Agenda - Council - 11/13/2012 - Laserfiche WebLink

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Assumed health care cost trend rates at December 31, were as follows: 2011 2010 Health care cost trend rate assumed for next year 7.5% 8.0% Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 5.0% 5.0% Year that the rate reaches the ultimate trend rate 2017 2017 Assumed health care cost trend rates have an impact on the amounts reported for the health care plans. A one -percentage -point change in the assumed health care cost trend rates would have the following pretax effect: (dollars in thousands) Effect on 2011 total of service and interest cost components Effect on postretirement benefit obligation at December 31, 2011 One -Percentage- One -Percentage - Point Increase Point Decrease $ 103 $ (63) 1,318 (941) Plan Assets The assets within the Bank of the West Employees' Retirement Plan and the UCB Retirement Plan ("the Plans") are managed in accordance with the Employee Retirement Income Security Act of 1974 ("ERISA"). The Plans' assets consist mainly of fixed income and equity securities of U.S. and foreign issuers and may include alternative investments such as real estate, private equity and other absolute return strategies. Investment Strategy and Risk Management for the Plans' Assets The long -tern investment objective of the ERP and UCB plans is to earn an investment return which meets or exceeds the following benchmarks over the long term: • The target rate of return should meet or exceed the current actuarial investment return assumption as reflected in the funding valuation rate. • The target rate of return should meet or exceed a compounded annual long-term rate of return equal to or greater than the Plans' custom benchmark returns. The Plans' assets are managed in accordance with the Retirement Committee's (the "Committee") guidelines. All transactions that utilize assets of the Trust will be undertaken for the sole benefit of the participants of the Plans. The assets selected for the Plans may consist of individual security issues managed by the investment manager(s) or securities held in a well -diversified portfolio of a registered investment company or an exchange -traded fund. In addition, for the UCB plan, the assets selected for the plan must have readily ascertainable market value and must be marketable. The assets under this plan may also consist of a publicly traded mutual fund. Investment managers may be permitted to use derivative instruments to control portfolio risk. The equity portion and debt portion of the Plans' assets may employ commingled assets or be individually invested expressly including the use of money market funds managed by a corporate trustee or by others. In its desire to protect Plans' assets, the Committee imposes general guidelines on asset allocation. Asset allocations are based on the Committee's appraisal of current and long -tern needs for liquidity and income of the Plans and its estimate of the investment returns from the various classes and types of investments. The asset allocations are likely to be the primary determinant of the Plans' returns and the associated volatility of returns for the Plans. -51- 2011 Bank of the West Annual Report