McKesson 2005 Annual Report Download - page 77

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
Information regarding the changes in benefit obligations for our other postretirement plans is as follows:
As described in Note 1, we adopted the provisions of FSP No. FAS 106-2 in the second quarter of 2005. The expected Medicare subsidy
had the effect of reducing the Company’s accumulated postretirement benefit obligations by approximately $19 million. This reduction is
recognized as an actuarial gain and amortized over three years. The expected subsidy also resulted in a nominal reduction in interest cost in
2005. As required by the FSP, the Company recognized total reductions in postretirement benefit expense of $7.4 million in 2005.
A reconciliation of the other postretirement plans’ funded status to the net liability recognized is as follows:
Other postretirement benefits are funded as claims are paid. Expected benefit payments for our other postretirement benefit plans, net of
expected Medicare subsidy receipts, are as follows:
Expected benefit payments are based on the same assumptions used to measure the benefit obligations and include estimated future
employee service.
Weighted-average assumptions used to estimate other postretirement benefit expenses and the actuarial present value of benefit obligations
were as follows:
Actuarial losses for the postretirement benefit plan are amortized over a three-year period. The assumed healthcare cost trends used in
measuring the accumulated postretirement benefit obligation were 15% and 14% for prescription drugs, 13% and 15% for medical and 6% and
7% for dental in 2005 and 2004. The healthcare cost trend rate assumption has a significant effect on the amounts reported. The table below
presents the impact of a one-
76
Years Ended March 31,
(In millions) 2005 2004
Change in benefit obligations
Benefit obligation at beginning of year $ 213.4 $ 178.3
Service cost 2.1 2.1
Interest cost 10.7 11.5
Immediate recognition of actuarial losses (0.6)39.0
Benefit payments (19.7) (17.5)
Benefit obligation at end of year $ 205.9 $213.4
Years Ended March 31,
(In millions) 2005 2004
Funded status
Funded status at end of year $ (205.9) $ (213.4)
Unrecognized net actuarial loss 40.9 64.4
Unrecognized prior service cost (2.4) (3.3)
Accrued benefit cost recognized in the consolidated balance shee
t
$ (167.4) $ (152.3)
(In millions)
2006 $20.9
2007 21.3
2008 21.4
2009 21.2
2010 20.9
2011 - 2015 113.0
2005 2004 2003
Net
p
eriodic ex
p
ense
Discount rates 6.00% 6.75% 7.25%
Benefit obligation
Discount rates 5.75% 6.00% 6.75%