Eli Lilly 2005 Annual Report Download - page 52

FI NA NCI A L S
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decreasing 1 percent per year to 6 percent in 2009 and thereafter.
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid
as follows:
Defined Benefit Retiree Health
Pension Plans Benefit Plans
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 271.7 $ 85.4
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278.2 92.3
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285.3 98.1
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293.1 104.3
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302.8 110.1
2011–2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,702.7 645.7
The total accumulated benefit obligation for our defined benefit pension plans was $4.88 billion and $4.55 bil-
lion at December 31, 2005 and 2004, respectively. The projected benefit obligation and fair value of the plan assets
for the defined benefit pension plans with projected benefit obligations in excess of plan assets were $1.51 billion
and $870.3 million, respectively, as of December 31, 2005, and $1.33 billion and $780.3 million, respectively, as of
December 31, 2004.
Net pension and retiree health benefit expense included the following components:
Defined Benefit Pension Plans Retiree Health Benefit Plans
2005 2004 2003 2005 2004 2003
Components of net periodic benefit cost
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . $297.4 $238.8 $195.4 $ 61.5 $47.6 $38.2
Interest cost. . . . . . . . . . . . . . . . . . . . . . . . . 296.2 286.4 267.2 80.7 62.5 60.4
Expected return on plan assets . . . . . . . . (445.9) (402.2) (382.7) (75.6) (60.2) (53.6)
Amortization of prior service cost . . . . . . 7.6 7.3 11.9 (15.6) (15.6) (15.6)
Recognized actuarial loss . . . . . . . . . . . . . 106.7 99.7 52.4 86.6 57.8 50.6
Net periodic benefit cost . . . . . . . . . . . . . . $262.0 $230.0 $144.2 $137.6 $92.1 $80.0
If the health-care-cost trend rates were to be increased by one percentage point each future year, the Decem-
ber 31, 2005, accumulated postretirement benefit obligation would increase by 14.0 percent and the aggregate of
the service cost and interest cost components of the 2005 annual expense would increase by 18.4 percent. A one-
percentage-point decrease in these rates would decrease the December 31, 2005, accumulated postretirement
benefit obligation by 12.2 percent and the aggregate of the 2005 service cost and interest cost by 15.5 percent.
We have defined contribution savings plans that cover our eligible employees worldwide. The purpose of these
defined contribution plans is generally to provide additional financial security during retirement by providing em-
ployees with an incentive to save. Our contributions to the plan are based on employee contributions and the level
of our match. Expenses under the plans totaled $96.1 million, $75.5 million, and $72.9 million for the years 2005,
2004, and 2003, respectively.
We provide certain other postemployment benefits primarily related to disability benefits and accrue for the
related cost over the service lives of employees. Expenses associated with these benefit plans in 2005, 2004, and
2003 were not significant.
Our U.S. defined benefit pension and retiree health benefit plan investment allocation strategy currently com-
prises approximately 85 percent to 95 percent growth investments and 5 percent to 15 percent fixed-income invest-
ments. Within the growth investment classification, the plan asset strategy encompasses equity and equity-like
instruments that are expected to represent approximately 75 percent of our plan asset portfolio of both public and
private market investments. The largest component of these equity and equity-like instruments is public equity
securities that are well diversified and invested in U.S. and international small-to-large companies. The remaining
portion of the growth investment classification is represented by other alternative growth investments.