Unum 2008 Annual Report Download - page 46

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The fair value of plan assets in our U.S. qualified defined benefit pension plan was $658.1 million at December 31, 2008, compared
to $784.3 million at year end 2007. This decline in fair value of plan assets, as well as the decrease in the discount rate, more than offset
the effect of the plan contribution during 2008, resulting in a year end deficit funding level in the plan of $266.9 million as of December 31,
2008, compared to a deficit of $43.8 million as of December 31, 2007.
The fair value of plan assets in our OPEB plan was $12.0 million at December 31, 2008 and 2007. These assets represent life insurance
reserves to fund the life insurance benefit portion of our OPEB plan. Our OPEB plan represents a non-vested, non-guaranteed obligation,
and current regulations do not require specific funding levels for these benefits, which are comprised of retiree life, medical, and dental
benefits. It is our practice to use general assets to pay medical and dental claims as they come due in lieu of utilizing plan assets for the
medical and dental benefit portions of our OPEB plan. We expect to receive subsidies under the Medicare Prescription Drug, Improvement
and Modernization Act of 2003 to partially offset these payments.
Our expected return on plan assets and discount rate discussed above will not affect the cash contributions we are required to make
to our U.S. pension and OPEB plans because we have met all minimum funding requirements set forth by ERISA. We had no regulatory
contribution requirements for 2008 and 2007; however, we elected to make voluntary contributions of $130.0 million and $110.0 million,
respectively, to our U.S. qualified defined benefit pension plan. We expect to make a voluntary contribution of approximately $70.0 million
in 2009, based on current tax law.
During 2006, the federal government enacted the Pension Protection Act of 2006 which requires companies to fully fund defined
benefit pension plans over a seven year period. We have evaluated this requirement and have made estimates of amounts to be funded in
the future. Based on this assessment, we do not believe that the funding requirements of the Pension Protection Act will cause a material
adverse effect on our liquidity.
The fair value of plan assets for our U.K. pension plan was £82.1 million at December 31, 2008, compared to £93.8 million at
December 31, 2007. The U.K. pension plan has a deficit of £4.7 million at December 31, 2008, compared to £0.9 million at December 31,
2007. We contribute to the plan in accordance with a schedule of contributions which requires that we contribute to the plan at the rate of
at least 15.0 percent of employee salaries, sufficient to meet the minimum funding requirement under U.K. legislation. During 2008, we
made a required contribution of £4.0 million. During 2007, we made a required contribution of £5.3 million. We anticipate that we will
make contributions during 2009 of approximately £3.5 million.
Income Taxes
We record a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. Our valuation
allowance relates primarily to assets for foreign net operating loss carryforwards and assets for our basis in certain of our foreign
subsidiaries that are not likely to be realized in the future based on our expectations using currently available evidence. In evaluating the
ability to recover deferred tax assets, we have considered all available positive and negative evidence including past operating results, the
existence of cumulative losses in the most recent years, forecasted earnings, future taxable income, and prudent and feasible tax planning
strategies. In the event we determine that we most likely would not be able to realize all or part of our deferred tax assets in the future,
an increase to the valuation allowance would be charged to earnings in the period such determination is made. Likewise, if it is later
determined that it is more likely than not that those deferred tax assets would be realized, the previously provided valuation allowance
would be reversed.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws in a multitude of jurisdictions,
both domestic and foreign. The amount of income taxes we pay is subject to ongoing audits in various jurisdictions, and a material assessment
by a governing tax authority could affect profitability.