Western Union 2008 Annual Report Download - page 68

WESTERN UNION
2008 Annual Report
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11. Employee Benefit Plans
Defined Contribution Plans
The Company’s Board of Directors approved The Western
Union Company Incentive Savings Plan (“401(k)”) as of
September 29, 2006, covering eligible non-union employ-
ees on the United States payroll of Western Union after the
spin-off date. Employees that make voluntary contributions
to this plan receive up to a 4% Western Union matching
contribution. All matching contributions are immediately
100% vested.
The Company has a 401(k) plan covering its former
union employees. Due to the restructuring and related
activities discussed in Note 3, the Company’s expenses
under this plan are immaterial.
The Company administers 16 defined contribution plans
in various countries globally on behalf of approximately
600 employee participants as of December 31, 2008. Such
plans have vesting and employer contribution provisions
that vary by country.
In addition, Western Union’s Board of Directors adopted
a non-qualified deferred compensation plan for highly
compensated employees. The plan provides tax-deferred
contributions, matching and the restoration of Company
matching contributions otherwise limited under the 401(k).
Prior to the spin-off from First Data, eligible full-time
non-union employees of the Company were covered under
a First Data sponsored defined contribution incentive sav-
ings plan. Employees who made voluntary contributions
to this plan, received up to a 3% Western Union matching
contribution, service related contributions of 1.5% to 3%
of eligible employee compensation, certain other addi-
tional employer contributions, and additional discretionary
Company contributions. In addition, First Data provided
non-qualified deferred compensation plans for certain
highly compensated employees. These plans provided
tax-deferred contributions, matching and the restoration
of Company contributions under the defined contribution
plans otherwise limited by IRS or plan limits.
The aggregate amount charged to expense in con-
nection with all of the above plans was $12.5 million,
$11.6 million and $10.8 million during the years ended
December 31, 2008, 2007 and 2006, respectively.
Defined Benefit Plans
On January 1, 2008, the Company adopted the remain-
ing provisions of SFAS No. 158, “Employers Accounting
for Defined Benefit Pension and Other Postretirement
Plans—An Amendment of SFAS No. 87, 88, 106 and 132(R)”
(“SFAS No. 158”), which required the Company to change
its plan measurement date to December 31 effective
January 1, 2008. The Company elected the alternative
transition method, and accordingly, the Company prepared
a 15-month projection of net periodic benefit income
for the period from October 1, 2007 through December 31,
2008. The pro-rated portion of net periodic benefit income
of $0.1 million for the period from October 1, 2007
through December 31, 2007 was reflected as an increase
to “Retained earnings” on January 1, 2008.
The Company has two frozen defined benefit pension
plans for which it had a recorded unfunded pension obliga-
tion of $107.1 million as of December 31, 2008, included
in “Other liabilities” in the Consolidated Balance Sheets.
No contributions were made to these plans by First Data
or Western Union during the years ended December 31,
2008, 2007 and 2006. Due to the impact of recently
enacted legislation, the Company will not be required
to contribute to these plans during 2009, but estimates
it will be required to contribute approximately $20 to
$25 million in 2010.
The Company recognizes the funded status of its
pension plans in its Consolidated Balance Sheets with
a corresponding adjustment to “Accumulated other
comprehensive loss,” net of tax.
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The following table provides a reconciliation of the changes in the pension plans’ benefit obligations, fair value of
assets and a statement of the funded status (in millions):
2008 2007
CHANGE IN BENEFIT OBLIGATION
Projected benefit obligation at October1, $ 426.0 $459.0
SFAS 158 measurement date adjustment (a) 6.1 —
Interest costs 24.4 24.6
Actuarial gain (5.6) (12.5)
Benefits paid (54.9) (45.1)
Employee termination benefits 2.8 —
Projected benefit obligation at December31, 2008 and September30, 2007 $ 398.8 $426.0
CHANGE IN PLAN ASSETS
Fair value of plan assets at October1, $ 398.4 $406.1
Actual return on plan assets (51.8) 37.4
Benefits paid (54.9) (45.1)
Fair value of plan assets at December31, 2008 and September30, 2007 291.7 398.4
Funded status of the plan $(107.1) $ (27.6)
Accumulated benefit obligation $ 398.8 $426.0
(a) Represents the adjustment to retained earnings of $0.1 million for the period from October1, 2007 through December31, 2007. This adjustment consists of interest
costs of $6.1 million, offset by $6.2 million which represents the expected return on plan assets less amortization of the actuarial loss.