Southwest Airlines 2009 Annual Report Download - page 91

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2009
15. EMPLOYEE RETIREMENT PLANS
Defined contribution plans
The Company has defined contribution plans covering substantially all its Employees. The Southwest
Airlines Co. Profit Sharing Plan (Profit Sharing Plan) is a defined contribution plan to which the Company
contributes 15 percent of its eligible pre-tax profits, as defined, on an annual basis. No Employee contributions to
the Profit Sharing Plan are allowed.
The Company also sponsors Employee savings plans under section 401(k) of the Internal Revenue Code,
which include Company matching contributions. The 401(k) plans cover substantially all Employees.
Contributions under all defined contribution plans are primarily based on Employee compensation and
performance of the Company.
Company contributions to all defined contribution plans expensed in 2009, 2008, and 2007 were $203
million, $243 million, and $279 million, respectively.
Postretirement benefit plans
The Company provides postretirement benefits to qualified retirees in the form of medical and dental
coverage. Employees must meet minimum levels of service and age requirements as set forth by the Company, or
as specified in collective bargaining agreements with specific workgroups. Employees meeting these
requirements, as defined, may use accrued unused sick time to pay for medical and dental premiums from the age
of retirement until age 65.
The following table shows the change in the Company’s accumulated postretirement benefit obligation
(APBO) for the years ended December 31, 2009 and 2008:
(In millions) 2009 2008
APBO at beginning of period ............................. $101 $ 88
Service cost ....................................... 10 14
Interest cost ....................................... 4 5
Benefits paid ...................................... (2) (3)
Actuarial gain ..................................... (27) (3)
APBO at end of period .................................. $ 86 $101
The assumed healthcare cost trend rates have a significant effect on the amounts reported for the Company’s
plan. A one-percent change in all healthcare cost trend rates used in measuring the APBO at December 31, 2009,
would have the following effects:
(In millions) 1% increase 1% decrease
Increase (decrease) in total service and interest
costs ...................................... $ 1 $ (1)
Increase (decrease) in the APBO ................. $ 5 $ (5)
The Company’s plans are unfunded, and benefits are paid as they become due. For 2009 and 2008, both
benefits paid and Company contributions to the plans were each $3 million. Estimated future benefit payments
expected to be paid for each of the next five years are $8 million each in 2010, 2011, and 2012, $9 million in
2013, $10 million in 2014, and $83 million for the next five years thereafter.
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