United Healthcare 2008 Annual Report Download - page 92

UNITEDHEALTH GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The $176 million Section 409A charge includes $87 million of expense ($55 million net of tax benefit) for the
payment of certain optionholders’ tax obligations for stock options exercised in 2006 and early 2007 and $89
million of expense ($57 million net of tax benefit) for the modification related to increasing the exercise price of
unexercised stock options granted to nonexecutive officer employees and the related cash payments. These
amounts have been recorded in the corporate segment.
As further discussed in Note 11 of Notes to the Consolidated Financial Statements, the Company maintains a
share repurchase program. The objectives of the share repurchase program are to optimize the Company’s capital
structure, cost of capital and return to shareholders, as well as to offset the dilutive impact of shares issued for
share-based award exercises.
Other Employee Benefit Plans
The Company also offers a 401(k) plan for all employees. Compensation expense related to this plan was not
significant for the years 2008, 2007 and 2006.
The Company has provided Supplemental Executive Retirement Plan benefits (SERPs), which are non-qualified
defined benefit plans, for its current CEO and its former CEO, as well as for certain nonexecutive officers under
plans that were assumed in acquisitions. No additional amounts are accruing to the SERPs of the Company’s
current CEO and former CEO. The SERPs are non-contributory, unfunded and provide benefits based on years of
service and compensation during employment. Pension expense is determined using various actuarial methods to
estimate the total benefits ultimately payable to executives, and is allocated to service periods. The actuarial
assumptions used to calculate pension costs are reviewed annually. Pension expense was not significant for the
years 2008, 2007 and 2006. The total SERP liability as of December 31, 2008 was $159 million, of which $51
million was recorded within Accounts Payable and Accrued Liabilities and $108 million was recorded within
Other Liabilities in the Consolidated Balance Sheets. The total SERP liability as of December 31, 2007 of $139
million was recorded within Other Liabilities in the Consolidated Balance Sheets.
In addition, the Company maintains non-qualified, unfunded deferred compensation plans, which allow certain
members of senior management and executives to defer portions of their salary or bonus and receive certain
Company contributions on such deferrals, subject to plan limitations. The deferrals are recorded within Long-
Term Investments with an approximately equal amount in Other Liabilities in the Consolidated Balance Sheets.
The total deferrals are distributable based upon termination of employment or other periods, as elected under
each plan and are $182 million and $225 million as of December 31, 2008 and 2007, respectively.
13. AARP
The Company provides health insurance products and services to members of AARP under a Supplemental
Health Insurance Program (the Program), and separate Medicare Advantage and Medicare Part D arrangements.
The products and services under the Program include supplemental Medicare benefits (AARP Medicare
Supplement Insurance), hospital indemnity insurance, including insurance for individuals between 50 to 64 years
of age, and other related products.
On October 3, 2007, the Company entered into four agreements with AARP, effective January 1, 2008, that
amended its existing AARP arrangements. These agreements extended the Company’s arrangements with AARP
on the Program to December 31, 2017, extended the Company’s arrangement with AARP on the Medicare Part D
business to December 31, 2014, and gave the Company an exclusive right to use the AARP brand on the
Company’s Medicare Advantage offerings until December 31, 2014, subject to certain limited exclusions.
82