Delta Airlines 2008 Annual Report Download - page 114

Table of Contents
Index to Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the principal reasons for the difference between the effective tax rate and the U.S. federal statutory income tax rate for the
year ended December 31, 2008, the eight months ended December 31, 2007, the four months ended April 30, 2007 and the year ended December 31, 2006:
Successor Predecessor
Year Ended
December 31,
2008
Eight Months
Ended
December 31,
2007
Four Months
Ended
April 30,
2007
Year Ended
December 31,
2006
U.S. federal statutory income tax rate (35.0)% 35.0% 35.0% (35.0)%
State taxes, net of federal income tax effect (0.6) 3.7 3.6 (2.5)
Increase (decrease) in valuation allowance(1) 8.3 — (39.3) 23.2
Goodwill impairment 26.8 — — —
Other, net (0.8) 1.5 0.4 3.3
Effective income tax rate (1.3)% 40.2% (0.3)% (11.0)%
(1) For the four months ended April 30, 2007, the decrease in the valuation allowance reflects fresh start adjustments.
NOTE 10. EMPLOYEE BENEFIT PLANS
We sponsor defined benefit and defined contribution pension plans, postretirement healthcare plans, and disability and survivorship plans for eligible
employees and retirees, and their eligible family members.
Northwest Merger
In accordance with SFAS 87, "Employers' Accounting for Pensions" ("SFAS 87") and SFAS 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" ("SFAS 106"), when an employer is acquired in a merger, any excess of projected benefit obligation over the plan assets is recognized
as a liability and any excess of plan assets over the projected benefit obligation is recognized as a plan asset. The recognition of a new liability or a new asset
by the acquirer, at the date of the merger, results in the elimination of any (1) previously existing unrecognized net gain or loss, (2) unrecognized prior service
cost and (3) unrecognized net transition obligation. In addition, the new liability or asset is measured using actuarial assumptions, as determined by the
purchaser. All significant weighted-average assumptions used were determined based on our policies that are discussed below in "Assumptions."
Defined Benefit Pension, Other Postretirement, and Postemployment Benefit Plans
Defined Benefit Pension Plans. We sponsor a defined benefit pension plan for eligible non-pilot Delta employees and retirees (the "Delta Non-Pilot
Plan") and defined benefit pension plans for eligible Northwest employees and retirees (the "Northwest Pension Plans"). These plans have been closed to new
entrants and frozen for future benefit accruals.
The Pension Protection Act of 2006 allows commercial airlines to elect alternative funding rules ("Alternative Funding Rules") for defined benefit plans
that are frozen. Under the Alternative Funding Rules, the unfunded liability for a frozen defined benefit plan may be amortized over a fixed 17-year period
and is calculated using an 8.85% interest rate. Delta elected the Alternative Funding Rules for the Delta Non-Pilot Plan, effective April 1, 2007 and Northwest
elected the Alternative Funding Rules for the Northwest Pension Plans effective October 1, 2006. We estimate that the funding requirements under these plans
will be approximately $275 million in 2009.
Defined Contribution Pension Plans. Prior to the Merger, both Delta and Northwest sponsored several defined contribution plans and we continue to
sponsor all of those plans. These plans each generally cover different employee groups at Delta and Northwest, and employer contributions vary by each plan.
The cost associated with our defined contribution pension plans is reflected in the tables below.
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