LabCorp 2009 Annual Report Download - page 61

LABORATORY CORPORATION OF AMERICA 59
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements
The Accumulated Benefit Obligation was $328.0 and
$288.6 at December 31, 2009 and 2008, respectively.
A summary of the changes in the fair value of plan
assets follows:
2009 2008
Fair value of plan assets at beginning of year $ 170.1 $ 270.7
Actual return on plan assets 57.4 (75.1)
Employer contributions 55.9 0.7
Benefits and administrative expenses paid (24.1) (26.2)
Fair value of plan assets at end of year $ 259.3 $ 170.1
Weighted-average assumptions used in the accounting for
the Company Plan and the PEP are summarized as follows:
2009 2008 2007
Discount rate 5.8% 6.5% 6.1%
Compensation increases 3.5% 3.5% 3.5%
Expected long-term rate of return 7.5% 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 target allocations for plan assets are
60% equity securities and 40% fixed income securities.
Equity securities primarily include investments in large-cap and
small-cap companies located in the United States and to a
lesser extent international equities in developed and emerging
countries. Fixed income securities primarily include U.S. Treasury
securities, mortgage-backed bonds and corporate bonds of
companies from diversified industries. The weighted-average
expected long-term rate of return for the Company Plan’s
assets is as follows:
Weighted-
Average
Expected
Target Long-Term Rate
Allocation of Return
Equity securities 60.0% 5.5%
Fixed income securities 40.0% 2.0%
The fair values of the Company Plan’s assets at December 31,
2009, by asset category are as follows:
Fair Value Fair Value Measurements as of
as of December 31, 2009
December 31, Using Fair Value Hierarchy
Asset Category 2009 Level 1 Level 2 Level 3
Cash $ 13.8 $ 13.8 $ – $ –
Equity securities:
U.S. large cap – blend
(a)
80.5 – 80.5 –
U.S. small cap – blend
(b) 23.3 – 23.3 –
International – developed 32.5 – 32.5 –
International – emerging 7.1 – 7.1 –
Fixed income securities:
U.S. fixed income
(c) 102.1 – 102.1 –
Total fair value of the
Company Plan’s assets $ 259.3 $ 13.8 $ 245.5 $ –
(a) This category represents an equity index fund not actively managed that tracks the S&P 500.
(b) This category represents an equity index fund not actively managed that tracks the Russell 2000.
(c) This category represents a bond index fund not actively managed that tracks the Barclays Capital
U.S. Aggregate Index.
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:
2010 $ 23.1
2011 22.0
2012 22.0
2013 22.5
2014 22.5
Years 2015-2019 119.0
Post-Retirement Medical Plan
The Company assumed obligations under a subsidiary’s post-
retirement medical plan. Coverage under this plan is restricted
to a limited number of existing employees of the subsidiary.
This plan is unfunded and the Company’s policy is to fund
benefits as claims are incurred. The effect on operations of the
post-retirement medical plan is shown in the following table:
Year ended December 31,
2009 2008 2007
Service cost for benefits earned $ 0.3 $ 0.4 $ 0.5
Interest cost on benefit obligation 2.3 2.7 2.7
Net amortization and deferral (1.7) (1.7) (2.1)
Post-retirement medical plan costs $ 0.9 $ 1.4 $ 1.1