Waste Management 2007 Annual Report Download - page 121

limited participation in these plans to participating retired employees as of December 31, 1998. The unfunded
benefit obligation for these plans was $58 million at December 31, 2007.
Our accrued benefit liabilities for our defined benefit pension and other post-retirement plans are $68 million
as of December 31, 2007 and are included as a component of “Accrued liabilities” in our Consolidated Balance
Sheet.
In addition, certain of our subsidiaries participate in various multi-employer employee benefit and pension
plans covering union employees not covered under other pension plans. These multi-employer plans are generally
defined contribution plans. Specific benefit levels provided by union pension plans are not negotiated with or known
by the employer contributors. Additionally, we have one instance of a site-specific plan for employees not covered
under other plans. The projected benefit obligation, plan assets and unfunded liability of the multi-employer
pension plans and the site specific plan are not material. Contributions of $33 million in 2007, $37 million in 2006
and $38 million in 2005 were charged to operations for those subsidiaries’ defined benefit and contribution plans.
10. Commitments and Contingencies
Financial instruments — We have obtained letters of credit, performance bonds and insurance policies and
have established trust funds and issued financial guarantees to support tax-exempt bonds, contracts, performance of
landfill closure and post-closure requirements, environmental remediation, and other obligations.
Historically, our revolving credit facilities have been used to obtain letters of credit to support our bonding and
financial assurance needs. We also have letter of credit and term loan agreements and a letter of credit facility that
were established to provide us with additional sources of capacity from which we may obtain letters of credit. These
facilities and agreements are discussed further in Note 7. We obtain surety bonds and insurance policies from two
entities in which we have a non-controlling financial interest. We also obtain insurance from a wholly-owned
insurance company, the sole business of which is to issue policies for the parent holding company and its other
subsidiaries, to secure such performance obligations. In those instances where our use of captive insurance is not
allowed, we generally have available alternative bonding mechanisms.
Because virtually no claims have been made against the financial instruments we use to support our
obligations, and considering our current financial position, management does not expect that any claims against
or draws on these instruments would have a material adverse effect on our consolidated financial statements. We
have not experienced any unmanageable difficulty in obtaining the required financial assurance instruments for our
current operations. In an ongoing effort to mitigate risks of future cost increases and reductions in available
capacity, we continue to evaluate various options to access cost-effective sources of financial assurance.
Insurance — We carry insurance coverage for protection of our assets and operations from certain risks
including automobile liability, general liability, real and personal property, workers’ compensation, directors’ and
officers’ liability, pollution legal liability and other coverages we believe are customary to the industry. Our
exposure to loss for insurance claims is generally limited to the per incident deductible under the related insurance
policy. Our exposure, however, could increase if our insurers were unable to meet their commitments on a timely
basis.
We have retained a significant portion of the risks related to our automobile, general liability and workers’
compensation insurance programs. For our self-insured retentions, the exposure for unpaid claims and associated
expenses, including incurred but not reported losses, is based on an actuarial valuation and internal estimates. The
estimated accruals for these liabilities could be affected if future occurrences or loss development significantly
differ from the assumptions used. As of December 31, 2007, our general liability, workers’ compensation and auto
liability insurance programs carry self-insurance exposures of up to $2.5 million, $1.5 million and $1 million per
incident, respectively. Effective January 1, 2008, we increased the per incident deductible of our worker’s
compensation insurance program to $5 million. Self-insurance claims reserves acquired as part of our acquisition
of WM Holdings in July 1998 were discounted at 4.0% at December 31, 2007 and 4.65% at December 31, 2006. The
86
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)