Windstream 2006 Annual Report Download - page 157

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Employee Benefit Plans and Postretirement Benefits, Continued:
Estimated future employer contributions, benefit payments and Medicare prescription drug subsidies expected to
offset the future postretirement benefit payments are as follows as of December 31, 2006:
(Millions)
Pension
Benefits
Postretirement
Benefits
Expected employer contributions for 2007 $ 6.6 $ 15.6
Expected benefit payments:
2007 $ 50.1 $ 16.6
2008 51.0 17.7
2009 52.7 18.8
2010 54.9 19.6
2011 – 2016 383.9 123.7
Expected subsidy:
2007 $ 0.9
2008 1.1
2009 1.2
2010 1.4
2012 – 2016 6.2
The expected employer contribution for pension benefits consists of $0.7 million necessary to fund the expected
benefit payments related to the unfunded supplemental retirement pension plans. In addition, the Company expects
to contribute $5.9 million to the Windstream plan during 2007 related to the plan formerly sponsored by Valor
calculated in accordance with the minimum funding requirements of the Employee Retirement Income Security
Act of 1974. Future discretionary contributions to the plan will depend on various factors, including future
investment performance, changes in future discount rates and changes in the demographics of the population
participating in the Company’s qualified pension plan. Expected benefit payments include amounts to be paid from
the plans or directly from Company assets, and exclude amounts that will be funded by participant contributions to
the plans.
Under the Medicare Prescription Drug, Improvement and Modernization Act of 2003, (the “Act”) beginning in
2006, the Act provides a prescription drug benefit under Medicare Part D, as well as a federal subsidy to plan
sponsors of retiree healthcare plans that provide a prescription drug benefit to their participants that is at least
actuarially equivalent to the benefit that will be available under Medicare. The amount of the federal subsidy is
based on 28 percent of an individual beneficiary’s annual eligible prescription drug costs ranging between $250
and $5,000. On May 19, 2004, the FASB issued Staff Position No. 106-2, “Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (“FSP
No. 106-2”). FSP No. 106-2 clarified that the federal subsidy provided under the Act should be accounted for as an
actuarial gain in calculating the accumulated postretirement benefit obligation and annual postretirement expense.
The Company determined that a substantial portion of the prescription drug benefits provided under its
postretirement benefit plan would be deemed actuarially equivalent to the benefits provided under Medicare
Part D. Effective July 1, 2004, the Company prospectively adopted FSP No. 106-2 and remeasured its accumulated
postretirement benefit obligation as of that date to account for the federal subsidy, the effects of which resulted in a
$14.2 million reduction in the Company’s accumulated postretirement benefit obligation and a $2.2 million
reduction in the Company’s 2004 postretirement expense. On January 21, 2005, the Department of Health and
Human Services issued final federal regulations related to the federal subsidy. These final rules did not have a
material effect on the Company’s benefit costs or accumulated postretirement benefit obligation.
Windstream sponsors a non-contributory defined contribution plan in the form of profit-sharing arrangements for
eligible employees, except bargaining unit employees. Prior to the spin-off from Alltel, Windstream employees
participated in the Alltel-sponsored plans and the amount of profit-sharing contributions to the plan was
determined by Alltel’s Board of Directors. Following the spin-off, the amount of profit-sharing contributions to the
plan are now determined annually by Windstream’s Board of Directors. Profit-sharing expense amounted to $5.5
million in 2006, $4.4 million in 2005 and $3.9 million in 2004.
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