Eversource 2001 Annual Report Download - page 43

Assumed health care cost trend rates have a significant effect
on the amounts reported for the health care plans. The effect of
changing the assumed health care cost trend rate by one percent-
age point in each year would have the following effects:
One One
Percentage Percentage
Point Point
(Millions of Dollars) Increase Decrease
Effect on total service and
interest cost components $ 1.1 $ (1.0)
Effect on postretirement
benefit obligation $ 13.4 $ (12.4)
The trust holding the health plan assets is subject to federal
income taxes.
B. 401(k) Savings Plan
NU maintains a 401(k) Savings Plan for substantially all NU sys-
tem employees. This savings plan provides for employee contribu-
tions up to specified limits. NU matches employee contributions
up to a maximum of 3 percent of eligible compensation with cash
and NU stock. The matching contributions made by NU were
$11.7 million in 2001, $13.6 million in 2000, and $13.8 million
in 1999.
C. ESOP
NU maintains an Employee Stock Ownership Plan (ESOP) for
purposes of allocating shares to employees participating in the
NU system’s 401(k) Savings Plan. Under this arrangement, NU
issued unsecured notes during 1991 and 1992 totaling $250 mil-
lion, the proceeds of which were lent to the ESOP trust for the
purchase of 10.8 million newly issued NU common shares
(ESOP shares). The ESOP trust is obligated to make principal
and interest payments on the ESOP notes at the same rate that
ESOP shares are allocated to employees. NU makes annual con-
tributions to the ESOP equal to the ESOP’s debt service, less divi-
dends received by the ESOP. All dividends received by the ESOP
on unallocated shares are used to pay debt service and are not con-
sidered dividends for financial reporting purposes. During the
fourth quarter of 1999 through the second quarter of 2001, NU
The following actuarial assumptions were used in calculating the plans’ year end funded status:
At December 31,
Pension Benefits Postretirement Benefits
2001 2000 2001 2000
Discount rate 7.25% 7.50% 7.25% 7.50%
Compensation/progression rate 4.25 4.50 4.25 4.50
Health care cost trend rate (a) N/A N/A 11.00 5.26
(a) The annual per capita cost of covered health care benefits was assumed to decrease to 5.00 percent by 2007.
The components of net periodic benefit (credit)/cost are:
For the Years Ended December 31,
Pension Benefits Postretirement Benefits
(Millions of Dollars) 2001 2000 1999 2001 2000 1999
Service cost $ 35.7 $ 41.2 $ 43.7 $6.2 $ 7.6 $ 7.6
Interest cost 119.7 118.5 106.3 27.2 25.5 21.8
Expected return on plan assets (214.1) (205.1) (175.5) (17.0) (15.3) (11.7)
Amortization of unrecognized net
transition (asset)/obligation (1.5) (1.4) (1.5) 14.5 15.1 15.1
Amortization of prior service cost 6.9 7.9 7.9 ———
Amortization of actuarial gain (47.7) (52.4) (33.5) ———
Other amortization, net ———(2.6) (4.3) (3.1)
Settlements and other (90.7) (6.6) 18.9 11.9 ——
Net periodic benefit (credit)/cost $ (191.7) $ (97.9) $ (33.7) $ 40.2 $ 28.6 $ 29.7
For calculating pension and postretirement benefit costs, the following assumptions were used:
For the Years Ended December 31,
Pension Benefits Postretirement Benefits
2001 2000 1999 2001 2000 1999
Discount rate 7.50% 7.75% 7.00% 7.50% 7.75% 7.00%
Expected long-term rate of return 9.50 9.50 9.50 N/A N/A N/A
Compensation/progression rate 4.50 4.75 4.25 4.50 4.75 4.25
Long-term rate of return -
Health assets, net of tax N/A N/A N/A 7.50 7.50 7.50
Life assets N/A N/A N/A 9.50 9.50 9.50
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