Mattel 2012 Annual Report Download - page 85

The assumptions used in determining the projected and accumulated benefit obligations of Mattel’s
domestic defined benefit pension and postretirement benefit plans are as follows:
December 31,
2012 2011
Defined benefit pension plans:
Discount rate .................................................................... 4.0% 4.5%
Weighted average rate of future compensation increases ................................. 3.8% 3.8%
Postretirement benefit plans:
Discount rate .................................................................... 4.0% 4.5%
Annual increase in Medicare Part B premium .......................................... 6.0% 6.0%
Health care cost trend rate:
Pre-65 ..................................................................... 8.5% 7.5%
Post-65 .................................................................... 7.5% 7.5%
Ultimate cost trend rate:
Pre-65 ..................................................................... 6.1% 5.0%
Post-65 .................................................................... 5.4% 5.0%
Year that the rate reaches the ultimate cost trend rate:
Pre-65 ..................................................................... 2030 2017
Post-65 .................................................................... 2030 2017
A one percentage point increase/(decrease) in the assumed health care cost trend rate for each future year
would impact the postretirement benefit obligation as of December 31, 2012 by $1.8 million and $(1.5) million,
respectively, while a one percentage point increase/(decrease) would impact the service and interest cost
recognized for 2012 by $0.1 million and $(0.1) million, respectively.
The estimated future benefit payments for Mattel’s defined benefit pension and postretirement benefit plans
are as follows:
Defined Benefit
Pension Plans
Postretirement
Benefit Plans
Before Subsidy
Benefit of
Medicare Part D
Subsidy
(In thousands)
2013 ............................................... $ 34,006 $ 3,000 $ (300)
2014 ............................................... 26,370 2,900 (300)
2015 ............................................... 27,352 2,800 (300)
2016 ............................................... 29,015 2,800 (300)
2017 ............................................... 30,352 2,800 (300)
2018 – 2022 ......................................... 173,602 12,400 (1,300)
Mattel expects to make cash contributions totaling approximately $37 million to its defined benefit pension
and postretirement benefit plans in 2013, which includes approximately $16 million for benefit payments for its
unfunded plans.
Mattel periodically commissions a study of the plans’ assets and liabilities to determine an asset allocation
that would best match expected cash flows from the plans’ assets to expected benefit payments. Mattel monitors
the returns earned by the plans’ assets and reallocates investments as needed. Mattel’s overall investment strategy
is to achieve an adequately diversified asset allocation mix of investments that provides for both near-term
benefit payments as well as long-term growth. The assets are invested in a combination of indexed and actively
managed funds. The target allocations for Mattel’s domestic plan assets, which comprise 81% of Mattel’s total
plan assets, are 35% in US equities, 35% in non-US equities, 20% in US long-term bonds, and 10% in US
Treasury inflation protected securities. The US equities are benchmarked against the S&P 500, and the non-US
equities are benchmarked against a combination of developed and emerging markets indices. Fixed income
73