Unum 2012 Annual Report Download - page 145

UNUM 2012 ANNUAL REPORT 143
Our rate of compensation increase assumption is generally based on periodic studies of compensation trends.
For measurement purposes at December 31, 2012 and 2011, the annual rate of increase in the per capita cost of covered
postretirement health care benefits assumed for the next calendar year was 8.00 percent and 8.50 percent, respectively, for benefits
payable to both retirees prior to Medicare eligibility as well as Medicare eligible retirees. The rate was assumed to change gradually
to 5.00 percent by 2019 and remain at that level thereafter.
The medical and dental premium used to determine the per retiree employer subsidy are capped. If the cap is not reached by the year
2015, the caps are then set equal to the year 2015 premium. Certain of the current retirees and all future retirees are subject to the cap.
Net Periodic Benefit Cost
The following table provides the components of the net periodic benefit cost for the plans described above for the years ended
December 31.
Pension Benefits
U.S. Plans Non U.S. Plans OPEB
(in millions of dollars) 2012 2011 2010 2012 2011 2010 2012 2011 2010
Service Cost $ 48.8 $ 42.7 $ 36.5 $ 4 . 2 $ 4.8 $ 4.9 $ 1 . 6 $ 1.9 $ 2.6
Interest Cost 84.4 77.6 71.1 8.5 8.8 9.5 9.6 10.0 10.8
Expected Return on Plan Assets (88.8) (87.6) (70.5) (11.1) (12.2) (10.7) (0.7) (0.7) (0.6)
Amortization of:
Net Actuarial Loss 45.9 31.9 29.8 0.5 — 2.4 — — —
Prior Service Credit (0.4) (0.5) (0.5) — — — (2.6) (2.6) (2.6)
Total $ 89.9 $ 64.1 $ 66.4 $ 2 . 1 $ 1.4 $ 6.1 $ 7 . 9 $ 8.6 $10.2
A one percent increase or decrease in the assumed health care cost trend rate at December 31, 2012 would have increased
(decreased) the service cost and interest cost by $0.2 million and $(0.2) million, respectively, and the postretirement benefit obligation
by $3.9 million and $(2.9) million, respectively.
Our OPEB plan currently receives a subsidy from the federal government under the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the Medicare Act). This act allows an employer to choose whether to coordinate prescription drug benefits
under a retiree medical plan with the Medicare prescription drug benefit or to keep the Company plan design as it is and receive a subsidy
from the federal government. When the Medicare Act became effective in 2006, we initially elected to receive the subsidy from the federal
government with plans to defer our coordination with the new prescription drug benefit until a later date. This anticipated change was
reflected in the net periodic benefit cost. In 2009, we amended the plan design to stop the deferral of coordination of benefits and elected
to continue receiving the existing subsidy from the federal government. This election resulted in a $4.4 million prior service credit that
began amortization in 2010. We received subsidy payments of $1.3 million in both 2012 and 2011. Our expected benefit payments in
future years have been reduced by the amount of subsidy payments we expect to receive.
The unrecognized net actuarial loss and prior service credit included in accumulated other comprehensive income and expected to be
amortized and included in net periodic pension cost during 2013 is $59.8 million before tax and $39.1 million after tax. The prior service
credit expected to be amortized and included as a reduction to net periodic cost for our OPEB plan during 2013 is $5.0 million before tax
and $3.2 million after tax.