The Travelers Cos. Inc., New York, plans to cut its expected rate of return on its defined benefit pension plan this year to 7.5%, from 8% last year, according to the company’s 10-K filing with the SEC.
The reduction “reflects the company’s current expectations of long-term returns on the plan’s invested assets,” the 10-K stated.
Those expectations take into account “the current low level of long-term interest rates as well as the Federal Reserve’s commentary in January 2012 regarding expected interest rate levels through 2014,” the 10-K said.
The company also is “projecting a return to more normal levels of long-term interest rates in the future,” the 10-K said.
The company has not determined whether it will make a contribution to the DB plan in 2012; it contributed $185 million last year and $35 million in 2010, according to the 10-K. However, Travelers “currently believes, subject to actual plan performance and funded status at the time, that it may make discretionary pension contributions of approximately $75 million to $100 million annually over the next few years,” the 10-K said.
Travelers doesn’t have a minimum funding requirement for the DB plan this year and doesn’t expect to have one in 2012. The company “has significant discretion in making contributions above those necessary to satisfy the minimum funding requirements,” the 10-K said.
The fair value of domestic DB plan assets was $2.41 billion as of Dec. 31up 3% from $2.34 billion in 2010.