Sprint - Nextel 2013 Annual Report Download - page 132

Table of Contents
Index to Consolidated Financial Statements
SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Benefit Plans
We provide a defined benefit pension plan and certain other postretirement benefits to certain employees, and we sponsor a defined contribution
plan for all employees.
As of the Successor year ended
December 31, 2013 and Predecessor year ended December 31, 2012 , the fair value of our pension plan assets and
certain other postretirement benefit plan assets in aggregate was
$1.8 billion and $1.6 billion , respectively, and the fair value of our projected benefit obligations
in aggregate was
$2.3 billion and $2.7 billion , respectively. As a result, the plans were underfunded by approximately $500 million and $1.1 billion at the
Successor year ended
December 31, 2013 and Predecessor year ended December 31, 2012 , respectively, and were recorded as a net liability in our consolidated
balance sheets. Estimated contributions totaling approximately
$68.5 million are expected to be paid during 2014.
The offset to the pension liability is recorded in equity as a component of "Accumulated other comprehensive income (loss)," net of tax, including
$93 million and $404 million for the Successor period ended December 31, 2013 and Predecessor year ended December 31, 2012 , respectively, which is amortized
to "Selling, general and administrative" in Sprint's consolidated statement of comprehensive loss. The change in the net liability of the plan in
2013 was affected
primarily by an increase in the discount rate, from
4.3% to 5.3% , used to estimate the projected benefit obligation. We intend to make future cash contributions
to the pension plan in an amount necessary to meet minimum funding requirements according to applicable benefit plan regulations.
As of December 31, 2005, the pension plan was amended to freeze benefit plan accruals for participants. The objective for the investment portfolio of
the pension plan is to achieve a long
- term nominal rate of return, net of fees, which exceeds the plan's long - term expected rate of return on investments for
funding purposes which was
7.75% for 2013 . To meet this objective, our investment strategy for 2013 was governed by an asset allocation policy, whereby a
targeted allocation percentage is assigned to each asset class as follows:
41% to U.S. equities; 18% to international equities; 21% to fixed income investments;
10% to real estate investments; and 10% to other investments including hedge funds. Actual allocations are allowed to deviate from target allocation
percentages by plus or minus 5%. As of December 1, 2013, the target allocation percentage assigned to each asset class was revised as follows:
38% to U.S.
equities;
16% to international equities; 28% to fixed income investments; 9% to real estate investments; and 9% to other investments including hedge funds.
The long
- term expected rate of return on investment for funding purposes is 7.75% for 2014.
Investments of the pension plan are measured at fair value on a recurring basis which is determined using quoted market prices or estimated fair
values. As of
December 31, 2013 , 49% of the investment portfolio was valued at quoted prices in active markets for identical assets; 33% was valued using
quoted prices for similar assets in active or inactive markets, or other observable inputs; and
18% was valued using unobservable inputs that are supported by
little or no market activity.
Under our defined contribution plan, participants may contribute a portion of their eligible pay to the plan through payroll withholdings. For
2013,
the Company matched 100% of the participants' pre - tax and Roth contribution (in aggregate) on the first 3% of eligible compensation and 50% of the
participants' pre
- tax and Roth (in aggregate) contribution on the next 2% of eligible compensation up to a maximum matching contribution of 4%. For the
Predecessor years ended
2012 and 2011 , the Company matched 50% of participants' contributions up to 2% of their eligible compensation. Fixed matching
contributions totaled approximately
$35 million for the Successor year ended 2013 , and $32 million , $30 million and $31 million for the Predecessor 191 - day period
ended July 10, 2013 and years ended
2012 and 2011 , respectively. Prior to 2013, the Company also made discretionary matching contributions, as determined by
the Board of Directors of the Company, equal to
100% of participants' contributions up to 3.95% of eligible compensation, or $60 million , in the Predecessor year
ended
2012 , and 1.2% of eligible compensation, or $20 million in the Predecessor year ended 2011 , based upon the attainment of certain profitability levels.
Revenue Recognition
Operating revenues primarily consist of wireless service revenues, revenues generated from device and accessory sales, revenues from wholesale
operators and third
- party affiliates, as well as long distance voice, data and
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