SWM - Mark Moore

company is responsible for investing in a fund in order to meet its obligations to the employee.With this plan, the company takes on the investment risk. Among defined benefit plans, themost popular type states a promise to pay retirees based on two factors, the length of theirservice and their salary history at the time of retirement. More and more companies areswitching to a defined contribution plan, such as a 401k. With this plan, the company makescontributions or matching contributions but does not promise the future benefit to theemployee. A defined contribution plan has the employee take on the investment risk, which inturn reduces the company’s costs and expenses. “The Company recognizes the estimated compensation cost of employees' pension andother postretirement benefits over their approximate period of service in accordance with SFASNo. 87, “Employers’ Accounting for Pensions” and SFAS No. 106, “Employers’ Accounting forPostretirement Benefits Other than Pensions”. The Company's earnings are impacted byamounts of expense recorded related to these benefits, which primarily consist of U.S. andFrench pension benefits and U.S. other postretirement benefits, or OPEBs. Each year's recordedexpenses are estimates based on actuarial calculations of the Company's accumulated andprojected benefit obligations, or PBOs, for the Company's various plans” (Schweitzer-Mauduit10-K). Pensions and other post retirement benefits are recorded as liabilities on the balancesheet. The discount rate is a major determinant of the planned assets and the future value ofthe cash flows the plans should create. The discount rate is indirectly correlated with firm’sliabilities, which will skew the financial statements if it is under or overestimated.Pension and Other Post Retirement BenefitsCompany 2008 2007 2006 2005 2004Schweitzer-Mauduit67.3 38.9 54.2 38.1 47.8Alliance One 11.3 1.9 8.9 3.3 4.1Universal Corp 88.3 100 70.4 50.9 46.5(In millions)58