Fluor 2004 Annual Report Download - page 89

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2002
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Net periodic postretirement benefit cost for continuing operations includes the following components:
Year Ended December 31
2004 2003
(in thousands)
Service cost $ – $ – $ –
Interest cost 1,808 2,243 2,055
Expected return on assets – – –
Amortization of prior service cost – – –
Actuarial adjustment – – 165
Recognized net actuarial loss 746 631 114
Net periodic postretirement benefit cost $ 2,554 $ 2,874 $ 2,334
The following table sets forth the change in benefit obligation of the company’s postretirement benefit plans for
continuing operations:
Year Ended December 31
2004 2003 2002
(in thousands)
Change in postretirement benefit obligation
Benefit obligation at beginning of period $ 34,545 $ 41,533 $ 31,429
Service cost – – –
Interest cost 1,808 2,243 2,055
Employee contributions 5,558 4,650 4,215
Actuarial (gain) loss (609) (4,588) 12,091
Benefits paid (10,383) (9,293) (8,257)
Benefit obligation at end of period $ 30,919 $ 34,545 $ 41,533
Funded status $ (30,919) $ (34,545) $ (41,533)
Unrecognized net actuarial loss 9,239 10,594 15,813
Accrued postretirement benefit obligation $ (21,680) $ (23,951) $ (25,720)
The discount rate used in determining the postretirement benefit obligation was 5.75 percent at December 31, 2004,
6.00 percent at December 31, 2003 and 7.00 percent at December 31, 2002. Benefit payments, as offset by employee
contributions, are not expected to change significantly in the future.
On December 8, 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the ‘‘Act’’) was
signed into law. The Act introduced a prescription drug benefit under Medicare (Medicare Part D) and a federal subsidy to
sponsors of retirement health care plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. In May
2004, the FASB issued Staff Position 106-2, ‘‘Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003’’ (FSP 106-2) providing guidance on accounting for the effects of the
Act and specific disclosure requirements. Based on an analysis of the Act, the company has concluded that its retiree medical
plans provide benefits that are at least actuarially equivalent to Medicare Part D. The company adopted the provisions of
FSP 106-2 as of July 1, 2004 and recorded the effects of the subsidy in measuring net periodic postretirement benefit cost
during the quarter ended September 30, 2004. This resulted in a reduction in the accumulated postretirement benefit
obligation for the subsidy related to benefits attributed to past service of $2.9 million and a pretax reduction in net periodic
postretirement benefit costs of $0.3 million for the second half of 2004.
The preceding information does not include amounts related to benefit plans applicable to employees associated with
certain contracts with the U.S. Department of Energy because the company is not responsible for the current or future funded
status of these plans.
F-22