*Pages 1--3 from Microsoft Word - 55340.doc* PUBLIC NOTICE Federal Communications Commission 445 12 th St., S. W. Washington, D. C. 20554 News Media Information 202 / 418- 0500 Internet: http:// www. fcc. gov TTY: 1- 888- 835- 5322 DA 06- 488 Released: February 28, 2006 GVNW REQUEST FOR CLARIFICATION CONCERNING THE APPROPRIATE ACCOUNTING TREATMENT OF KEY MAN INSURANCE PLEADING CYCLE ESTABLISHED WCB/ Pricing 06- 11 COMMENTS: March 21, 2006 REPLY COMMENTS: March 31, 2006 On November 21, 2005, GVNW filed a letter seeking a clarification that the cost of commercial life insurance purchased by a telephone company to protect the company against the death of an employee or director is properly accounted for in Account 6720, General and Administrative, 47 C. F. R. 32.6720. These insurance policies, sometimes referred to as “key man” insurance, have a variety of uses in the business world, e. g., providing for future employee benefits, funding estate or inheritance tax obligations, funding the buy- out of an ownership interest. Key man insurance was not specifically addressed in Responsible Accounting Officer Letter No. 7, Part 32, Uniform System of Accounts for Class A and Class B Carriers – Questions and Answers (issued July 1, 1987). To develop a record to permit the Commission to respond to the clarification request, we ask interested parties to comment on the following specific issues. We invite interested parties to identify the various purposes for which key man insurance is used by telephone companies in order to provide a foundation for determining the appropriate accounting treatment. We ask parties to specify how those costs and the insurance proceeds are currently recorded on the regulatory accounting books. For each of the uses of key man insurance that a party identifies, it should discuss the appropriate ratemaking treatment for such use (including what would constitute a reasonable level of coverage), with special attention to (1) the extent to which the proceeds of the insurance policy will benefit either ratepayer or corporate interests and (2) whether the insurance premiums would result in two separate charges being included in ratemaking for the same activity. We also ask parties to address the effect, if any, that ratemaking treatment should have on accounting treatment of such costs. In this connection, parties are asked to discuss which key man insurance costs, if any, should be recorded in section 32.7300, Nonoperating Income and Expense. That section provides that the account is to be used “to record the results of transactions, events and circumstances affecting the company [that] are not operational in nature.” 47 C. F. R. 32.7300. This issue is of primary importance to rate- of- return local exchange carriers because it has ratemaking implications for them. We therefore request the National Exchange Carrier Association, Inc., to discuss its treatment of key man insurance costs as the administrator of the interstate pooling and tariffing process for many rate- of- return carriers. Interested parties may file comments on or before March 21, 2006. Reply comments may be filed on or before March 31, 2006. All such filings shall refer to the internal file number: WCB/ Pricing 06- 11. Comments in this proceeding may not be filed using the Commission's Electronic Comment Filing System (ECFS). 1 presentations in permit- but- disclose proceedings are set forth in section 1.1206( b) of the Commission's rules. 3 For further information, contact Douglas Slotten, Pricing Policy Division, Wireline Competition Bureau, (202) 418- 1572. -FCC- 3 47 C. F. R. § 1.1206( b). 3