Vectren 2008 Annual Report Download - page 83

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81
Following is a roll forward of the total amount of unrecognized tax benefits for the years ended December 31, 2008
and 2007:
(in millions) 2008 2007
Unrecognized tax benefits at January 1 6.2$ 11.6$
Gross Increases - tax positions in prior periods 1.7 0.3
Gross Decreases - tax positions in prior periods (6.0) (7.4)
Gross Increases - current period tax positions 0.3 1.9
Gross Decreases - current period tax positions - (0.2)
Unrecognized tax benefits at December 31 2.2$ 6.2$
The change in unrecognized tax benefits during 2008 totaled $4.0 million, almost none of which impacted the
effective rate. During 2007 the change in unrecognized tax benefits totaled $5.4 million, of which $3.1 million
impacted the effective tax rate. The amount of unrecognized tax benefits, which, if recognized, that would impact
the effective tax rate as of December 31, 2008 and 2007, was $0.5 million and $0.1 million, respectively.
As of December 31, 2008, the remaining unrecognized tax benefit relates to tax positions for which the ultimate
deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of
the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility
period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing
authority.
The Company accrues interest and penalties associated with unrecognized tax benefits in Income taxes. The
Company recognized expense related to interest and penalties totaling of less than $0.1 million in 2008 and
approximately $0.5 million in 2007. During the year ended December 31, 2006, the Company recognized expense
related to interest and penalties of less than $1 million. The Company had approximately $0.8 million for the
payment of interest and penalties accrued as of December 31, 2008 and 2007.
The net liability on the Consolidated Balance Sheet for unrecognized tax benefits inclusive of interest, penalties and
net of secondary impacts which are a component of the Deferred taxes and are benefits, totaled $0.8 million and
$2.5 million, respectively, at December 31, 2008 and 2007.
From time to time, the Company may consider changes to filed positions that could impact its unrecognized tax
benefits. However, it is not expected that such changes would have a significant impact on earnings and would
only affect the timing of payments to taxing authorities.
9. Retirement Plans & Other Postretirement Benefits
At December 31, 2008, the Company maintains three qualified defined benefit pension plans, a nonqualified
supplemental executive retirement plan (SERP), and three other postretirement benefit plans. The defined benefit
pension and other postretirement benefit plans, which cover eligible full-time regular employees, are primarily
noncontributory. The postretirement health care and life insurance plans are a combination of self-insured and fully
insured plans. The Company has a Voluntary Employee Beneficiary Association (VEBA) Trust Agreement for the
partial funding of postretirement health benefits for retirees and their eligible dependents and beneficiaries in one of
the three plans. Annual VEBA funding is discretionary. The qualified pension plans and the SERP are aggregated
under the heading “Pension Benefits.” Other postretirement benefit plans are aggregated under the heading “Other
Benefits.”
SFAS 158
The Company accounts for its pension and post-retirement obligations in accordance with SFAS No. 158,
“Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans-an amendment of FASB
Statements No. 87, 88, 106, and 132(R)” (SFAS 158). Under SFAS 158, the Company recognizes the funded status
of its pension plans and postretirement plans. SFAS 158 defines the funded status of a defined benefit plan as its
assets less its projected benefit obligation, which includes projected salary increases, and defines the funded status
of a postretirement plan as its assets less its accumulated postretirement benefit obligation. To the extent this