Unum 2011 Annual Report Download - page 39

Unum 2011 Annual Report
Unum
2011
37
qualified defined benefit pension plan. We made no pension contributions to our U.S. qualified defined benefit pension plan during 2011,
but we expect to make a contribution of approximately $53.0 million in 2012.
During 2006, the U.S. 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 £120.9 million at December 31, 2011, compared to £112.7 million at
December 31, 2010. The U.K. pension plan had a surplus of £11.3 million and £14.8 million at December 31, 2011 and 2010, respectively.
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
24.8 percent of pensionable salaries for active members of the plan, plus 0.4 percent of pensionable salaries for all employees (including
active members of the plan) who are entitled to lump sum death in service benefits under the plan, sufficient to meet the minimum
funding requirement under U.K. legislation. During 2011 and 2010, we made required contributions of £2.9 million and £3.2 million,
respectively. We expect to make contributions of approximately £2.9 million during 2012.
See Note 8 of the “Notes to Consolidated Financial Statements” contained herein for further discussion.
Income Taxes
We record a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. As of
December 31, 2011, we had no net operating loss carryforward pertaining to our U.S. operations. In 2011, as part of an IRS settlement, we
released the $4.1 million valuation allowance related to basis differences in foreign subsidiaries and net operating loss carryforwards in
foreign jurisdictions for which we previously believed we would not realize a tax benefit.
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.
GAAP prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in income tax returns. The evaluation of a tax position is a two step process. The first step is to
determine whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the
position. The second step is to measure a position that satisfies the recognition threshold at the largest amount of benefit that is greater
than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more likely than not
threshold but that now satisfy the recognition threshold are recognized in the first subsequent financial reporting period in which that
threshold is met. Previously recognized tax positions that no longer meet the more likely than not recognition threshold are derecognized
in the first subsequent financial reporting period in which that threshold is no longer met. If a previously recognized tax position is settled
for an amount that is different from the amount initially measured, the difference will be recognized as a tax benefit or expense in the
period the settlement is effective. We believe that tax positions have been reflected in our financial statements at appropriate amounts in
conformity with GAAP.
See Note 6 of the “Notes to Consolidated Financial Statements” contained herein.