LabCorp 2010 Annual Report Download - page 45

43
Rental expense, which includes rent for real estate, equipment
and automobiles under operating leases, amounted to $202.1,
$182.9 and $175.1 for the years ended December 31, 2010,
2009 and 2008, respectively.
At December 31, 2010, the Company was a guarantor on
approximately $1.6 of equipment leases. These leases were
entered into by a joint venture in which the Company owns a
50% interest and have a remaining term of approximately
two years.
16. Pension and Postretirement Plans
Pension Plans
In October 2009, the Company received approval from its Board
of Directors to freeze any additional service-based credits for
any years of service after December 31, 2009 on the defined
benefit retirement plan (the “Company Plan”) and the nonquali-
fied supplemental retirement plan (the “PEP”). Both plans have
been closed to new participants. Employees participating in
the Company Plan and the PEP no longer earn service-based
credits, but continue to earn interest credits. In addition, effective
January 1, 2010, all employees eligible for the defined contribu-
tion retirement plan (the “401K Plan”) receive a minimum 3%
non-elective contribution (“NEC”) concurrent with each payroll
period. The NEC replaces the Company match, which has been
discontinued. Employees are not required to make a contribution
to the 401K Plan to receive the NEC. The NEC is non-forfeitable
and vests immediately. The 401K Plan also permits discretionary
contributions by the Company of 1% to 3% of pay for eligible
employees based on service.
The Company believes these changes to the Company
Plan, the PEP and its 401K Plan align the Company’s retire-
ment plan strategy with prevailing industry practices and
reduce the impact of market volatility on the Company Plan.
The Company’s 401K Plan covers substantially all employees.
Prior to 2010, Company contributions to the plan were based
on a percentage of employee contributions. In 2010, the
Company made non-elective and discretionary contributions
to the plan. The cost of this plan was $40.6, $15.2 and $15.5
in 2010, 2009 and 2008, respectively. The increase in 401K
costs and contributions was due to the non-elective and
discretionary contributions made by the Company in 2010.
In addition, the Company Plan covers substantially all
employees hired prior to December 31, 2009. The benefits
to be paid under the Company Plan are based on years of
credited service through December 31, 2009, interest credits
and average compensation. The Company’s policy is to fund
the Company Plan with at least the minimum amount required
by applicable regulations. The Company made contributions
to the Company Plan of $0.0, $54.8 and $0.0 in 2010, 2009
and 2008, respectively.
The PEP covers the Company’s senior management group.
Prior to 2010, the PEP provided for the payment of the difference,
if any, between the amount of any maximum limitation on annual
benefit payments under the Employee Retirement Income Security
Act of 1974 and the annual benefit that would be payable under
the Company Plan but for such limitation. Effective January 1,
2010, employees participating in the PEP no longer earn service-
based credits. The PEP is an unfunded plan.
As a result of the changes to the Company Plan and
PEP which were adopted in the fourth quarter of 2009, the
Company recognized a net curtailment charge of $2.8 due
to remeasurement of the PEP obligation at December 31,
2009 and the acceleration of unrecognized prior service
for that plan. Projected pension expense for the Company
Plan and the PEP is expected to decrease from $9.6 in 2010
to $8.9 in 2011. In addition, the Company does not plan to
make contributions to the Company Plan during 2011.
The effect on operations for both the Company Plan and
the PEP are summarized as follows:
Year ended December 31,
2010 2009 2008
Service cost for benefits earned $ 2.6 $ 20.8 $ 20.0
Interest cost on benefit obligation 18.1 18.3 17.2
Expected return on plan assets (18.5) (17.3) (22.2)
Net amortization and deferral 7.4 12.0 2.8
Curtailment cost
– 2.8 –
Executive retirement charge – – 1.7
Defined benefit plan costs $ 9.6 $ 36.6 $ 19.5
Amounts included in accumulated other comprehensive
earnings consist of unamortized net loss of $109.3. The
accumulated other comprehensive earnings that are expected
to be recognized as components of the defined benefit plan
costs during 2011 are $7.8 related to amortization of net loss.
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements