American Airlines 2006 Annual Report Download - page 78

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74
10. Retirement Benefits
All employees of the Company may participate in pension plans if they meet the plans’ eligibility requirements.
The defined benefit plans provide benefits for participating employees based on years of service and average
compensation for a specified period of time before retirement. The Company uses a December 31 measurement
date for all of its defined benefit plans. American’s pilots also participate in a defined contribution plan for which
Company contributions are determined as a percentage (11 percent) of participant compensation. Certain non-
contract employees (including all new non-contract employees) participate in a defined contribution plan in which
the Company will match the employees’ before-tax contribution on a dollar-for-dollar basis, up to 5.5 percent of
their pensionable pay.
In addition to pension benefits, other postretirement benefits, including certain health care and life insurance
benefits (which provide secondary coverage to Medicare), are provided to retired employees. The amount of
health care benefits is limited to lifetime maximums as outlined in the plan. Substantially all regular employees of
American and employees of certain other subsidiaries may become eligible for these benefits if they satisfy
eligibility requirements during their working lives.
Certain employee groups make contributions toward funding a portion of their retiree health care benefits during
their working lives. The Company funds benefits as incurred and makes contributions to match employee
prefunding.
On December 31, 2006, the Company adopted the recognition and disclosure provisions of SFAS 158. SFAS
158 required the Company to recognize the funded status (i.e., the difference between the fair value of plan
assets and the projected benefit obligations) of its pension plans in the consolidated balance sheet as of
December 31, 2006 with a corresponding adjustment to accumulated other comprehensive loss. The adjustment
to accumulated other comprehensive loss at adoption primarily represents the net unrecognized actuarial losses
and unrecognized prior service costs. These amounts will be subsequently recognized as net periodic pension
cost pursuant to the Company’s historical accounting policy of amortizing such amounts. Further, actuarial gains
and losses that arise in subsequent periods and are not recognized as net periodic pension cost in the same
periods will be recognized as a component of other comprehensive income. Those amounts will be subsequently
recognized as a component of net periodic pension cost on the same basis as the amounts recognized in
accumulated other comprehensive loss at adoption of SFAS 158.
The incremental effects of adopting the provisions of SFAS 158 on the Company’s consolidated balance sheet at
December 31, 2006 are presented in the following table. The adoption of SFAS 158 had no effect on the
Company’s consolidated statement of operations for the year ended December 31, 2006, or for any prior period
presented, and it will not affect the Company’s operating results in future periods.
Prior to adopting
SFAS 158
Effect of
adopting
SFAS 158
As Reported at
December 31,
2006
Intangible asset (pension) $ 118 $ (118) $ -
Accrued pension and postretirement
benefits liability
4,657
880
5,537
Total liabilities 28,871 880 29,751
Accumulated other comprehensive loss (458) (998) (1,456)
Total stockholders’ equity (deficit) 392 (998) (606)