Alaska Airlines and Horizon Air 2007 Annual Report Download - page 183

The estimated amortization of prior service cost
and net loss from AOCI in 2008 is $4.5 million
and $5.2 million, respectively, for the qualified
defined-benefit pension plans. For the
nonqualified defined-benefit pension plans, the
estimated amortization of prior service cost and
net loss from AOCI in 2008 is $0.1 million and
$0.2 million, respectively.
Net pension expense for the defined-benefit plans included the following components for 2007, 2006,
and 2005 (in millions):
Qualified Nonqualified
2007 2006 2005 2007 2006 2005
Service cost ............................... $ 49.7 $ 52.4 $ 50.4 $1.1 $1.1 $1.3
Interest cost ............................... 60.9 56.1 50.9 1.9 2.0 1.9
Expected return on assets .................... (66.3) (55.0) (49.9) ———
Amortization of prior service cost ............... 4.9 5.0 4.9 0.1 0.1 0.1
Curtailment loss ............................ —0.2 — ———
Recognized actuarial loss ..................... 13.4 19.6 15.4 0.3 0.4 0.3
Net pension expense ........................ $ 62.6 $ 78.3 $ 71.7 $3.4 $3.6 $3.6
With the adoption of SFAS 158 in 2006, the
Company now records all of the unrecognized
prior service cost and net loss into AOCI in order
to fully recognize the funded status of the plans.
In 2005, the Company recorded $41.2 million
(net of taxes of $24.4 million) in non-cash
charges to equity in connection with the defined-
benefit plans that the Company sponsors for
eligible employees. The charge in 2005 can be
partially attributed to the reduction of the
discount rate and a change from the GAM83
mortality tables to the RP2000 tables.
The Company expects to contribute
approximately $50 million and $2 million to the
qualified and nonqualified defined-benefit
pension plans, respectively, during 2008.
Future benefits expected to be paid over the next
ten years under the defined-benefit pension
plans from the assets of those plans as of
December 31, 2007 are as follows (in millions):
Qualified Nonqualified
2008 ..................... $ 28.1 $ 2.0
2009 ..................... 38.4 2.2
2010 ..................... 50.1 2.2
2011 ..................... 52.5 2.2
2012 ..................... 57.5 2.4
2013 – 2017 ............... $391.6 $14.2
Postretirement Medical Benefits
The Company allows retirees to continue their
medical, dental, and vision benefits by paying all
or a portion of the active employee plan premium
until eligible for Medicare, currently age 65. This
results in a subsidy to retirees, because the
premiums received by the Company are less
than the actual cost of the retirees’ claims. The
accumulated postretirement benefit obligation
(APBO) for this subsidy is unfunded, and at
December 31, 2007 and 2006 was $101.7
million and $97.5 million, respectively. This
liability was determined using an assumed
discount rate of 6.00% and 5.75% at
December 31, 2007 and 2006, respectively.
2007 2006
Accumulated postretirement benefit
obligation
Beginning of year ................ $ 97.5 $82.1
Service cost .................... 4.6 4.3
Interest cost .................... 6.3 4.9
Amendments ................... —8.7
Actuarial (gain) loss .............. (4.4) (0.3)
Benefits paid ................... (2.3) (2.2)
End of year ..................... $101.7 $97.5
2007 2006
Plan assets at fair value
Beginning of year ................ $— $—
Employer contributions ............ 2.3 2.2
Benefits paid ................... (2.3) (2.2)
End of year ..................... $— $—
Funded status (unfunded) .......... $(101.7) $(97.5)
83
ŠForm 10-K