Quest Diagnostics 2015 Annual Report Download - page 114

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(in millions unless otherwise indicated)
F- 39
Supplemental Deferred Compensation Plans
The Company has a supplemental deferred compensation plan that is an unfunded, non-qualified plan that provides for
certain management and highly compensated employees to defer up to 50% of their salary in excess of their defined
contribution plan limits and for certain eligible employees, up to 95% of their variable incentive compensation. The maximum
Company matching contribution is 5% of eligible employee compensation. The compensation deferred under this plan,
together with Company matching amounts, are credited with earnings or losses measured by the mirrored rate of return on
investments elected by plan participants. Each plan participant is fully vested in all deferred compensation, Company match
and earnings credited to their account. The amounts accrued under the Company's deferred compensation plans were $49
million at both December 31, 2015 and 2014. Although the Company is currently contributing all participant deferrals and
matching amounts to trusts, the funds in these trusts, totaling $49 million at both December 31, 2015 and 2014, are general
assets of the Company and are subject to any claims of the Company's creditors.
The Company also offers certain employees the opportunity to participate in a non-qualified deferred compensation
program. Eligible participants are allowed to defer up to $20 thousand of eligible compensation per year. The Company
matches employee contributions equal to 25%, up to a maximum of $5 thousand per plan year. A participant's deferrals,
together with Company matching credits, are “invested” at the direction of the employee in a hypothetical portfolio of
investments which are tracked by an administrator. Each participant is fully vested in their deferred compensation and vests in
Company matching contributions over a four-year period at 25% per year. The amounts accrued under this plan were $36
million at both December 31, 2015 and 2014. The Company purchases life insurance policies, with the Company named as
beneficiary of the policies, for the purpose of funding the program's liability. The cash surrender value of such life insurance
policies was $29 million and $30 million at December 31, 2015 and 2014, respectively.
For the years ended December 31, 2015, 2014 and 2013, the Company's expense for matching contributions to these
plans were not material.
17. COMMITMENTS AND CONTINGENCIES
Letters of Credit and Contractual Obligations
The Company can issue letters of credit under its Secured Receivables Credit Facility and Senior Unsecured
Revolving Credit Facility (see Note 13). In support of its risk management program, to ensure the Company’s performance or
payment to third parties, $67 million in letters of credit, principally issued under the Secured Receivables Credit Facility, were
outstanding at December 31, 2015. The letters of credit primarily represent collateral for current and future automobile liability
and workers’ compensation loss payments.
Minimum rental commitments under noncancelable operating leases, primarily real estate, in effect at December 31,
2015 are as follows:
Year Ending December 31,
2016 $ 182
2017 138
2018 94
2019 67
2020 44
2021 and thereafter 152
Minimum lease payments $ 677
Operating lease rental expense for 2015, 2014 and 2013 totaled $224 million, $242 million and $223 million,
respectively. Rent expense associated with operating leases that include scheduled rent increases and tenant incentives,
such as rent holidays and improvement allowances, is recorded on a straight-line basis over the term of the lease.
The Company has certain noncancelable commitments to purchase products or services from various suppliers,
mainly for consulting and other service agreements, and standing orders to purchase reagents and other laboratory supplies.
QUEST DIAGNOSTICS 2015 ANNUAL REPORT ON FORM 10-K