Alaska Airlines and Horizon Air 2013 Annual Report Download - page 161

Net pension expense for the defined-benefit plans included the following components for the years
ended December 31 (in millions):
Qualified Nonqualified
2013 2012 2011 2013 2012 2011
Service cost .................................. $46 $38 $35 $1 $1 $1
Interest cost .................................. 73 73 73 122
Expected return on assets ....................... (111) (93) (88) ———
Amortization of prior service cost .................. (1) (1) (1) ———
Recognized actuarial loss ........................ 43 40 23 111
Net pension expense ........................... $50 $57 $42 $3 $4 $4
Historically, the Company’s practice has been to
contribute to the qualified defined-benefit
pension plans an amount equal to the greater of
1) the minimum required by law, 2) the Pension
Protection Act (PPA) target liability, or 3) the
service cost as actuarially calculated. There are
no current funding requirements for the
Company’s plans in 2014. The Company expects
to contribute approximately $2 million to the
nonqualified defined-benefit pension plans during
2014.
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, 2013 (in millions):
Qualified Nonqualified
2014 .................. $72 $ 2
2015 .................. 84 2
2016 .................. 76 4
2017 .................. 93 2
2018 .................. 92 2
2019—2023 ............ 548 18
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. This liability was determined using an assumed discount rate of 4.85% and 3.95% at
December 31, 2013 and 2012, respectively. The Company does not believe the U.S. Health Care
Reform: The Patient Protection and Affordable Care Act and The Health Care and Education
Reconciliation Act will have a significant impact on the Company's cost for postretirement medical
benefits.
(in millions) 2013 2012
Accumulated postretirement benefit obligation
Beginning of year ................................................................... $117 $ 120
Service cost ....................................................................... 55
Interest cost ....................................................................... 45
Actuarial gain ...................................................................... (35) (11)
Benefits paid ...................................................................... (2) (2)
End of year ........................................................................ $89 $ 117
Plan assets at fair value
Beginning of year ................................................................... $— $—
Employer contributions ............................................................... 22
Benefits paid ...................................................................... (2) (2)
End of year ........................................................................ $— $—
Funded status (unfunded) ............................................................ $ (89) $(117)
75
ŠForm 10-K