LabCorp 2006 Annual Report Download - page 50

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
48 Laboratory Corporation of America® Holdings 2006
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The effect on operations for both the defined benefit retirement
plan and the nonqualified supplemental retirement plan are summarized
as follows:
Years Ended December 31,
2006 2005 2004
Service cost for benefits earned $ 17.1 $ 15.7 $ 13.9
Interest cost on benefit obligation 14.5 13.8 12.8
Expected return on plan assets (21.4) (21.0) (16.9)
Net amortization and deferral 4.4 1.3 1.5
CEO retirement charge 0.7 – –
Defined benefit plan costs $ 15.3 $ 9.8 $ 11.3
Amounts included in accumulated other comprehensive earnings
consist of unamortized net loss of $47.1 and unrecognized prior
service cost of $4.0. The accumulated other comprehensive earnings
that are expected to be recognized as components of the defined
benefit plan costs during 2007 are $1.9 related to amortization of net
loss and $0.6 related to recognition of prior service costs.
A summary of the changes in the projected benefit obligations of
the defined benefit retirement plan and the nonqualified supplemental
retirement plan are summarized as follows:
2006 2005
Balance at January 1 $263.4 $233.0
Service cost 17.1 15.7
Interest cost 14.5 13.8
Actuarial loss (1.4) 15.5
Amendments (0.7) (1.8)
Benefits paid (15.1) (12.8)
CEO retirement charge 0.7 –
Balance at December 31 $278.5 $263.4
The Accumulated Benefit Obligation was $273.3 and $258.8 at
December 31, 2006 and 2005, respectively.
A summary of the changes in the fair value of plan assets follows:
2006 2005
Fair value of plan assets at beginning of year $259.1 $248.6
Actual return on plan assets 32.4 16.8
Employer contributions 0.4 8.3
Benefits paid (17.2) (14.6)
Fair value of plan assets at end of year $274.7 $259.1
Weighted-average assumptions used in the accounting for the
defined benefit retirement plan and the nonqualified supplemental
retirement plan are summarized as follows:
2006 2005 2004
Discount rate 6.00% 5.60% 6.00%
Compensation increases 3.0% 3.0% 3.0%
Expected long term rate of return 8.5% 8.5% 8.5%
The Company maintains an investment policy for the management
of the Company Plan’s assets. The objective of this policy is to build a
portfolio designed to achieve a balance between investment return and
asset protection by investing in equities of high quality companies and
in high quality fixed income securities which are broadly balanced and
represent all market sectors. The Company’s plan asset allocations at
December 31, 2006 and 2005 for the defined benefit retirement plan
and the nonqualified supplemental retirement plan are summarized
as follows, target allocation for 2007, and expected long-term rate of
return by asset category are as follows:
Weighted-
Percentage of Average
Target Plan Assets Expected
Asset Allocation at December 31, Long-Term Rate
Category 2007 2006 2005 of Return – 2006
Equity Securities 70.0% 69.9% 69.2% 6.8%
Debt Securities 30.0% 30.1% 30.7% 1.7%
The following assumed benefit payments under the Company’s
defined benefit and nonqualified supplemental retirement plans, which
reflect expected future service, and were used in the calculation of
projected benefit obligations, are expected to be paid as follows:
2007 $18.0
2008 18.9
2009 19.4
2010 20.8
2011 22.3
Years 2012 – 2016 141.6