Entergy 2011 Annual Report Download - page 100

Contributions
Entergy currently expects to contribute approximately $163 million to
its qualified pension plans and approximately $80.4 million to other
postretirement plans in 2012. The required pension contributions will
not be known with more certainty until the January 1, 2012 valuations
are completed by April 1, 2012, however Entergy’s preliminary
estimates of 2012 funding requirements indicate that the contributions
will not exceed historical levels of pension contributions.
Actuarial Assumptions
The significant actuarial assumptions used in determining the
pension PBO and the other postretirement benefit APBO as of
December 31, 2011, and 2010 were as follows:
2011 2010
Weighted-average discount rate:
Qualified pension 5.10% - 5.20% 5.60% - 5.70%
Other postretirement 5.10% 5.50%
Non-qualified pension 4.40% 4.90%
Weighted-average rate of increase
in future compensation levels 4.23% 4.23%
The significant actuarial assumptions used in determining the net
periodic pension and other postretirement benefit costs for 2011,
2010, and 2009 were as follows:
2011 2010 2009
Weighted-average discount rate:
Qualified pension 5.60% - 5.70% 6.10% - 6.30% 6.75%
Other postretirement 5.50% 6.10% 6.70%
Non-qualified pension 4.90% 5.40% 6.75%
Weighted-average rate of increase
in future compensation levels 4.23% 4.23% 4.23%
Expected long-term rate of
return on plan assets:
Pension assets 8.50% 8.50% 8.50%
Other postretirement
non-taxable assets 7.75% 7.75% 8.50%
Other postretirement
taxable assets 5.50% 5.50% 6.00%
Entergy’s other postretirement benefit transition obligations are
being amortized over 20 years ending in 2012.
The assumed health care cost trend rate used in measuring Entergy’s
December 31, 2011 APBO was 7.75% for pre-65 retirees and 7.5% for
post-65 retirees for 2012, gradually decreasing each successive year
until it reaches 4.75% in 2022 and beyond for both pre-65 and post-65
retirees. The assumed health care cost trend rate used in measuring
Entergy’s 2011 Net Other Postretirement Benefit Cost was 8.5% for pre-
65 retirees and 8.0% for post-65 retirees for 2011, gradually decreasing
each successive year until it reaches 4.75% in 2019 and beyond for
pre-65 retirees and 4.75% in 2018 and beyond for post-65 retirees. A
one percentage point change in the assumed health care cost trend
rate for 2011 would have the following effects (in thousands):
1 Percentage Point Increase 1 Percentage Point Decrease
Impact on the Impact on the
sum of service sum of service
Impact on costs and Impact on costs and
the APBO interest cost the APBO interest cost
Entergy
Corporation and
its subsidiaries $218,138 $23,318 $(183,492) $(18,721)
Medicare Prescription Drug, Improvement and
Modernization Act of 2003
In December 2003, the Medicare Prescription Drug, Improvement
and Modernization Act of 2003 became law. The Act introduces a
prescription drug benefit cost under Medicare (Part D), which
started in 2006, as well as a federal subsidy to employers who
provide a retiree prescription drug benefit that is at least actuarially
equivalent to Medicare Part D.
The actuarially estimated effect of future Medicare subsidies
reduced the December 31, 2011 and 2010 Accumulated Postretirement
Benefit Obligation by $274 million and $267 million, respectively,
and reduced the 2011, 2010, and 2009 other postretirement benefit
cost by $33.0 million, $26.6 million, and $24.0 million, respectively.
In 2011, Entergy received $4.6 million in Medicare subsidies for
prescription drug claims.
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.
Entergy also sponsors the Savings Plan of Entergy Corporation
and Subsidiaries IV (established in 2002), the Savings Plan of
Entergy Corporation and Subsidiaries VI (established in April 2007),
and the Savings Plan of Entergy Corporation and Subsidiaries VII
(established in April 2007) 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 June 3, 2010, employees participating in the Savings Plan
of Entergy Corporation and Subsidiaries II (Savings Plan II) were
transferred into the System Savings Plan when Savings Plan II
merged into the System Savings Plan.
Entergy’s subsidiaries’ contributions to defined contribution plans
collectively were $42.6 million in 2011, $41.8 million in 2010, and
$41.9 million in 2009. The majority of the contributions were to the
System Savings Plan.
NOTE 12. STOCK-BASED COMPENSATION
Entergy grants stock options and long-term incentive and restricted
liability awards to key employees of the Entergy subsidiaries under
its Equity Ownership Plans which are shareholder-approved stock-
based compensation plans. The Equity Ownership Plan, as restated in
February 2003 (2003 Plan), had 722,251 authorized shares remaining
for long-term incentive and restricted liability awards as of December
31, 2011. Effective January 1, 2007, Entergy’s shareholders approved
the 2007 Equity Ownership and Long-Term Cash Incentive Plan (2007
Plan). The maximum aggregate number of common shares that can be
issued from the 2007 Plan for stock-based awards is 7,000,000 with no
more than 2,000,000 available for non-option grants. The 2007 Plan,
which only applies to awards made on or after January 1, 2007, will
expire after 10 years. As of December 31, 2011, there were 1,052,035
authorized shares remaining for stock-based awards, all of which
are available for non-option grants. Effective May 6, 2011, Entergy’s
shareholders approved the 2011 Equity Ownership and Long-Term
Cash Incentive Plan (2011 Plan). The maximum number of common
shares that can be issued from the 2011 Plan for stock-based awards
is 5,500,000 with no more than 2,000,000 available for incentive stock
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
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