Southwest Airlines 2013 Annual Report Download - page 123

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During 2013, the Company recorded a $41 million actuarial gain as a decrease to the APBO with an offset
to AOCI. This actuarial gain is reflected above and resulted from changes in certain key assumptions used to
determine the Company’s year-end obligation. The assumption change that resulted in the largest portion of the
actuarial gain was the expected participation rate in the Plan for future qualifying retirees, which reflects lower
expectations as to utilization of benefits based on recent history.
Also, pursuant to the Merger Agreement between AirTran and Southwest, Southwest Employees that were
former AirTran employees are to be given credit for their service with AirTran for purposes of determining
eligibility for retiree benefits. This service credit requirement resulted in a $17 million increase to the APBO
during 2012, which is being accounted for as prior service cost to be amortized over the average future service of
active AirTran employees.
The assumed healthcare cost trend rates have a significant effect on the amounts reported for the
consolidated postretirement plans. A one percent change in all healthcare cost trend rates used in measuring the
APBO at December 31, 2013, would have the following effects:
(in millions) 1% increase 1% decrease
Increase (decrease) in total service and interest costs .................. $ 3 $ (3)
Increase (decrease) in the APBO ................................. $ 19 $ (16)
All plans are unfunded, and benefits are paid as they become due. Estimated future benefit payments
expected to be paid for each of the next five years and the five years thereafter are $4 million in 2014, $5 million
in 2015, $6 million in 2016, $7 million in 2017, $7 million in 2018, and $50 million for the next five years
thereafter.
The funded status (the difference between the fair value of plan assets and the projected benefit
obligations) of the Company’s consolidated benefit plans are recognized in the Consolidated Balance Sheet, with
a corresponding adjustment to AOCI. The following table reconciles the funded status of the plans to the accrued
postretirement benefit cost recognized in Other non-current liabilities on the Company’s Consolidated Balance
Sheet at December 31, 2013 and 2012.
(in millions) 2013 2012
Funded status ....................................... $ (138) $ (148)
Unrecognized net actuarial gain ........................ (80) (44)
Unrecognized prior service cost ........................ 15 18
Accumulated other comprehensive income ............... 65 26
Cost recognized on Consolidated Balance Sheet ........... $ (138) $ (148)
The consolidated periodic postretirement benefit cost for the years ended December 31, 2013, 2012, and
2011, included the following:
(in millions) 2013 2012 2011
Service cost ............................................... $ 30 $ 20 $ 17
Interest cost ...............................................444
Amortization of prior service cost ............................. 3 — —
Recognized actuarial gain .................................... (4) (5) (6)
Net periodic postretirement benefit cost ......................... $ 33 $ 19 $ 15
Unrecognized prior service cost is expensed using a straight-line amortization of the cost over the average
future service of Employees expected to receive benefits under the plans. Actuarial gains are amortized utilizing
the minimum amortization method. The following actuarial assumptions were used to account for the Company’s
postretirement benefit plans at December 31, 2013, 2012, and 2011:
115