Entergy 2005 Annual Report Download - page 94

ENTERGY CORPORATION AND SUBSIDIARIES 2005
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NOTES to CONSOLIDATED FINANCIAL STATEMENTS continuedNOTES to CONSOLIDATED FINANCIAL STATEMENTS continued
VOLUNTARY SEVERANCE PROGRAM
As part of an initiative to achieve productivity improvements with a
goal of reducing costs, primarily in the Non-Utility Nuclear and
U.S. Utility businesses, in the second half of 2003 Entergy offered a
voluntary severance program to employees in various departments.
Approximately 1,100 employees, including 650 employees in
nuclear operations from the Non-Utility Nuclear and U.S. Utility
businesses, accepted the offers. As a result of this program, in the
fourth quarter 2003 Entergy recorded additional pension and
postretirement costs (including amounts capitalized) of $110.3 mil-
lion for special termination benefits and plan curtailment charges.
These amounts are included in the net pension cost and net postre-
tirement benefit cost for the year ended December 31, 2003.
MEDICARE PRESCRIPTION DRUG, IMPROVEMENT
AND MODERNIZATION ACT OF 2003
In December 2003, the President signed the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 into law. The
Act introduces a prescription drug benefit cost under Medicare
(Part D), starting in 2006, as well as federal subsidy to employers
who provide a retiree prescription drug benefit that is at least actu-
arially equivalent to Medicare Part D.
The actuarially estimated effect of future Medicare subsidies
reduced the December 31, 2005 and 2004 Accumulated
Postretirement Benefit Obligation by $176 million and $161 million,
respectively, and reduced the 2005 and 2004 other postretirement
benefit cost by $24.3 million and $23.3 million, respectively.
NON-QUALIFIED PENSION PLANS
Entergy also sponsors non-qualified, non-contributory defined ben-
efit pension plans that provide benefits to certain executives.
Entergy recognized net periodic pension cost of $16.4 million in
2005, $16.4 million in 2004, and $14.5 million in 2003. The projected
benefit obligation was $142 million and $141 million as of
December 31, 2005 and 2004, respectively. There are $0.4 million
in plan assets for a pre-merger Entergy Gulf States plan. The
accumulated benefit obligation was $133 million and $130 million
as of December 31, 2005 and 2004, respectively. As of December 31,
2005, Entergy’s additional minimum pension liability for the non-
qualified pension plans was $63.1 million. This liability was offset by
a $13.6 million intangible asset, $38.1 million regulatory asset, and
an $11.4 million charge to accumulated other comprehensive
income before taxes.
DEFINED CONTRIBUTION PLANS
Entergy sponsors the Savings Plan of Entergy Corporation and
Subsidiaries (System Savings Plan). The System Savings Plan is a
defined contribution plan covering eligible employees of Entergy
and its subsidiaries. The employing Entergy subsidiary makes
matching contributions for all non-bargaining and certain bargaining
employees to the System Savings Plan in an amount equal to 70%
of the participants’ basic contributions, up to 6% of their eligible
earnings per pay period. The 70% match is allocated to investments
as directed by the employee.
Through January 31, 2004, the System Savings Plan provided
that the employing Entergy subsidiary make matching contributions
in the following manner for all non-bargaining and certain bargain-
ing employees. The employing Entergy subsidiary continues to
make matching contributions in the following manner for all other
bargaining employees who don’t receive the 70% matching
contribution discussed above. The System Savings Plan provides that
the employing Entergy subsidiary make matching contributions:
■in an amount equal to 75% of the participants’ basic contribu-
tions, up to 6% of their eligible earnings per pay period, in
shares of Entergy Corporation common stock if the employees
direct their company-matching contribution to the purchase of
Entergy Corporation’s common stock; or
■in an amount equal to 50% of the participants’ basic contribu-
tions, up to 6% of their eligible earnings per pay period, if the
employees direct their company-matching contribution to other
investment funds.
Entergy also sponsors the Savings Plan of Entergy Corporation
and Subsidiaries II (established in 2001), Savings Plan of Entergy
Corporation and Subsidiaries IV (established in 2002), and the
Savings Plan of Entergy Corporation and Subsidiaries V (estab-
lished in 2002) to which matching contributions are also made. The
plans are defined contribution plans that cover eligible employees,
as defined by each plan, of Entergy and its subsidiaries. Effective
December 31, 2005, employees participating in the Savings Plan
of Entergy Corporation and Subsidiaries V (Savings Plan V) were
transferred into the System Savings Plan when Savings Plan V was
merged into the System Savings Plan.
Entergy’s subsidiaries’ contributions to defined contribution
plans collectively were $33.8 million in 2005, $32.9 million in 2004,
and $31.5 million in 2003. The majority of the contributions were
to the System Savings Plan.
NOTE 11. BUSINESS SEGMENT INFORMATION
Entergy’s reportable segments as of December 31, 2005 are U.S.
Utility and Non-Utility Nuclear. U.S. Utility generates, transmits,
distributes, and sells electric power in portions of Arkansas,
Louisiana, Mississippi, and Texas, and provides natural gas utility
service in portions of Louisiana. Non-Utility Nuclear owns and
operates five nuclear power plants and is primarily focused on sell-
ing electric power produced by those plants to wholesale customers.
“All Other” includes the parent company, Entergy Corporation, and
other business activity, including the Energy Commodity Services
segment, the Competitive Retail Services business, and earnings on
the proceeds of sales of previously-owned businesses. The Energy
Commodity Services segment was presented as a reportable seg-
ment prior to 2005, but it did not meet the quantitative thresholds
for a reportable segment in 2005 and 2004, and with the sale of
Entergy-Koch’s businesses in 2004, management does not expect
the Energy Commodity Services segment to meet the quantitative
thresholds in the foreseeable future. The 2004 and 2003 informa-
tion in the tables below has been restated to include the Energy
Commodity Services segment in the All Other column. As a result
of the Entergy New Orleans bankruptcy filing, Entergy has discon-
tinued the consolidation of Entergy New Orleans retroactive to
January 1, 2005, and is reporting Entergy New Orleans results
under the equity method of accounting in the U.S. Utility segment.