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PBOP Plan: NU provides certain retiree health care benefits, primarily medical and
dental, and life insurance benefits through a PBOP Plan. These benefits are available for
employees retiring from NU who have met specified service requirements. For current
employees and certain retirees, the total benefit is limited to two times the 1993 per
retiree health care cost. These costs are charged to expense over the estimated work
life of the employee. NU uses a December 31st measurement date for the PBOP Plan.
NU annually funds postretirement costs through external trusts with amounts that have
been and will continue to be recovered in rates and that are tax deductible.
NU allocates net periodic postretirement benefits expense to its subsidiaries based
on the actual participant demographic data for each subsidiary’s participants. Benefit
payments to participants and contributions are also tracked for each subsidiary. The
actual investment return for the trust each year is allocated to each of the subsidiaries in
proportion to the investment return expected to be earned during the year.
PBOP Curtailments and Termination Benefits: NU recorded an estimated pre-tax
curtailment expense in 2005 relating to its corporate reorganization. NU also accrued
a pre-tax termination benefit in 2005 relating to certain benefits provided under
the terms of the PBOP Plan. Based on refinements to its estimates, NU recorded
an adjustment to the curtailment and related termination benefits in 2006. This
adjustment resulted in a pre-capitalization, pre-tax reduction in the curtailment expense
of $2.2 million and an increase to termination benefits of $0.3 million in 2006.
The following table represents information on the benefit obligations for NU’s plans, fair
values of plan assets, and funded status:
At December 31,
Postretirement
Pension Benefits SERP Benefits Benefits
(Millions of Dollars) 2008 2007 2008 2007 2008 2007
Change in benefit obligation
Benefit obligation at beginning of year $ (2,256.9 ) $ (2,334.6 ) $ (32.1 ) $ (34.0 ) $ (459.6 ) $ (469.9 )
Service cost (43.9 ) (47.0 ) (0.7 ) (0.8 ) (7.1 ) (7.4 )
Interest cost (144.0 ) (136.4 ) (2.0 ) (1.9 ) (28.3 ) (25.7 )
Actuarial gain/(loss) 19.5 178.4 (1.7 ) 2.6 20.2 3.3
Prior service cost - (40.0 ) - - - -
Federal subsidy on benefits paid - - - - (3.4 ) (3.8 )
Benefits paid - excluding lump sum payments 127.1 122.2 2.3 2.0 42.2 43.9
Benefits paid - lump sum payments 0.5 0.2 - - - -
Termination benefits - 0.3 - - - -
Benefit obligation at end of year $ (2,297.7 ) $ (2,256.9 ) $ (34.2 ) $ (32.1 ) $ (436.0 ) $ (459.6 )
Change in plan assets
Fair value of plan assets at beginning of year $ 2,459.4 $ 2,356.2 $ N/A $ N/A $ 278.1 $ 266.6
Actual return on plan assets (775.0 ) 225.6 N/A N/A (80.1 ) 14.4
Employer contribution - - N/A N/A 39.8 41.0
Benefits paid - excluding lump sum payments (127.1 ) (122.2 ) N/A N/A (42.2 ) (43.9 )
Benefits paid - lump sum payments (0.5 ) (0.2 ) N/A N/A - -
Fair value of plan assets at end of year $ 1,556.8 $ 2,459.4 N/A N/A $ 195.6 $ 278.1
Funded status at December 31st $ (740.9 ) $ 202.5 $ (34.2 ) $ (32.1 ) $ (240.4 ) $ (181.5 )
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