Sprint - Nextel 2014 Annual Report Download - page 98

Table of Contents
Index to Consolidated Financial Statements
SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F-15
liability (i.e., the estimated unpaid balance of the subscribers' installment contracts) would be approximately $248 million as
of March 31, 2015. This amount is not an indication of the Company's expected loss exposure because it does not consider
the expected fair value of the used handset, which is required to be returned to us in good working condition at trade-in, nor
does it consider the probability and timing of trade-in. The total guarantee liabilities associated with the option, which are
recorded in "Accrued expenses and other current liabilities" in the consolidated balance sheets, were immaterial.
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.
In June 2014, the Company’s Board of Directors approved a plan amendment to the Sprint Retirement Pension
Plan (the Plan) to offer certain terminated participants, who had not begun to receive Plan benefits, the opportunity to
voluntarily elect to receive their benefits as an immediate lump sum distribution. Upon expiration of the election period and
completion of cash payments on November 28, 2014, the lump sum distribution, totaling approximately $560 million, created
a settlement event that resulted in a $59 million charge, which is reflected in "Other, net" in the consolidated statements of
operations, and a reduction in the projected benefit obligation of approximately $300 million, impacted by the settlement as
well as a change in the mortality tables and a change in the discount rate used to estimate the projected benefit obligation.
As of March 31, 2015 and 2014, the fair value of our pension plan assets and certain other postretirement benefit
plan assets in aggregate was $1.3 billion and $1.8 billion, respectively, and the fair value of our projected benefit obligations
in aggregate was $2.2 billion and $2.4 billion, respectively. As a result, the plans were underfunded by approximately $900
million and $600 million at March 31, 2015 and 2014, respectively, and were recorded as a net liability in our consolidated
balance sheets. Estimated contributions totaling approximately $8 million are expected to be paid during the fiscal year 2015.
The offset to the pension liability is recorded in equity as a component of "Accumulated other comprehensive
loss," net of tax, including $393 million, $147 million, and $93 million for the Successor year ended March 31, 2015, the
three-month transition period ended March 31, 2014, year ended December 31, 2013, respectively, which is amortized to
"Selling, general and administrative" in Sprint's consolidated statements of operations. The change in the net liability of the
Plan in the Successor year ended March 31, 2015 was affected by the impact of the settlement event on the projected benefit
obligation combined with a change in the discount rate used to estimate the projected benefit obligation, decreasing from
4.9% for the Successor three-month transition period ended March 31, 2014 to 4.2% for the Successor year ended March 31,
2015. The change in the net liability of the Plan in the Successor three-month transition period ended March 31, 2014 and
year ended December 31, 2013 was affected primarily by a change in the discount rate used to estimate the projected benefit
obligation, decreasing from 5.3% to 4.9% for the Successor three-month transition period ended March 31, 2014. We intend
to make future cash contributions to the Plan in an amount necessary to meet minimum funding requirements according to
applicable benefit plan regulations.
As of December 31, 2005, the 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% at March 31, 2015 and 2014.
To meet this objective, our investment strategy for the year ended March 31, 2015 was governed by an asset allocation policy,
whereby a targeted allocation percentage is assigned to each asset class 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. Actual allocations are allowed to deviate from target allocation percentages within a range for each asset class as
defined in the investment policy.
Investments of the Plan are measured at fair value on a recurring basis which is determined using quoted market
prices or estimated fair values. As of March 31, 2015, 47% of the investment portfolio was valued at quoted prices in active
markets for identical assets; 35% 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 the Successor year ended March 31, 2015, the three-month transition period ended March 31, 2014,
and the year ended December 31, 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 contribution (in aggregate)