Health Net 2002 Annual Report Download - page 75

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HEALTH NET, INC. | 73
One of our subsidiaries recorded a curtailment gain of
$2,176,000 during the year ended December 31, 2001 due
to termination of certain benefits in accordance with plan
amendments.
The weighted average annual discount rate assumed
was 6.5% and 7.0% for the years ended December 31,
2002 and 2001, respectively, for both pension plan benefit
plans and other postretirement benefit plans. Weighted
average compensation increases of between 2.0% to 6.0%
for the years ended December 31, 2002 and 2001 were
assumed for the pension benefit plans.
For measurement purposes, depending upon the type
of coverage offered, an 11.0% to 15.0% annual rate of
increase in the per capita cost covered health care benefits
was assumed for 2002, and 7.0% to 8.5% was assumed
for 2001. These rates were assumed to decrease gradually
to between 5.0% to 5.5% in 2009 for 2002 and to
between 5.0% and 5.5% in 2008 for 2001.
A one percentage point change in assumed health care
cost trend rates would have the following effects for the
year ended December 31, 2002:
1-percentage 1-percentage
(Amounts in thousands) point increase point decrease
Effect on total of service
and interest cost $106 $(85)
Effect on postretirement
benefit obligation $920 $(753)
We have no minimum pension liability adjustment to
be included in comprehensive income.
NOTE 10—Income Taxes
Significant components of the provision for income taxes are as follows for the years ended December 31:
(Amounts in thousands) 2002 2001 2000
Current:
Federal $81,533 $583 $18,459
State 15,433 16,254 10,349
Total current 96,966 16,837 28,808
Deferred:
Federal 12,093 42,618 64,644
State 9,869 (8,634) 5,672
Total deferred 21,962 33,984 70,316
Total provision for income taxes $118,928 $50,821 $99,124
A reconciliation of the statutory federal income tax rate and the effective income tax rate on income is as follows for
the years ended December 31:
2002 2001 2000
Statutory federal income tax rate 35.0% 35.0% 35.0%
State and local taxes, net of federal income tax effect 4.6 3.6 4.0
Tax exempt interest income (0.1) (1.1) (0.9)
Goodwill and intangible assets amortization 0.1 6.0 3.3
Examination settlements (5.9) (7.2) (2.3)
Other, net (0.3) 0.7 (1.4)
Effective income tax rate 33.4% 37.0% 37.7%