amortized over the estimated future working life of the plan participants and will therefore affect pension expense recognized and obligations recorded in future periods. We also base our net pension expense primarily on a market related valuation of plan assets. In accordance with this approach, we recognize differences between the actual and expected return on plan assets primarily over a five-year period and as a result future pension expense will be impacted when these previously deferred gains or losses are recorded. See the new accounting pronouncements below for the effect of SFAS No. 158, Employers’ Accounting for Defined Pension and Other Post Retirement Plans an amendment of FASB Statements No. 87, 88, 106 and 132(R).

Investment related risks and uncertainties

We invest our pension plan assets in a variety of investment securities in accordance with our strategic asset allocation policy. The composition of our U.S. pension plan assets at December 31, 2008 was approximately 50% equity securities, 39% fixed income securities, 7% real estate investments and 4% private equity investments. The composition of our U.K. pension plan assets at December 31, 2008 was approximately 63% equity securities, 33% fixed income securities and 4% cash. Investment securities are exposed to various risks such as interest rate, market and credit risks. In particular, due to the level of risk associated with equity securities, it is reasonably possible that changes in the values of such investment securities will occur and that such changes could materially affect our future results.

This excerpt taken from the PBI DEF 14A filed Mar 27, 2008.

Pension Benefits

The following table provides information regarding post-employment payments to the named officers. It includes data regarding the Pitney Bowes Pension Plan, Pension Restoration Plan and U.K. Pension Fund. The Pitney Bowes Pension Plan is a qualified pension plan for U.S. employees, while the Pitney Bowes Pension Fund is a qualified pension plan for U.K. employees. U.S. named officers are eligible to participate in the Pitney Bowes Pension Plan which is a broad-based tax-qualified plan under which employees generally are eligible to retire with unre-duced benefits at age 65. U.S. named officers are also eligible to participate in the Pension Restoration Plan which provides eligible employees with compensation greater than the $225,000 limit for 2007 with benefits based on the same formula used under the qualified plan. The Pension Restoration Plan is offered to approximately 800 of our current active employees to provide for retirement benefits above amounts available under the tax-qualified Pension Plan. To the limited extent that Pitney Bowes has granted extra years of credited service under its pension plans, the policy is broad based and not limited to executives. Payments under the nonqualified Pension Restoration Plan are paid from our general assets. These payments are substantially equal to the difference between the amount that would have been payable under our qualified Pension Plan in the absence of legislation limiting pension benefits and earnings that may be considered in calculating pension benefits, and the amount actually paid

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under our qualified Pension Plan. Pitney Bowes does not maintain an excess benefit plan with special provisions, such as above-market interest rates.

All of the named officers are fully vested in their pension benefit.

The amounts reported in the table below equal the present value of the accumulated benefit at December 31, 2007, for the named officers under the various Pitney Bowes pension plans based on service and covered earnings (as described below) considered by the plans for the period through December 31, 2007. The present value has been calculated assuming the named officer will remain employed until age 65, generally the age at which retirement may occur without any reduction in benefits, and that the benefit is payable consistent with the assumptions as described in note 13 to the financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2007.

This excerpt taken from the PBI 10-K filed Feb 29, 2008.

Pension benefits

Assumptions and estimates

The valuation and calculation of our net pension expense, assets and obligations are dependent on various assumptions and estimates. We make assumptions relating to discount rates, rate of compensation increase, expected return on plan assets and other factors. These assumptions are evaluated and updated annually and are described in further detail in Note 13 to the Consolidated Financial Statements. The following assumptions relate to our U.S. qualified pension plan, which is our largest plan. We determine our discount rate for the U.S. retirement benefit plan by using a model that discounts each year’s estimated benefit payments by an applicable spot rate. These spot rates are derived from a yield curve created from a large number of high quality corporate bonds. Accordingly, our discount rate assumption was 6.15% at December 31, 2007 and 5.85% at December 31, 2006. The rate of compensation increase assumption reflects our actual experience and best estimate of future increases. Our estimate of the rate of compensation increase was 4.50% at December 31, 2007 and 2006. Our expected return on plan assets is determined based on historical portfolio results, the plan’s asset mix and future expectations of market rates of return on the types of assets in the plan. Our expected return on plan assets assumption was 8.50% in 2007 and 2006.

Sensitivity to changes in assumptions:

 

 

 

Discount rate – a 0.25% increase in the discount rate would decrease annual pension expense by approximately $2.9 million.

 

 

 

 

Rate of compensation increase – a 0.25% increase in the rate of compensation increase would increase annual pension expense by approximately $2.5 million.

 

 

 

 

Expected return on plan assets – a 0.25% increase in the expected return on assets of our principal plans would decrease annual pension expense by approximately $3.9 million.

