Health Net 1998 Annual Report Download - page 51

F O U N DAT IO N HEALT H SYSTEMS, I N C . 4 9
The projected benefit obl i g a t i o n ,a c c u mu l a t e d
benefit obligation and plan assets for the pension plan
we r e $13,947,000, $ 9 , 3 9 1 , 0 0 0 , and $0 at December
3 1 ,1 9 9 8 , re s p e c t i ve l y, and $7,018,000, $ 4 , 5 7 2 , 0 0 0 ,
and $0 at December 31, 1 9 9 7 , re s p e c t iv e l y.
The weighted average annual discount rate
assumed was 6.75% and 7.25% for the years ended
December 31,1998 and 1997, respectively, for both
pension benefit plans and other postretirement ben-
efit plans.Weighted average compensation increases
of 6% for the years ended December 31,1998 and
1997 were assumed for the pension benefit plans.
For measurement purposes, a 6.25% annual
rate of increase in the per capita cost of covered
health care benefits was assumed for 1998, and 6.5%
was assumed for 1997.These rates were assumed to
decrease gradually to 4.5% in 2006 for 1998 and
2005 for 1997 and remain at that level thereafter.
The Company has multiple postretirement
benefit plans.The Company acquired PACC
effective September 30,1997,including its frozen
post-retirement benefit plan.The PACC plan is
non-contributory.The FHC plan is contributory
by certain participants.The account for the FHC
plan anticipates future cost-sharing changes to the
plan consistent with the Company’s expressed intent
to increase retiree contributions at the same rate as
the Company’s premium increases.
A one-percentage-point change in assumed
health care cost trend rates would have the follow-
ing effects:
1-percentage 1-percentage
(in thousands) point increase point decrease
Effect on total of service and
interest cost, 1998 11 (9)
Effect on postretirement benefit
obligation,12/ 31/ 98 102 (84)
The Company has no minimum pension
liability adjustment to be included in compre h e n-
s ive income.
Performance Based Annual Bonus Plan
In 1998,the Company adopted a Performance-
Based Annual Bonus Plan that qualified under
Section 162(m) of the Code (the “162(m) Plan”).
Under the 162(m) Plan,if the Company achieved
greater than $250 million in consolidated income
from operations before taxes (as determined under
GAAP consistently applied,excluding any non-
re c u rring or extraord i n a ry charges), c e rtain exe c u t i ve s
were potentially eligible to receive cash bonuses
from a pool of $7.5 million based on the executives’
salaries in relation to the pool.Amounts payable to
such executives from such pool were subject to
downward adjustment by the Company’s Compen-
sation and Stock Option Committee of the Board
of Directors.The $250 million performance goal
for the 162(m) Plan was not met for 1998.
Note 10 – I ncome Ta x e s
Significant components of the provision (benefit)
for income taxes are as follows for the years ended
December 31:
(in thousands) 1998 1997 1996
Current:
Federal $ 6,346 $(12,894) $13,687
State 3,897 3,183 2,593
Total current 10,243 (9,711) 16,280
Deferred:
Federal (121,800) (57,150) 7,420
State (7,630) (5,478) 1,123
Total deferred (129,430) (62,628) 8,543
Total provision
(benefit) for
income taxes $(119,187) $(72,339) $24,823
Income tax expense (benefit) is included in
the consolidated financial statements as follows for
the years ended December 31:
(in thousands) 1998 1997 1996
Continuing
operations $ (88,996) $(21,418) $14,124
Discontinued
operations (30,191) (50,921) 10,699
Total provision
(benefit) for
income taxes $(119,187) $(72,339) $24,823