LabCorp 2013 Annual Report Download - page 53

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The weighted-average discount rates used in the calculation of
the accumulated post-retirement benefit obligation were 5.0% and
4.2% as of December 31, 2013 and 2012, respectively. The health
care cost trend rate was assumed to be 7.5% as of December 31,
2013 and 2012, declining gradually to 5.0% in the year 2021. The
health care cost trend rate has a significant effect on the amounts
reported. The impact of a percentage point change each year in the
assumed health care cost trend rates would change the accumulated
post-retirement benefit obligation as of December 31, 2013 by an
increase of $8.7 or a decrease of $7.3. The impact of a percentage
point change on the aggregate of the service cost and interest cost
components of the 2013 post-retirement benefit costs results in an
increase of $0.5 or decrease of $0.4. The plan amendment in 2013
reflects the impact of shifting from projection scale AA to projection
scale BB for both the RP-2000 Combined Healthy Mortality Table
and the RP-2000 Disabled Mortality Table.
The following assumed benefit payments under the Company’s
post-retirement benefit plan, which reflect expected future service,
as appropriate, and were used in the calculation of projected
benefit obligations, are expected to be paid as follows:
2014 $ 2.5
2015 2.7
2016 2.9
2017 3.0
2018 3.1
Years 2019-2023 17.9
Deferred Compensation Plan
In 2001, the Board approved the Deferred Compensation Plan
(“DCP”) under which certain of the Company’s executives, may
elect to defer up to 100.0% of their annual cash incentive pay
and/or up to 50.0% of their annual base salary and/or eligible
commissions subject to annual limits established by the federal
government. The DCP provides executives a tax efficient strategy
for retirement savings and capital accumulation without significant
cost to the Company. The Company makes no contributions to
the DCP. Amounts deferred by a participant are credited to a book-
keeping account maintained on behalf of each participant, which
is used for measurement and determination of amounts to be paid
to a participant, or his or her designated beneficiary, pursuant to the
terms of the DCP. The amounts accrued under this plan were $36.3
and $26.6 at December 31, 2013 and 2012, respectively. Deferred
amounts are the Company’s general unsecured obligations and are
subject to claims by the Company’s creditors. The Company’s general
assets may be used to fund obligations and pay DCP benefits.
17. Fair Value Measurements
The Company’s population of financial assets and liabilities subject
to fair value measurements as of December 31, 2013 and 2012 are
as follows:
Fair Value Fair Value Measurements as of
as of December 31, 2013
December 31, Using Fair Value Hierarchy
2013 Level 1 Level 2 Level 3
Noncontrolling interest put $ 19.4 $ – $ 19.4 $ –
Interest rate swap – – – –
Cash surrender value of
life insurance policies 35.1 – 35.1 –
Deferred compensation liability 36.3 – 36.3 –
Fair Value Fair Value Measurements as of
as of December 31, 2012
December 31, Using Fair Value Hierarchy
2012 Level 1 Level 2 Level 3
Noncontrolling interest put $ 20.7 $ – $ 20.7 $ –
Cash surrender value of
life insurance policies 30.4 – 30.4 –
Deferred compensation liability 26.6 – 26.6 –
The noncontrolling interest put is valued at its contractually
determined value, which approximate fair value. During the year
ended December 31, 2013, the carrying value of the noncontrolling
interest put decreased by $1.3 consisting of a $0.8 increase in the
contractually determined value and a $2.5 decrease for foreign
currency translation.
The Company offers certain employees the opportunity to
participate in a DCP. A participant’s deferrals are “invested” at the
direction of the employee in a hypothetical portfolio of investments
which are tracked by an administrator. From time to time, the
Company purchases life insurance policies, with the Company
named as beneficiary of the policies. Changes in the cash surrender
value of the life insurance policies are based upon earnings and
changes in the value of the underlying investments. Changes in the
fair value of the DCP obligation are derived using quoted prices in
active markets based on the market price per unit multiplied by the
number of units. The cash surrender value and the DCP obligations
are classified within Level 2 because their inputs are derived
principally from observable market data by correlation to the
hypothetical investments.
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements