COL » Topics » Pension Benefits

These excerpts taken from the COL 10-K filed Nov 25, 2008.

Pension Benefits

        We have historically provided retirement benefits to most of our employees in the form of defined benefit pension plans. Accounting standards require the cost of providing these pension plans be measured on an actuarial basis. These accounting standards will generally reduce, but not eliminate, the volatility of pension expense as actuarial gains and losses resulting from both normal year-to-year changes in valuation assumptions and the differences from actual experience are deferred and amortized. The application of these accounting standards requires management to make numerous assumptions and judgments that can significantly affect these measurements. Critical assumptions made by management in performing these actuarial valuations include the selection of discount rates and expectations on the future rate of return on pension plan assets.

        Discount rates are used to determine the present value of our pension obligations and also affect the amount of pension expense recorded in any given period. We estimate this discount rate based on

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the rates of return of high quality, fixed-income investments with maturity dates that reflect the expected time horizon that benefits will be paid (see Note 11 in the consolidated financial statements in Item 8 below). Changes in the discount rate could have a material effect on our reported pension obligations and related pension expense.

        The expected rate of return is our estimate of the long-term earnings rate on our pension plan assets and is based upon both historical long-term actual and expected future investment returns considering the current investment mix of plan assets. Differences between the actual and expected rate of return on plan assets can impact our expense for pension benefits.

        Holding all other factors constant, the estimated impact on 2008 pension expense caused by hypothetical changes to key assumptions is as follows:

 
  Change in Assumption
(dollars in millions)
  25 Basis Point Increase   25 Basis Point Decrease
Assumption

Pension obligation discount rate

  $5 pension expense decrease   $5 pension expense increase

Expected long-term rate of return on plan assets

  $6 pension expense decrease   $6 pension expense increase

Pension Benefits



        We have historically provided retirement benefits to most of our employees in the form of defined benefit pension plans. Accounting
standards require the cost of providing these pension plans be measured on an actuarial basis. These accounting standards will generally reduce, but not eliminate, the volatility of pension expense as
actuarial gains and losses resulting from both normal year-to-year changes in valuation assumptions and the differences from actual experience are deferred and amortized. The
application of these accounting standards requires management to make numerous assumptions and judgments that can significantly affect these measurements. Critical assumptions made by management in
performing these actuarial valuations include the selection of discount rates and expectations on the future rate of return on pension plan assets.



        Discount
rates are used to determine the present value of our pension obligations and also affect the amount of pension expense recorded in any given period. We estimate this discount
rate based on



40











the
rates of return of high quality, fixed-income investments with maturity dates that reflect the expected time horizon that benefits will be paid (see Note 11 in the consolidated financial
statements in Item 8 below). Changes in the discount rate could have a material effect on our reported pension obligations and related pension expense.



        The
expected rate of return is our estimate of the long-term earnings rate on our pension plan assets and is based upon both historical long-term actual and
expected
future investment returns considering the current investment mix of plan assets. Differences between the actual and expected rate of return on plan assets can impact our expense for pension benefits.



        Holding
all other factors constant, the estimated impact on 2008 pension expense caused by hypothetical changes to key assumptions is as follows:










































 
 Change in Assumption
(dollars in millions)
 25 Basis Point Increase  25 Basis Point Decrease
Assumption



Pension obligation discount rate

 $5 pension expense decrease $5 pension expense increase

Expected long-term rate of return on plan assets

 $6 pension expense decrease $6 pension expense increase




This excerpt taken from the COL 10-Q filed Apr 25, 2007.

Pension Benefits

We amended our U.S. qualified and non-qualified pension plans in 2003 covering all salary and hourly employees not covered by collective bargaining agreements to discontinue benefit accruals for salary increases and services rendered after September 30, 2006. As a result, we expect the defined benefit pension expense to decrease from $70 million in 2006 to $11 million in 2007. Concurrently, we plan to make additional company contributions to our existing defined contribution savings plan of approximately $28 million in 2007.

