Humana 2009 Annual Report Download - page 104

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
equal to the par amount of our senior notes. These swap agreements were qualified and designated as a fair value
hedge. The gain or loss on the swap agreements as well as the offsetting loss or gain on the senior notes was
recognized in current earnings. We included the gain or loss on the swap agreements in interest expense, the
same line item as the offsetting loss or gain on the related senior notes. The gain or loss due to hedge
ineffectiveness was not material for 2008 or 2007.
During 2008, we terminated all of our interest-rate swap agreements for cash consideration of $93.0 million.
We recognized a $10.4 million impairment charge as a realized investment loss associated with the termination
of a swap with a subsidiary of Lehman, which subsequently filed for bankruptcy protection.
13. EMPLOYEE BENEFIT PLANS
Employee Savings Plan
We have defined contribution retirement and savings plans covering eligible employees. Our contribution to
these plans is based on various percentages of compensation, and in some instances, on the amount of our
employees’ contributions to the plans. The cost of these plans amounted to approximately $102.5 million in
2009, $79.6 million in 2008, and $69.7 million in 2007, all of which was funded currently to the extent it was
deductible for federal income tax purposes. The Company’s cash match is invested pursuant to the participant’s
contribution direction. Based on the closing stock price of $43.89 on December 31, 2009, approximately 15% of
the retirement and savings plan’s assets were invested in our common stock, or approximately 4.5 million shares,
representing 3% of the shares outstanding as of December 31, 2009. At December 31, 2009, approximately
7.9 million shares of our common stock were reserved for issuance under our defined contribution retirement and
savings plans.
Stock-Based Compensation
We have plans under which options to purchase our common stock and restricted stock awards have been
granted to executive officers, directors and key employees. The terms and vesting schedules for stock-based
awards vary by type of grant. Generally, the awards vest upon time-based conditions. For prospective grants of
stock options or restricted stock awards on or after January 1, 2010, our equity award program includes a
retirement provision that treats all employees with a combination of age and years of service with the Company
totaling 65 or greater, with a minimum required age of 55 and a minimum requirement of 5 years of service, as
retirement-eligible. Upon exercise, stock-based compensation awards are settled with authorized but unissued
company stock. The compensation expense that has been charged against income for these plans was as follows
for the years ended December 31, 2009, 2008, and 2007:
2009 2008 2007
(in thousands)
Stock-based compensation expense by type:
Stock options ..................................... $19,555 $ 18,202 $ 15,408
Restricted stock awards ............................. 46,315 37,167 26,724
Total stock-based compensation expense ........... 65,870 55,369 42,132
Tax benefit recognized .......................... (24,128) (20,282) (15,568)
Stock-based compensation expense, net of tax . . . $ 41,742 $ 35,087 $ 26,564
The tax benefit recognized in our consolidated financial statements is based on the amount of compensation
expense recorded for book purposes. The actual tax benefit realized in our tax return is based on the intrinsic
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