334 



Annals of the Smithsonian Institution 1 999 



(12) Affiliate Relationships 



The Smithsonian provides certain fiscal, procurement, 

 facilities and administrative services to several separately 

 incorporated affiliated organizations, not consolidated in 

 these financial statements, for which certain officials of the 

 Smithsonian serve on the governing boards. The amounts 

 paid to the Smithsonian by these organizations for the 

 above services totaled $164 of trust funds and $147 of 

 federal funds for fiscal year 1999. 



Deposits held in custody for these organizations at 

 September 30, 1999, were $3,133 and were recorded in 

 the trust funds. 



The Friends of the National Zoo (FONZ), an indepen- 

 dent 501(c)(3) organization, raises funds for the benefit of 

 the Smithsonian's National Zoological Park. Funds received 

 by the Smithsonian from FONZ are recorded as unre- 

 stricted revenue and totaled $583 in fiscal year 1999. 



(13) Employee Benefit Plans 



The federal employees of the Smithsonian are covered by 

 either the Civil Service Retirement System (CSRS) or the 

 Federal Employee Retirement System (FERS). The terms of 

 these plans are defined in federal regulations. Under both 

 systems, the Smithsonian withholds from each federal 

 employee's salary the required salary percentage. The 

 Smithsonian also contributes specified percentages. The 

 Smithsonian's expense for these plans for fiscal year 1999 

 was $16,912. 



The Smithsonian has a separate defined contribution 

 retirement plan for trust fund employees, in which sub- 

 stantially all such employees are eligible to participate. 

 Under the plan, the Smithsonian contributes stipulated 

 percentages of salary which are used to purchase individual 

 annuities, the rights to which are immediately vested with 

 the employees. Employees can make voluntary contribu- 

 tions, subject to certain limitations. The Smithsonian's cost 

 of the plan for fiscal year 1999 was $10,437. 



In addition to the Smithsonian's retirement plans, the 

 Smithsonian makes available certain health care and life 

 insurance benefits to active and retired trust fund employ- 

 ees. The plan is contributory for retirees and requires pay- 

 ment of premiums and deductibles. Retiree contributions 

 for premiums are established by an insurance carrier based 

 on the average per capita cost of benefit coverage for all 

 participants, active and retired, in the Smithsonian's plan. 

 The following information summarizes the activity of 

 postretirement benefit plans as of and for the year ended 

 September 30, 1999: 



Change in benefit obligation: 



Benefit obligation at September 30, 1998 10,498 



Service cost 300 



Interest cost 351 



Actuarial gain (6,181) 



Benefits paid (118) 



Benefit obligation, September 30, 1999 4,850 



Change in plan assets: 



Fair value of plan assets, September 30, 1998 234 



Actual return on plan assets 19 



Employer contributions 118 



Refund of life insurance reserve (253) 



Benefits paid (118) 



Fair value of plan assets, September 30, 1999 — 



Projected benefit obligation in excess of plan assets (4,850) 

 Unrecognized transition obligation 4,564 



Unrecognized net actuarial gain (6,508) 



Accrued postretirement benefit obligation (6,794) 



Components of net periodic benefit cost: 



Service cost 300 



Interest cost 351 



Expected return on plan assets (19) 



Amortization of transition obligation 326 



Amortization of unrecognized gain (633) 



Net periodic postretirement benefit cost 325 



Weighted-average assumptions as of September 30: 



Discount rate 8.25% 



Expected return on plan assets 8.25% 



Rate of compensaiton increase 3.50% 



For measurement purposes, the September 30, 1999 postre- 

 tirement benefit obligation was determined using a 6.5 per- 

 cent annual rate of increase in the per capita cost of cov- 

 ered health care benefits was assumed for fiscal year 2000. 

 The rate was assumed to decrease gradually to 4.5 percent 

 for fiscal year 2004 and remain at that level thereafter. The 

 effect of a one percent change in the assumed health care 

 cost trend rate at September 30, 1999 would have resulted 

 in an approximate $522 increase or $409 decrease in the 

 postretirement benefit obligation and an approximate 

 $93 increase or $71 decrease in the 1999 postretirement 

 benefit cost. 



(14) Income Taxes 



The Smithsonian is recognized as exempt from income tax- 

 ation under the provisions of Section 501(c)(3) of the Inter- 

 nal Revenue Code (the Code). Organizations described in 

 that section are taxable only on their unrelated business 

 income. Periodical advertising sales is the main source of 

 unrelated business income. An IRS determination letter has 

 been received supporting the Smithsonian's tax-exempt 