 

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Table of Contents
This excerpt taken from the COL 10-Q filed Jan 25, 2007.

Pension Benefits

We amended our U.S. qualified and non-qualified pension plans in 2003 covering all salary and hourly employees not covered by collective bargaining agreements to discontinue benefit accruals for salary increases and services rendered after September 30, 2006. As a result, we expect the defined benefit pension expense to decrease from $70 million in 2006 to $11 million in 2007. Concurrently, we plan to make an additional company contribution to our existing defined contribution savings plan of approximately $28 million in 2007.

 

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Table of Contents
This excerpt taken from the COL 10-K filed Nov 13, 2006.

Pension Benefits

The Company provides pension benefits to most of the Company’s U.S. employees in the form of non-contributory, defined benefit plans that are considered qualified plans under applicable laws. The benefits provided under these plans for salaried employees are generally based on years of service and average compensation. The benefits provided under these plans for hourly employees are generally based on specified benefit amounts and years of service. In addition, the Company sponsors an unfunded non-qualified defined benefit plan for certain employees. The Company also maintains two pension plans in foreign countries, one of which is unfunded.

In June 2003, the Company’s U.S. qualified and non-qualified defined benefit pension plans were amended to discontinue benefit accruals for salary increases and services rendered after September 30, 2006. These changes will affect all of the Company’s domestic pension plans for all salaried and hourly employees not covered by collective bargaining agreements. Concurrently, the Company plans to supplement its existing defined contribution savings plan effective October 1, 2006 to include additional Company contributions.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

In 2006, the Company’s U.S. qualified defined benefit pension plan was also amended to discontinue pre-retirement and post retirement lump sum ancillary death benefits. The amendment is effective for active employees who are entitled to a deferred vested benefit that die on or after October 1, 2006, and for retirees under the plan who die on or after January 1, 2007. The effect of this plan amendment was to both reduce the benefit obligation and increase the funded status of the Company’s U.S. qualified pension plan by $28 million at September 30, 2006.

Also during 2006, the Company’s United Kingdom defined benefit pension plan was amended to discontinue benefit accruals for salary increases and services rendered after February 28, 2009 for all participants. Concurrently, the Company plans to replace the defined benefit by expanding its existing defined contribution savings plan effective March 1, 2006 to include additional Company contributions. New hires on or after March 1, 2006 participate only in the defined contribution plan. Existing employees may choose to move to the new plan any time after March 1, 2006. The effect of this plan amendment was to both reduce the benefit obligation and increase the funded status of the Company’s United Kingdom pension plan by $8 million at September 30, 2006.

For the years ended September 30, 2006 and 2005, the Company made contributions to its pension plans as follows:

 

(in millions)

 

   2006    2005

Discretionary contributions to U.S. qualified plan

   $ 50    $ 100

Contributions to international plans

     9      8

Contributions to U.S. non-qualified plan

     7      6
             

Total

   $ 66    $ 114
             

The Company’s objective with respect to the funding of its pension plans is to provide adequate assets for the payment of future benefits. Pursuant to this objective, the Company will fund its pension plans as required by governmental regulations and may consider discretionary contributions as conditions warrant. During 2006 and 2005, the Company made discretionary contributions to its U.S. qualified pension plan of $50 million and $100 million, respectively. These contributions resulted in a reduction of a previously established deferred tax benefit and as a result, there was no effect on the Company’s effective income tax rate or related income tax expense during 2006 and 2005.

The Company is not required to make any contributions to its U.S. qualified pension plan in 2007 pursuant to governmental regulations; however, the Company plans to make a $75 million discretionary contribution to the U.S. qualified pension plan in 2007. Contributions to the Company’s international plans and the U.S. non-qualified plan are expected to total $13 million in 2007.

This excerpt taken from the COL 10-Q filed Jul 27, 2006.

