Health Net 2000 Annual Report Download - page 48

46 HEALTH NET 2000 Annual Report
The weighted average annual discount rate assumed
was 7.50% and 7.75% for the years ended December 31,
2000 and 1999, respectively, for both pension plan benefit
plans and other postretirement benefit plans.Weighted
average compensation increases of between 2.00% to
6.00% for the years ended December 31, 2000 and 1999
were assumed for the pension benefit plans.
For measurement purposes, depending upon the
type of coverage offered, a 6.00% to 9.00% annual rate of
increase in the per capita cost covered health care benefits
was assumed for 2000, and 6.00% was assumed for 1999.
These rates were assumed to decrease gradually to
between 5.50% and 6.00% in 2007 for 2000 and to
4.50% in 2006 for 1999.
The Company has multiple postretirement medical
benefit plans.The Health Net plan is non-contributory
for employees retired prior to December 1, 1995 who
have attained the age of 62; employees retiring after
December 1, 1995 who have attained age 62 contribute
from 25% to 100% of the cost of coverage depending
upon years of service.The Company has two other bene-
fit plans that it has acquired as part of the acquisitions
made in 1997. One of the plans is frozen and non-con-
tributory, whereas the other plan is contributory by cer-
tain participants.
A one percentage point change in assumed health
care cost trend rates would have the following effects for
the year ended December 31, 2000 (amounts in thousands):
1-percentage 1-percentage
point increase point decrease
Effect on total of service
and interest cost $ 258 $ (190)
Effect on postretirement
benefit obligation 1,333 (1,017)
The Company has no minimum pension liability
adjustment to be included in comprehensive income.
Performance-Based Annual Bonus Plan
In 2000, the Company adopted a new Executive Officer
Incentive Plan that qualifies as a Performance-Based
Annual Bonus Plan under Section 162(m) of the Code
(the “162(m) Plan”). Under the 162(m) Plan, certain exec-
utives were eligible to receive cash bonuses based upon
the attainment of objective performance goals established
by the Company’s Compensation and Stock Option
Committee pursuant to the terms of the 162(m) Plan.
NOTE 10 – Income Taxes
Significant components of the provision (benefit) for
income taxes are as follows for the years ended December
31 (amounts in thousands):
2000 1999 1998
Current:
Federal $18,459 $29,080 $ 6,346
State 10,349 (6,448) 3,897
Total current 28,808 22,632 10,243
Deferred:
Federal 64,644 52,419 (121,800)
State 5,672 21,175 (7,630)
Total deferred 70,316 73,594 (129,430)
Total provision
(benefit) for
income taxes $99,124 $96,226 $(119,187)
The $119.2 million tax benefit in 1998 includes
$30,191,000 of tax benefit associated with the disposition
of the Company’s workers’compensation segment, which
was recorded as a discontinued operation in 1997.The
tax benefit offsets additional pretax losses recorded upon
completion of the sale in December 1998.