Assumptions 2001, and the target allocation for 2004, by asset category,  ar e as follows:  The actuarial assumptions were as follows: The asset allocation for O&R’s other postretirement benefit plans at the end of 2003, 2002 and 2001 was approximately 90% and 10% in debt and equity securities, respectively. The company plans to align its asset allocation to the target shown above. Con Edison has established postretirement health and life insurance benefit plan trusts for the investment of assets to be used for the exclusive purpose of providing other postretire- ment benefits to participants and beneficiaries. Refer to Note E for descriptions of the basis for determining the expected return on assets and investment policies and strategies. Refer to Note E for a discussion of Con Edison’s investment strategy .  The health care cost trend rate used to determine net periodic benefit cost for the year ended December 31, 2003 was 9.00%. This rate was assumed to decrease gradually to 4.75% for 2009 and remain at that level thereafter. The health care cost trend rate used to determine benefit obligations at December 31, 2003 was 9.00%. This rate was assumed to decrease gradually to 4.50% for 2009 and remain at that level thereafter. A one-percentage point change in the assumed health care cost trend rate would have the following effects at  December 31, 2003: In December 2003, President Bush signed into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003. As permitted by the FASB, the Companies have elected not to defer recognition of this Act. See Note V. To reflect the effect of the Act on the plans, the 2003 year-end accumulated postretirement benefit obligations were reduced for Con Edison, Con Edison of New York and O&R by $128 million, $114 million and $14 million, respectively, and the 2004 after-tax postretirement benefit costs are estimated to be reduced by $10 million for Con Edison, $9 million for Con Edison of New York and $1 million for O&R. The Companies will recognize the 28% subsidy (reflected as an unrecognized net gain to each plan) as an offset to plan costs. The 28% sub- sidy is expected to reduce prescription drug plan costs by about 25%. The Companies’ actuaries have determined that each prescription drug plan provides a benefit that is at least actuarially equivalent to the Medicare prescription drug plan and projections indicate that this will be the case for 20 years. (For a small number of pension recipients, whose benefits total less than $12,000 per year, this will be the case indefinitely.) When the plans’ benefits are no longer actuarially equivalent to the Medicare plan, 25% of the retirees in each plan are assumed to begin to decline participation in the Companies’ pr escription programs. Specific authoritative guidance on the accounting for the federal subsidy is pending and guidance, when issued, could require a change to previously reported information. Based on current estimates, Con Edison of New York and O&R expect to contribute $27 million and $8 million, respectively, to the other postretirement benefit plans in 2004. The asset allocation for Con Edison of New York’s other postretirement benefit plans at the end of 2003, 2002 and Con Edison Annual Report 2003 73 Plan Assets Expected Contributions Effect of Medicare Prescription Subsidy Target Allocation Plan Assets at December 31, Asset Category 2004 2003 2002 2001 Equity Securities 65% 62% 55% 58% Debt Securities 35% 38% 45% 42% To tal 100% 100% 100% 100% 2003 2002 2001 Weighted-average assumptions  used to determine  benefit obligations at December 31: Discount Rate 6.30% 6.75% 7.50% Weighted-average assumptions  used to determine net periodic  benefit cost for the years  ended December 31: Discount Rate 6.75% 7.50% 7.75% Expected Return on Plan Assets Tax-Exempt Assets 8.80% 9.20% 9.20% Taxable Assets Con Edison of New York 7.80% 8.20% 8.20% O&R 8.30% 8.70% 8.70% Con Edison  Con Edison of New York O&R 1-Percentage-Point (Millions of Dollars) Increase Decrease Increase Decrease Increase Decrease Effect on accumulated postretirement  benefit obligation $128 $114 $115 $103 $13 $11 Effect on service cost and interest cost components  for 2003 $011 $010 $010 $109 $01 $01