Delayed recognition principles

In accordance with SFAS No. 87, Employers’ Accounting for Pensions, actual pension plan results that differ from our assumptions and estimates are accumulated and amortized over the estimated future working life of the plan participants and will therefore affect pension expense recognized and obligations recorded in future periods. We also base our net pension expense primarily on a market related valuation of plan assets. In accordance with this approach, we recognize differences between the actual and expected return on plan assets primarily over a five-year period and as a result future pension expense will be impacted when these previously deferred gains or losses are recorded. See the new accounting pronouncements below for the effect of SFAS No. 158, Employers’ Accounting for Defined Pension and Other Post Retirement Plans an amendment of FASB Statements No. 87, 88, 106 and 132(R).

Investment related risks and uncertainties

We invest our pension plan assets in a variety of investment securities in accordance with our strategic asset allocation policy. The composition of our U.S. pension plan assets at December 31, 2007 was approximately 66% equity securities, 28% fixed income securities and 6% real estate investments. Investment securities are exposed to various risks such as interest rate, market and credit risks. In particular, due to the level of risk associated with equity securities, it is reasonably possible those changes in the values of such investment securities will occur and that such changes could materially affect our future results.

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This excerpt taken from the PBI DEF 14A filed Apr 3, 2007.

Pension Benefits

The following table provides information regarding post-employment payments to the named executive officers. It includes data regarding the Pitney Bowes Pension Plan, Pension Restoration Plan and U.K. Pension Fund. The amounts reported in the table below equal the present value of the accumulated benefit at December 31, 2006, for the named executive officers under the various Pitney Bowes pension plans based on service and covered earnings (as described below) considered by the plans for the period through December 31, 2006. The present value has been calculated assuming the named executive officer will remain employed until age 65, the age at which retirement may occur without any reduction in benefits, and that the benefit is payable consistent with the assumptions as decribed in note 13 to the financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2006.

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This excerpt taken from the PBI 10-K filed Mar 1, 2007.

Pension benefits

Assumptions and estimates

Our net pension expense, assets and obligations are dependent on various assumptions and estimates. We make assumptions relating to discount rates, rate of compensation increase, expected return on plan assets and other factors. These assumptions are evaluated and updated annually and are described in further detail in Note 13 to the Consolidated Financial Statements. The following assumptions relate to our U.S. qualified pension plan, which is our largest plan. We determine our discount rate for the U.S. retirement benefit plan by using a model that discounts each year’s estimated benefit payments by an applicable spot rate. These spot rates are derived from a yield curve created from a large number of high quality corporate bonds. Accordingly, our discount rate assumption was 5.85% at December 31, 2006 and 5.60% at December 31, 2005. The rate of compensation increase assumption reflects our actual experience and best estimate of future increases. Our estimate of the rate of compensation increase was 4.50% at December 31, 2006 and 2005. Our expected return on plan assets is determined based on historical portfolio results, the plan’s asset mix and future expectations of market rates of return on the types of assets in the plan. Our expected return on plan assets assumption was 8.50% in 2006 and 2005.

Sensitivity to changes in assumptions:

  • Discount rate – a 0.25% increase in the discount rate would decrease annual pension expense by approximately $2.8 million.
  • Rate of compensation increase – a 0.25% increase in the rate of compensation increase would increase annual pension expense by approximately $2.2 million.
  • Expected return on plan assets – a 0.25% increase in the expected return on assets of our principal plans would decrease annual pension expense by approximately $3.9 million.

Delayed recognition principles

In accordance with SFAS No. 87, Employers’ Accounting for Pensions, actual pension plan results that differ from our assumptions and estimates are accumulated and amortized over the estimated future working life of the plan participants and will therefore affect pension expense recognized and obligations recorded in future periods. We also base our net pension expense primarily on a market related valuation of plan assets. In accordance with this approach we recognize differences between the actual and expected return on plan assets primarily over a five-year period and as a result future pension expense will be impacted when these previously deferred gains or losses are recorded. See new accounting pronouncements below for the effect of SFAS No. 158, Employee’s Accounting for Defined Pension and Other Post Retirement Plans an amendment of FASB Statements No. 87, 88, 106 and 132(R).

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Investment related risks and uncertainties

We invest our pension plan assets in a variety of investment securities in accordance with our strategic asset allocation policy. The composition of our U.S. pension plan assets at December 31, 2006 was approximately 72% equity securities, 23% fixed income securities and 5% real estate investments. Investment securities are exposed to various risks such as interest rate, market and credit risks. In particular, due to the level of risk associated with equity securities, it is reasonably possible that changes in the values of such investment securities will occur and that such changes could materially affect our future results.

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