Pension Benefits

Pension expense for the full year 2006 is expected to be $70 million compared to $31 million for the full year 2005. The increase in pension expense is due primarily to a lower discount rate and higher pensionable earnings.

This excerpt taken from the COL 10-Q filed Apr 26, 2006.

Pension Benefits

Pension expense for the full year 2006 is expected to be $70 million compared to $31 million for the full year 2005. The increase in pension expense is due primarily to a lower discount rate and higher pensionable earnings.

This excerpt taken from the COL 10-Q filed Jan 26, 2006.

Pension Benefits

 

Pension expense for the full year 2006 is expected to be $70 million compared to $31 million for the full year 2005. The increase in pension expense is due primarily to a lower discount rate and higher pensionable earnings.

 

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Table of Contents
This excerpt taken from the COL 10-K filed Nov 21, 2005.

Pension Benefits

 

The Company provides pension benefits to most of the Company’s U.S. employees in the form of non-contributory, defined benefit plans that are considered qualified plans under applicable laws. The benefits provided under these plans for salaried employees are generally based on years of service and average compensation. The benefits provided under these plans for hourly employees are generally based on specified benefit amounts and years of service. In addition, the Company sponsors an unfunded non-qualified defined benefit plan for certain employees. The Company also maintains three pension plans in foreign countries, two of which are unfunded.

 

In June 2003, the Company’s U.S. qualified and non-qualified defined benefit pension plans were amended to discontinue benefit accruals for salary increases and services rendered after September 30, 2006. These changes will affect all of the Company’s domestic pension plans for all salaried and hourly employees not covered by collective bargaining agreements. Concurrently, the Company plans to supplement its existing defined contribution savings plan effective October 1, 2006 to include additional Company contributions.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the years ended September 30, 2005 and 2004, the Company made contributions to its pension plans as follows:

 

(in millions)

 

   2005

   2004

Discretionary contributions to U.S. qualified plans

   $ 100    $ 125

Contributions to international plans

     8      —  

Contributions to U.S. non-qualified plan

     6      7
    

  

Total

   $ 114    $ 132
    

  

 

The Company’s objective with respect to the funding of its pension plans is to provide adequate assets for the payment of future benefits. Pursuant to this objective, the Company will fund its pension plans as required by governmental regulations and may consider discretionary contributions as conditions warrant. During 2005 and 2004, the Company made discretionary contributions to its qualified pension plans of $100 million and $125 million, respectively. These contributions resulted in a reduction of a previously established deferred tax benefit and as a result, there was no effect on the Company’s effective income tax rate or related income tax expense during 2005 and 2004.

 

The Company is not required to make any contributions to its qualified pension plans in 2006 pursuant to governmental regulations and current projections indicate that none will be required in 2007; however, future funding requirements are difficult to estimate as such estimates are dependent upon market returns and interest rates, which can be volatile. The Company currently has no plans to make additional discretionary contributions to its U.S. qualified pension plans in 2006. Contributions to the Company’s international plans and the non-qualified plan are expected to total $11 million in 2006.

 

This excerpt taken from the COL 10-Q filed Jul 28, 2005.

Pension Benefits

 

Pension expense for the full year 2005 is expected to be $32 million (including pension expense from the acquisition of TELDIX) compared to $31 million for the full year 2004.

 

This excerpt taken from the COL 10-Q filed Apr 27, 2005.

Pension Benefits

 

Pension expense for the three months ended March 31, 2005 and 2004 was $7 million and $8 million, respectively, and $15 million and $16 million for the six months ended March 31, 2005 and 2004, respectively. Pension expense for the full year 2005 is expected to be $31 million (including pension expense from the acquisition of TELDIX) compared to $31 million for the full year 2004.

 

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Table of Contents
This excerpt taken from the COL 10-Q filed Jan 26, 2005.

Pension Benefits

 

Pension expense for both the three months ended December 31, 2004 and 2003 was $8 million. Pension expense for the full year 2005 will be approximately $30 million compared to $31 million for the full year 2004.

 

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