Notes to Financial Statements
8. Benefit Plans
Retirement Plans
Substantially all employees of the Foundation are covered by two defined contribution retirement plans which provide for retirement benefits through a combination of the purchase of individually-owned annuities and cash payout. The Foundation’s policy is to fund costs incurred. Pension expense amounted to approximately $3.6 million and $3.4 million for 2006 and 2005, respectively, under these plans.
Postretirement Benefits
The Foundation provides postretirement medical and dental benefits to all employees who meet eligibility requirements.
The benefit obligation for 2006 and 2005 is summarized as follows (in thousands):
| 2006 | 2005 | |
|---|---|---|
| Benefit obligation at December 31 | $22,363 | $20,077 |
| Fair value of plan assets at December 31 | — | — |
| Funded status | $(22,363) | $(20,077) |
| (Accrued) benefit cost recognized in the statement of financial position | $(16,786) | $(14,157) |
| Weighted-average assumptions used to determine obligations as of December 31 | ||
| Discount rate | 6.00% | 6.00% |
| Expected return on plan assets | N/A | N/A |
The benefit information for 2006 and 2005 is summarized as follows (in thousands):
| 2006 | 2005 | |
|---|---|---|
| Benefit cost | $3,426 | $2,977 |
| Employer contributions | 797 | 575 |
| Plan participants’ contributions | 29 | 12 |
| Benefits paid | 826 | 587 |
| Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31 | ||
| Discount rate | 5.50% | 5.75% |
| Expected return on plan assets | N/A | N/A |
| Assumed health care cost trend rates at December 31 | ||
| Health care cost trend rate for the next year | 9.00% | 10.00% |
| Rate to which the cost trend rate is assumed to decline | 5.00% | 5.00% |
| Year that the rate reaches the ultimate trend rate | 2013 | 2013 |
The estimated future benefit payments are as follows (in thousands):
| 2007 | $612 |
|---|---|
| 2008 | 640 |
| 2009 | 713 |
| 2010 | 793 |
| 2011 | 832 |
| 2012–2015 | $5,343 |
In December 2003 the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) was signed in to law. The Act introduces a prescription drug benefit under Medicare Part D as well as a Federal subsidy to employers whose plans provide actn “auarial equivalent” prescription drug benefit. The Foundation’s postretirement prescription drug benefits should qualify for this subsidy. The Foundation will treat the effects of the Act as an actuarial gain upon adoption of the Financial Accounting Standards Board Staff Position No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” as of December 31, 2006.