NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) Retirement and Deferred Compensation Plans (Continued)
The weighted-average assumptions used in determining the actuarial present value of the projected benefit obligations under the defined benefit plans are as follows:
| April 29, 2007 |
April 30, 2006 |
||||||
|---|---|---|---|---|---|---|---|
| Discount rate | 6.0 | % | 6.0 | % | |||
| Increase in future compensation levels | 4.0 | 4.5 | |||||
| Expected long-term rate of return on assets | 7.5 | 7.5 | |||||
The weighted average assumptions used in determining the net periodic benefit cost under the defined benefit plans are as follows:
| 2007 | 2006 | 2005 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Discount rate | 6.00 | % | 5.50 | % | 6.25 | % | |||||
| Increase in future compensation levels | 4.50 | 4.50 | 4.50 | ||||||||
| Expected long-term rate of return on assets | 7.50 | 7.50 | 7.50 | ||||||||
Fleetwood selected the expected long-term rate of return on assets in consultation with their investment advisors and actuaries. These rates are intended to reflect the average rates expected to be earned on the funds invested or to be invested to provide required plan benefits. The plan is assumed to continue in effect as long as assets are expected to be invested.
In estimating the expected long-term rate of return on assets, appropriate consideration is given to historical performance for the major asset classes held or anticipated to be held by the applicable plan trusts and to current forecasts of future rates of return for those asset classes. Cash flow and expenses are taken into consideration to the extent that the expected returns would be affected by them. Assets are held in qualified trusts and anticipated returns are not reduced for taxes.
The pension plan’s weighted-average asset allocations as of the measurement date for fiscal 2007 and fiscal 2006, by category, are as follows:
| Plan Assets | |||||||
|---|---|---|---|---|---|---|---|
| Asset category | 2007 | 2006 | |||||
| Equities | 70 | % | 71 | % | |||
| Fixed income securities | 27 | 26 | |||||
| Cash | 3 | 3 | |||||
| Total | 100 | % | 100 | % | |||
The objective of the plan’s trust funds is to sufficiently diversify plan assets to maintain a reasonable level of risk without imprudently sacrificing return, with a target asset allocation of approximately 30% fixed income securities and approximately 70% equities. Fleetwood retains an investment manager who selects the funds to implement the investment strategy, such that the investments approximate the target asset allocation. Fleetwood’s policy is not to invest plan assets in Fleetwood shares.
The components of net periodic pension cost are as follows:
| 2007 | 2006 | 2005 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (Amounts in thousands) | |||||||||||
| Service cost—benefits earned during the year | $ | 573 | $ | 668 | $ | 561 | |||||
| Interest cost on projected benefit obligation | 589 | 549 | 468 | ||||||||
| Expected return on plan assets | (519 | ) | (442 | ) | (415 | ) | |||||
| Amortization of unrecognized prior service cost | 9 | 9 | 9 | ||||||||
| Recognized net actuarial loss | 98 | 197 | 81 | ||||||||
| Net periodic pension cost | $ | 750 | $ | 981 | $ | 704 | |||||
Fleetwood expects to contribute $670,000 to its defined benefit pension plan in fiscal 2008.
The following benefit payments, which reflect future service as appropriate, are expected to be paid:
| Pension Benefits |
|||
|---|---|---|---|
| (Amounts in thousands) |
|||
| 2008 | $ | 184 | |
| 2009 | 237 | ||
| 2010 | 274 | ||
| 2011 | 314 | ||
| 2012 | 374 | ||
| 2013-2017 | 2,752 | ||