6. Pension Plans and Other Postretirement Benefits
Pursuant to various labor agreements, the Company is also required to make contributions to certain union-administered pension and health and welfare plans that totaled $9.3 million, $8.4 million and $7.5 million in 2000, 1999 and 1998, respectively. The Company also has nonqualified supplemental executive retirement plans in place for certain key employees for whom it has purchased cost recovery variable life insurance.
Defined Contribution Plans
Other Postretirement Benefits
Following is a reconciliation of the benefit obligation, fair value of plan assets and funded status of the Company's defined benefit and other postretirement benefit plans as of the respective balance sheet dates:
The Company sponsors a noncontributory defined benefit pension plan that covers certain full-time employees of Revco who are not covered by collective bargaining agreements. On September 20, 1997, the Company suspended future benefit accruals under this plan. Benefits paid to retirees are based upon age at retirement, years of credited service and average compensation during the five year period ending September 20, 1997. The plan is funded based on actuarial calculations and applicable federal regulations.
The Company sponsors a voluntary 401(k) Savings Plan that covers substantially all employees who meet plan eligibility requirements. The Company makes matching contributions consistent with the provisions of the plan. The Company also maintains a nonqualified, unfunded Deferred Compensation Plan for certain key employees. This plan provides participants the opportunity to defer portions of their compensation and receive matching contributions that they would have otherwise received under the 401(k) Savings Plan if not for certain restrictions and limitations under the Internal Revenue Code. The Companys contributions under the above defined contribution plans totaled $23.0 million, $17.0 million and $26.4 million in 2000, 1999 and 1998, respectively. The Company also sponsors an Employee Stock Ownership Plan. See Note 4 for further information about this plan.
The Company provides postretirement healthcare and life insurance benefits to retirees who meet eligibility requirements. The Company's funding policy is generally to pay covered expenses as they are incurred.
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| Defined Benefit Plans | Other Postretirement Benefits | |||
| In millions | 2000 | 1999 | 2000 | 1999 |
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| Change in benefit obligation: Benefit obligation at beginning of year |
$ 254.8 | $ 297.6 | $ 14.0 | $ 14.0 |
| Service cost | 0.9 | 0.7 | | |
| Interest cost | 19.8 | 19.8 | 1.0 | 0.9 |
| Actuarial loss (gain) | 9.6 | (40.3) | (0.5) | 1.1 |
| Benefits paid | (17.9) | (23.0) | (1.1) | (2.0) |
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| Benefit obligation at end of year | $ 267.2 | $ 254.8 | $ 13.4 | $ 14.0 |
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| Change in plan assets: Fair value at beginning of year |
$ 248.8 | $ 223.1 | $ | $ |
| Actual return on plan assets | (3.3) | 37.3 | | |
| Company contributions | 7.1 | 11.4 | 1.1 | 2.0 |
| Benefits paid | (17.9) | (23.0) | (1.1) | (2.0) |
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| Fair value at end of year(1) | $ 234.7 | $ 248.8 | $ | $ |
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| Funded status: Funded status |
$ (32.5) | $ (6.0) | $ (13.4) | $ (14.0) |
| Unrecognized prior service cost | 1.0 | 1.1 | (0.8) | (0.9) |
| Unrecognized net (gain) loss | (27.7) | (60.6) | (0.4) | 0.8 |
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| Accrued pension costs | $ (59.2) | $ (65.5) | $ (14.6) | $ (14.1) |
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(1) Plan assets consist primarily of mutual funds, common stock and insurance contracts.
Following is a summary of the net periodic pension cost for the defined benefit and other postretirement benefit plans for the respective years:
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| Defined Benefit Plans | Other Postretirement Benefits | |||||
| In millions | 2000 | 1999 | 1998 | 2000 | 1999 | 1998 |
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| Service cost | $ 0.9 | $ 0.7 | $ 0.5 | $ | $ | $ |
| Interest cost on benefit obligation | 19.8 | 19.8 | 19.5 | 1.0 | 0.9 | 1.0 |
| Expected return on plan assets | (18.6) | (16.6) | (16.4) | | | |
| Amortization of net (gain) loss | (0.1) | 1.3 | 1.2 | (0.2) | | (0.2) |
| Amortization of prior service cost | 0.1 | 0.1 | 0.1 | (0.1) | (0.1) | (0.1) |
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| Net periodic pension cost | $ 2.1 | $ 5.3 | $ 4.9 | $ 0.7 | $ 0.8 | $ 0.7 |
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| Weighted average assumptions: Discount rate |
7.75% | 8.00% | 6.75% | 7.75% | 7.75% | 6.75% |
| Expected return on plan assets | 9.25% | 9.00% | 9.00% | | | |
| Rate of compensation increase | 4.00% | 4.00% | 4.50% | | | |
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For measurement purposes, future healthcare costs are assumed to increase at an annual rate of 8.0%, decreasing to an annual growth rate of 5.0% in 2004 and thereafter. A one percent change in the assumed healthcare cost trend rate would change the accumulated postretirement benefit obligation by $0.8 million and the total service and interest costs by $0.1 million.
