Southwest Airlines 2010 Annual Report Download - page 103

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The following table shows the change in the Company’s accumulated postretirement benefit obligation
(APBO) for the years ended December 31, 2010 and 2009:
(In millions) 2010 2009
APBO at beginning of period .............................. $86 $101
Service cost ............................................ 16 10
Interest cost ............................................ 4 4
Benefits paid ........................................... (7) (2)
Actuarial gain .......................................... (8) (27)
APBO at end of period ................................... $91 $ 86
The assumed healthcare cost trend rates have a significant effect on the amounts reported for the Company’s
plan. A one-percent change in all healthcare cost trend rates used in measuring the APBO at December 31, 2010,
would have the following effects:
(In millions) 1% increase 1% decrease
Increase (decrease) in total service and interest
costs ...................................... $2 $(2)
Increase (decrease) in the APBO ................. $6 $(6)
The Company’s plans are unfunded, and benefits are paid as they become due. For 2010 and 2009,
Company contributions to the plans were $7 million and $3 million, respectively. Estimated future benefit
payments expected to be paid for each of the next five years are $6 million in 2011, $5 million in 2012, $7
million in 2013, $9 million in 2014, $12 million in 2015, and $95 million for the next five years thereafter.
The Company recognizes the funded status (i.e., the difference between the fair value of plan assets and the
projected benefit obligations) of its benefit plans in the Consolidated Balance Sheet, with a corresponding
adjustment to AOCI. The following table reconciles the funded status of the plan to the Company’s accrued
postretirement benefit cost recognized in Other non-current liabilities on the Company’s Consolidated Balance
Sheet at December 31, 2010 and 2009.
(In millions) 2010 2009
Funded status .......................................... $(91) $(86)
Unrecognized net actuarial gain ............................ (57) (54)
Unrecognized prior service cost ............................ 2 2
Accumulated other comprehensive income ................... 55 52
Cost recognized on Consolidated Balance Sheet ............... $(91) $(86)
During 2009, the Company recorded a $29 million actuarial gain as a decrease to the recognized obligation
with the offset to Accumulated other comprehensive income (loss), primarily as a result of changes in
assumptions related to the estimated amount of unused sick time at retirement, estimated age of Employees at
retirement, and a change in the expense attribution period for a specific Employee group.
The Company’s periodic postretirement benefit cost for the years ended December 31, 2010, 2009, and
2008, included the following:
(In millions) 2010 2009 2008
Service cost .............................................. $ 16 $10 $14
Interest cost .............................................. 4 4 5
Amortization of prior service cost ............................ — 1 2
Recognized actuarial gain .................................. (5) (7) (3)
Net periodic postretirement benefit cost ....................... $ 15 $ 8 $18
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