McKesson 2006 Annual Report Download - page 80

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Information regarding the changes in benefit obligations for our other postretirement plans is as follows:
As described in Note 1, we adopted the provisions of FSP No. FAS 109-2 in the second quarter of 2005. The expected Medicare subsidy
had the effect of reducing the Company’s accumulated postretirement benefit obligations by approximately $19 million. This reduction is
recognized as an actuarial gain and amortized over three years. The expected subsidy also resulted in a nominal reduction in interest cost in
2005. As required by the FSP, the Company recognized total reductions in postretirement benefit expense of $7 million in 2005.
A reconciliation of the other postretirement plans’ funded status to the net liability recognized is as follows:
Other postretirement benefits are funded as claims are paid. Expected benefit payments for our other postretirement benefit plans, net of
expected Medicare subsidy receipts, are as follows:
Expected benefit payments are based on the same assumptions used to measure the benefit obligations and include estimated future
employee service.
Weighted-average assumptions used to estimate other postretirement benefit expenses and the actuarial present value of benefit obligations
were as follows:
Actuarial losses for the postretirement benefit plan are amortized over a three-year period. The assumed healthcare cost trends used in
measuring the accumulated postretirement benefit obligation were 13% and 15% for prescription drugs, 10% and 13% for medical and 5% and
6% for dental in 2006 and 2005. The healthcare cost trend rate assumption has a significant effect on the amounts reported. For 2006, 2005 and
2004, a one-percentage-point increase and a one-percentage-point decrease in the assumed healthcare cost trend rate would impact total
75
Years Ended March 31,
(In millions) 2006 2005
Chan
g
e in benefit obli
g
ations
Benefit obligation at beginning of year $206 $213
Service cost 2 2
Interest cost 11 11
Immediate recognition of actuarial losses (gains) 14 (1)
Benefit payments (20) (19)
Benefit obligation at end of year $213 $206
Years Ended March 31,
(In millions) 2006 2005
Funded status
Funded status at end of year $(213) $(206)
Unrecognized net actuarial loss 34 41
Unrecognized prior service cost (1) (2)
Accrued benefit cost recognized in the consolidated balance sheet $(180) $(167)
(In millions)
2007 $20
2008 20
2009 20
2010 19
2011 19
2012 – 2016 86
2006 2005 2004
Net periodic expense
Discount rates 5.75% 6.00% 6.75%
Benefit obli
g
ation
Discount rates 5.55% 5.75% 6.00%