Entergy 2007 Annual Report Download - page 93

91
Entergy Corporation and Subsidiaries 2007
Notes to Consolidated Financial Statements continued
ES T I M AT E D FU T U R E BE N E F I T PAY M E N T S
Based upon the assumptions used to measure Entergy’s qualied
pension and postretirement benet obligation at December 31, 2007,
and including pension and postretirement benets attributable to
estimated future employee service, Entergy expects that benets to be
paid and the Medicare Part D subsidies to be received over the next ten
years for Entergy Corporation and its subsidiaries will be as follows
(in thousands):
Estimated Future Benefits Payments
Postretirement Estimated Future
Qualified Non-Qualified (before Medicare Subsidy
Pension Pension Medicare Subsidy) Receipts
2008 $ 138,942 $ 5,936 $ 66,419 $ 5,109
2009 $ 144,468 $ 6,252 $ 70,153 $ 5,726
2010 $ 150,929 $ 6,245 $ 74,885 $ 6,311
2011 $ 159,494 $ 4,901 $ 79,181 $ 6,979
2012 $ 171,302 $ 4,889 $ 82,860 $ 7,725
2013 – 2017 $1,090,132 $25,174 $ 481,994 $50,819
CO N T R I B U T I O N S
Entergy Corporation and its subsidiaries expect to contribute $226
million (excluding about $1 million in employee contributions) to the
qualied pension plans and $69.6 million to its other postretirement
plans in 2008. Guidance pursuant to the Pension Protection Act of
2006 rules, eective for the 2008 plan year and beyond, may aect the
level of Entergy’s pension contributions in the future.
AC T U A R I A L AS S U M P T I O N S
e assumed health care cost trend rate used in measuring the APBO
of Entergy was 9% for 2008, gradually decreasing each successive year
until it reaches 4.75% in 2013 and beyond. e assumed health care
cost trend rate used in measuring the Net Other Postretirement Benet
Cost of Entergy was 10% for 2007, gradually decreasing each successive
year until it reaches 4.5% in 2012 and beyond. A one percentage point
change in the assumed health care cost trend rate for 2007 would have
the following eects (in thousands):
1 Percentage Point Increase 1 Percentage Point Decrease
Impact Impact
on the sum of on the sum of
Impact on service costs and Impact on service costs and
2007 the APBO interest cost the APBO interest cost
Entergy
Corporation and
its Subsidiaries $115,169 $14,854 $(102,675) $(12,656)
e signicant actuarial assumptions used in determining the
pension PBO and the SFAS 106 APBO as of December 31, 2007, and
2006 were as follows:
2007 2006
Weighted-average discount rate:
Pension 6.50% 6.00%
Other postretirement 6.50% 6.00%
Weighted-average rate of increase
in future compensation levels 4.23% 3.25%
e signicant actuarial assumptions used in determining the net
periodic pension and other postretirement benet costs for 2007,
2006, and 2005 were as follows:
2007 2006 2005
Weighted-average discount rate:
Pension 6.00% 5.90% 6.00%
Other postretirement 6.00% 5.90% 6.00%
Weighted-average rate of increase
in future compensation levels 3.25% 3.25% 3.25%
Expected long-term rate of
return on plan assets:
Taxable assets 5.50% 5.50% 5.50%
Non-taxable assets 8.50% 8.50% 8.50%
Entergy’s remaining pension transition assets were being amortized
over the greater of the remaining service period of active participants
or 15 years which ended in 2005, and its SFAS 106 transition obligations
are being amortized over 20 years ending in 2012.
ME D I C A R E PR E S C R I P T I O N DR U G , IM P R OV E M E N T
A N D MO D E R N I Z AT I O N AC T O F 2003
In December 2003, the President signed the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 into law. e Act
introduces a prescription drug benet cost under Medicare (Part D),
which started in 2006, as well as a federal subsidy to employers who
provide a retiree prescription drug benet that is at least actuarially
equivalent to Medicare Part D.
e actuarially estimated eect of future Medicare subsidies
reduced the December 31, 2007 and 2006 Accumulated Postretirement
Benet Obligation by $182 million and $183 million, respectively, and
reduced the 2007, 2006, and 2005 other postretirement benet cost by
$26.5 million, $29.3 million, and $24.3 million, respectively. In 2007,
Entergy received $4.6 million in Medicare subsidies for prescription
drug claims through June 2007.
NO N -QUA L I F I E D PE N S I O N PL A N S
Entergy also sponsors non-qualied, non-contributory dened benet
pension plans that provide benets to certain executives. Entergy
recognized net periodic pension cost related to these plans of $20.6
million in 2007, $21 million in 2006, and $16.4 million in 2005. e
projected benet obligation was $134.5 million and $137 million as of
December 31, 2007 and 2006, respectively. ere are $0.2 million in
plan assets for a pre-merger Entergy Gulf States Louisiana plan. e
accumulated benet obligation was $118 million and $127 million as
of December 31, 2007 and 2006, respectively.
Aer the application of SFAS 158, Entergy’s non-qualied, non-
current pension liability at December 31, 2007 and 2006 was $128.4
million and $122.2 million, respectively; and its current liability was
$5.9 million and $14.5 million, respectively. e unamortized transition
asset, prior service cost and net loss are recognized in regulatory assets
($43.9 million at December 31, 2007 and $50.8 million at December
31, 2006) and accumulated other comprehensive income before taxes
($17.4 million at December 31, 2007 and $15.8 million at December
31, 2006).