Sprint - Nextel 2006 Annual Report Download - page 119

Download and view the complete annual report

Please find page 119 of the 2006 Sprint - Nextel annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 140

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140

As of May 17, 2006, in connection with the spin-off of Embarq, the accrued postretirement benefit obligation
for participants designated to work for Embarq and the related plan assets were transferred to Embarq. This
event required a remeasurement of benefit obligations associated with remaining Sprint Nextel employees in
accordance with SFAS No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions. All
related plan assets had been funded by Embarq subsidiaries, and accordingly, were transferred to Embarq.
Because prescription drug coverage is available through Medicare beginning in 2006, we amended the retiree
medical plans in the third quarter 2005 to largely eliminate prescription drug coverage for Medicare-eligible
retirees. This amendment precipitated a remeasurement of retiree medical expense, using a 5.25% discount
rate as of the July 1, 2005 remeasurement date. The amendment decreased the accumulated postretirement
benefit obligation by $250 million, and decreased 2005 benefit expense by $13 million.
Benefit Expense
We use a December 31 measurement date for our pension and postretirement benefit plans. The actuarial
assumptions used to compute the net pension expense and postretirement benefit expense are based upon
information available as of the beginning of the year, as presented in the following table.
2006
Post Spin-Off
2006
Pre
Spin-Off 2005 2004
2006
Post
Spin-Off
2006
Pre
Spin-Off 2005 2004
Pension Plan Postretirement Benefit Plan
Actuarial assumptions at beginning
of year:
Discount rate ............... 6.50% 5.75% 6.0% 6.25% 6.50% 5.75% 6.0% 6.25%
Expected rate of compensation
increase ................. N/A 4.25% 4.25% 4.25% 4.25% 4.25% 4.25% 4.25%
Expected long-term rate of
return on plan assets . . . ..... 8.75% 8.75% 8.75% 8.75% N/A 8.75% 8.75% 8.75%
Initial healthcare cost trend
rate .................... N/A N/A N/A N/A 9.3% 9.3% 10.0% 10.0%
Ultimate healthcare cost trend
rate .................... N/A N/A N/A N/A 5.0% 5.0% 5.0% 5.0%
Year ultimate trend rate is
reached ................. N/A N/A N/A N/A 2012 2012 2012 2011
N/A — Not Applicable
F-42
SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)