CVS 2004 Annual Report Download - page 41
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Please find page 41 of the 2004 CVS annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Revenue Code. The Company’s contributions under the above
defined contribution plans totaled $52.1 million in 2004, $46.9
million in 2003 and $29.1 million in 2002. The Company also
sponsors an Employee Stock Ownership Plan. See Note 6 for
further information about this plan.
Other postretirement benefits
The Company provides postretirement healthcare and life
insurance benefits to certain retirees who meet eligibility
requirements. The Company’s funding policy is generally to
pay covered expenses as they are incurred. For retiree medical
plan accounting, the Company reviews external data and its
own historical trends for healthcare costs to determine the
healthcare cost trend rates.
For measurement purposes, future healthcare costs are assumed
to increase at an annual rate of 10.0%, decreasing to an annual
growth rate of 5.0% in 2009 and thereafter. A one percent
change in the assumed healthcare cost trend rate would change
the accumulated postretirement benefit obligation by $0.8
million and the total service and interest costs by $0.1 million.
During 2004, the Company adopted the Financial Accounting
Standards Board Staff Position No. FAS 106-2, “Accounting and
Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003.” This
statement requires disclosure of the effects of the Medicare
Prescription Drug, Improvement and Modernization Act and
an assessment of the impact of the federal subsidy on the
accumulated postretirement benefit obligation and net periodic
postretirement benefit cost. The adoption of this statement
did not have a material impact on the Company’s consolidated
results of operations, financial position or related disclosures.
CVS Corporation 2004 Annual Report | 39
Pension plans
The Company sponsors a non-contributory defined benefit
pension plan that covers certain full-time employees of Revco,
D.S., Inc. who were not covered by collective bargaining
agreements. On September 20, 1997, the Company suspended
future benefit accruals under this plan. Benefits paid to retirees
are based upon age at retirement, years of credited service
and average compensation during the five-year period ending
September 20, 1997. The plan is funded based on actuarial
calculations and applicable federal regulations.
Pursuant to various labor agreements, the Company is also
required to make contributions to certain union-administered
pension and health and welfare plans that totaled $15.0 million
in 2004, $13.2 million in 2003 and $12.1 million in 2002.
The Company also has nonqualified supplemental executive
retirement plans in place for certain key employees for whom
it has purchased cost recovery variable life insurance.
The Company uses an investment strategy which emphasizes
equities in order to produce higher expected returns, and in
the long run, lower expense and cash contribution requirements.
The pension plan assets allocation targets 70% equity and
30% fixed income.
Following is the pension plan assets allocation by major category
for the respective years:
2004 2003
Equity 70% 72%
Fixed Income 29% 27%
Other 1% 1%
100% 100%
The equity investments primarily consist of large cap value
and international value equity funds. The fixed income
investments primarily consist of intermediate-term bond
funds. The other category consists of cash and cash equivalents
held for benefit payments.