Sprint - Nextel 2006 Annual Report Download - page 120

The components of the pension expense and postretirement benefit expense for the years ended December 31,
2006, 2005 and 2004 are detailed below:
2006 2005 2004 2006 2005 2004
Year Ended December 31, Year Ended December 31,
Pension Plan Postretirement Benefit Plan
(in millions)
Service cost .................................... $ 20 $134 $133 $ 7 $13 $13
Interest cost .................................... 149 264 250 18 48 56
Expected return on plan assets ...................... (195) (328) (303) (1) (3) (3)
Amortization of transition asset ..................... — — (2) — (1) (1)
Amortization of prior service cost ................... 6 16 16 (25) (57) (49)
Recognized net actuarial loss ....................... 38 110 89 10 28 28
Curtailment loss — partial freeze of benefits accruals ..... — 4 ————
Net benefit expense .............................. $ 18 $200 $183 $ 9 $28 $44
Net benefit expense includes $21 million, $63 million and $57 million for the years ended December 31,
2006, 2005 and 2004, respectively, that was allocated to the Local segment prior to the spin-off of Embarq.
We believe these amounts approximate the expense related to participants designated to work for Embarq and,
accordingly, these amounts are included in discontinued operations in the accompanying consolidated
statements of operations. In 2006, all pension service costs are attributable to the Local segment as our
pension benefits for continuing Sprint Nextel employees were frozen as of December 31, 2005.
Benefit Obligations
The actuarial assumptions used to compute the funded status for the plans are based upon information
determined as of December 31, 2006 and 2005, and are as follows:
2006 2005 2006 2005
As of December 31, As of December 31,
Pension Plan
Postretirement
Benefit Plan
Actuarial assumptions at end of year:
Discount rate ....................................... 6.20% 5.75% 6.20% 5.75%
Expected rate of compensation increase .................... N/A 4.25% 4.25% 4.25%
Initial healthcare cost trend rate .......................... N/A N/A 8.6% 9.3%
Ultimate healthcare cost trend rate........................ N/A N/A 5.0% 5.0%
Year ultimate trend rate is reached........................ N/A N/A 2012 2012
N/A — Not Applicable
In addition to the above rates, the discount rate used to determine benefit obligations as of the remeasurement
date of May 17, 2006, associated with the spin-off of Embarq, was 6.50%.
SFAS Nos. 87 and 106 require that the calculation of a benefit obligation include a discount rate that reflects
the rate at which the benefits could effectively be settled and further suggest that this rate reflect the rates of
return currently available on high quality fixed income securities whose cash flows (via coupon and maturities)
match the timing and amount of future benefit payments of the plan. Accordingly, our actuaries completed a
cash flow bond matching analysis consistent with this methodology.
F-43
SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)