8. Benefit Plans
Retirement Plans
Substantially all employees of the Foundation are covered by two defined contribution retirement plans which provide for retirement benefits through a combination of the purchase of individually-owned annuities and cash payout. The Foundation’s policy is to fund costs incurred. Pension expense amounted to approximately $4.0 million and $3.6 million for 2007 and 2006, respectively, under these plans.
Postretirement Benefits
The Foundation provides postretirement medical and dental benefits to all employees who meet eligibility requirements.
During 2007, the Foundation adopted Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefits, Pension and Other Postretirement Plans ("SFAS 158"). SFAS No. 158 requires the Foundation to report the funded status of each pension and other postretirement benefit plan as an asset (for over-funded plans) or as a liability (for under-funded plans), replacing the accrued benefit obligation currently recorded. The funded status reported on the balance sheet as of December 31, 2007 is equal to the benefit obliga- tion. SFAS No. 158 also requires that unamortized actuarial gains and losses and prior service costs or credits are recognized as an increase or decrease to net assets. SFAS No. 158 also requires employers to measure benefit plan assets and liabilities and determine the discount rate for subsequent year expense recognition as of the balance sheet date for financial reporting purposes. The adoption of SFAS No. 158 resulted in a decrease of $5,354,049 to unrestricted net assets.
Information with respect to this plan as of and for the years ended December 31, 2007 and 2006 is as follows (in thousands):
| 2007 | 2006 | |
|---|---|---|
| Benefit obligation at December 31 | ($24,810) | ($22,363) |
| Fair value of plan assets at December 31 | — | — |
| Funded status | ($24,810) | ($22,363) |
| Amounts recognized in unrestricted net assets consist of | ||
| Transition obligation | — | N/A |
| Prior service cost (credit) | (515) | N/A |
| Net loss (gain) | 5,869 | N/A |
| Total amount recognized | 5,354 | N/A |
| Benefit Cost | $3,334 | $3,425 |
| Employer contributions | 664 | 797 |
| Plan participants' contributions | 34 | 29 |
| Total benefits paid | 698 | 826 |
| Amounts recognized in the statement of financial positions consist of: | ||
| Accrued benefit cost | N/A | (16,786) |
| Liabilities | (24,810) | N/A |
| Net amounts recognized in accounts payable and accrued expenses | ($24,810) | ($16,786) |
The benefit information for 2007 and 2006 is summarized as follows (in thousands):
| 2007 | 2006 | |
|---|---|---|
| Weighted-average assumptions used to determine obligations as of December 31 | ||
| Discount rate | 6.50% | 6.00% |
| Expected return on plan assets | N/A | N/A |
| Weighted-average assumptions as of December 31 used for net periodic benefit cost | ||
| Discount rate | 6.00% | 5.55% |
| Expected return on plan assets | N/A | N/A |
| Assumed health care cost trend rates at December 31 | ||
| Health care cost trend rate assumed for the next year | 8.00% | 9.00% |
| Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) | 5.00% | 5.00% |
| Year that the rate reaches the ultimate trend rate | 2019 | 2013 |
| Expected contributions for 2008 | $822,804 | |
| Amounts in net unrestricted assets expected to be recognized in net periodic benefit cost in fiscal 2008 | ||
| Amortization of transition asset | – | |
| Amortization of unrecognized net loss (gain) | 225 | |
| Amortization of unrecognized net loss (gain) | (82) | |
| Total | $143 |
The estimated future benefit payments are as follows (in thousands):
| Before Medicare Rx Subsidy | Medicare Subsidy | After Medicare Rx Subsidy | |
|---|---|---|---|
| 2008 | $823 | $– | $823 |
| 2009 | 924 | (56) | 924 |
| 2010 | 1,022 | (63) | 959 |
| 2011 | 1,088 | (75) | 1,013 |
| 2012 | 1,201 | (88) | 1,113 |
| 2013–2017 | 7,872 | (686) | 7,186 |
In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("the Act”) was signed in to law. The Act introduces a prescription drug benefit under Medicare Part D as well as a Federal subsidy to employers whose plans provide an “actuarial equivalent” prescription drug benefit. The Foundation’s postretirement prescription drug benefits have been determined to qualify for this subsidy. The Foundation has treated the effects of the Act as an actuarial gain after adoption of the Financial Accounting Standards Board Staff Position No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” as of December 31, 2007. However, the Plan is not assumed to apply for the subsidy until 2009 at the earliest.