Parker-Hannifin Corporation - Page 10

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          account employees who might recover from their disability or die            
          in the interim and stop receiving payments.                                 
               Petitioner’s benefits department forwarded the fiscal 1986             
          reserve amount that was calculated by Mercer to Dorn.  After Dorn           
          reviewed how employees went on and came off long-term disability,           
          which he felt was infrequently, Dorn determined that the 1986               
          reserve adjusted by some factor would be acceptable as a 1987               
          reserve.  Dorn increased the reserve by 6 percent and arrived at            
          $2.5 million.  Mercer confirmed that 6 percent was a conservative           
          factor to use in the adjustment.  Dorn used the $2.5 million that           
          he calculated for long-term disability reserves in calculating              
          the 1987 contribution.                                                      
               Actual Expenditures                                                    
               The cost of benefits and administrative fees actually paid             
          by Provident, on behalf of petitioner, for long-term disability             
          claims of its employees during its 1986 year was $338,486.  The             
          cost of benefits and administrative fees actually paid by                   
          Provident, on behalf of petitioner, for long-term disability                
          claims of its employees during its 1987 year was $442,198.  The             
          amount of long-term disability benefits and administrative fees             
          actually paid by Provident, on behalf of the VEBA Trust, through            
          August 31, 1988, with respect to employees who were disabled as             
          of June 30, 1987, was $487,651.  The VEBA Trust reimbursed                  
          Provident for such payments, and, thus, there is a slight timing            
          difference.                                                                 




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