Eli Lilly 2008 Annual Report Download - page 108

PROXY STATEMENT
106106
The retirement plan benefi ts shown in the table are net present values. The benefi ts are not payable as a lump
sum; they are generally paid as a monthly annuity for the life of the retiree and any qualifying survivor. The annual
benefi t under the plan is calculated using the average of the annual earnings for the highest fi ve out of the last 10
years of service (fi nal average earnings). Annual earnings covered by the retirement plan consist of salary and
bonus (amounts disclosed in the company’s proxy statements for the relevant years) calculated for the amount of
bonus paid (rather than credited) and for the year in which earnings are paid (rather than earned or credited). In
addition, for years prior to 2003, the calculation includes performance award payouts. The amount of the benefi t
also depends on the retiree’s age and years of service at the time of retirement. Benefi t calculations are based on
“points,” with an employee’s points equaling the sum of his or her age plus years of service. Employees who retire
(i) at age 65 with at least fi ve years of service, (ii) at age 62 with at least 80 points, or (iii) with 90 or more points
receive an unreduced benefi t. Employees may elect early retirement with reduced benefi ts under either of the fol-
lowing two options:
• Employees with between 80 and 90 points may retire with a benefi t that is reduced by three percent for each year
that the employee has left to reach 90 points or age 62.
• Employees who have less than 80 points, but who have reached age 55 and have at least 10 years of service, may
retire with a benefi t that is reduced as described above and is further reduced by six percent for each year that
the employee has left to reach 80 points or age 65.
All U.S. retirees are entitled to medical insurance under the company’s plans. Retirees with spouses or
unmarried dependents may elect that, upon the retiree’s death, the plan will pay survivor annuity benefi ts at either
25, 50, or 75 percent of the retiree’s annuity benefi t. Election of the higher survivor benefi t will result in a lower
annuity payment during the retiree’s life.
Dr. Paul joined the company in 1993. Dr. Paul will receive 10 years of additional service credit if he remains
employed by the company past age 60, or is involuntarily terminated before he turns 60. When Mr. Armitage joined
the company in 1999, the company agreed to provide him with a retirement benefi t based on his actual years of
service and earnings at age 60. Since Mr. Armitage reached age 60 with 9.75 years of service, he has been treated
as though he has, for eligibility purposes only, 20 years of service. The additional service credit made him eligible
to begin reduced benefi ts nine months early, but did not change the timing or amount of his unreduced benefi ts
(shown in the Pension Benefi ts in 2008 table on page 105). A grant of additional years of service credit to any
employee must be approved by the compensation committee of the board of directors.
Upon retirement, Mr. Taurel was appointed chairman emeritus, effective January 1, 2009. In connection with
that appointment, we are providing the following administrative support arrangement to Mr. Taurel, in addition to
normal retirement programs. This arrangement has been granted for a period of fi ve years following his retire-
ment, at which point the compensation committee of the board of directors may elect to extend this arrangement
for an additional period, if requested by Mr. Taurel.
Benefi t Incremental Cost
to the Company (annualized)
Offi ce space 1 —
Administrative and computer/technology support 2 $40,000
Parking at company facilities —
1 Currently this space is provided in the corporate headquarters at no incremental cost to the company.
2 The incremental cost to the company is calculated by estimating the cost of computer hardware, software, and IT
support, as well as part-time administrative support.