Sprint - Nextel 2006 Annual Report Download - page 121

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The following table summarizes the change in the projected benefit obligation for the pension plan and the
change in the accumulated benefit obligation for the postretirement benefit plan for the years ended
December 31, 2006 and 2005:
2006 2005 2006 2005
Year Ended
December 31,
Year Ended
December 31,
Pension Plan
Postretirement
Benefit Plan
(in millions)
Benefit obligation at beginning of year ................. $4,683 $4,466 $ 719 $ 967
Service cost..................................... 20 134 7 13
Interest cost..................................... 149 264 18 48
Plan amendments................................. (1) 8 — (250)
Curtailment ..................................... — (233) — —
Actuarial loss (gain) .............................. (10) 252 (10) 3
Benefits paid directly by Sprint Nextel ................. — — (24) (62)
Benefits paid from fund ............................ (105) (208) (1) —
Benefit obligation transferred to Embarq ............... (3,373) — (634) —
Benefit obligation at end of year ..................... $1,363 $4,683 $ 75 $ 719
Accumulated benefit obligation ...................... $1,363 $4,567 N/A N/A
N/A — Not Applicable
The pension plan’s projected benefit obligation equals the accumulated benefit obligation as of December 31,
2006, due to the spin-off of Embarq and pension plan amendments made as of December 31, 2005.
Plan Assets
The plan assets of the pension plan are currently used for the payment of pension benefits. The plan assets
exceed the actuarial present value of pension benefits to be paid over the next fiscal year. Therefore, the entire
liability for pension benefits is classified as a long-term liability.
We have assumed an 8.75% expected rate of return on plan assets since December 31, 2003. This estimate for
the return on assets reflects the average rate of earnings expected on the funds invested to provide for the
benefits included in the projected benefit obligation and is generally consistent with our target investment
policy. To assess the ongoing appropriateness of this rate, we requested our actuaries to prepare an investment
return estimate using our actual asset allocation as of November 30, 2006. This analysis resulted in an
estimated expected rate of return on plan assets of 8.5%. We will use this rate of return on plan assets to
determine pension expense for the year ending December 31, 2007.
F-44
SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)