Eli Lilly 2006 Annual Report Download - page 92

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PROXY STATEMENT
9090
The matching contributions are in the form of Lilly stock. The employee contributions, company contributions,
and earnings thereon are paid out in accordance with elections made by the participant. See the Summary
Compensation Table on page 85 for information about company contributions to the named executive offi cers.
• The Lilly Retirement Plan (the retirement plan), a tax-qualifi ed defi ned benefi t plan that provides monthly
retirement benefi ts to eligible employees. See the Summary Compensation Table on page 85 for additional
information about the value of these pension benefi ts.
Section 415 of the Internal Revenue Code generally places a limit on the amount of annual pension that can be
paid from a tax-qualifi ed plan ($175,000) as well as on the amount of annual earnings that can be used to calculate
a pension benefi t ($220,000). However, since 1975 the company has maintained a non-tax-qualifi ed plan that pays
eligible employees the difference between the amount payable under the tax-qualifi ed plan and the amount they
would have received without the qualifi ed plan’s limit. The non-qualifi ed plan is unfunded and subject to forfeiture
in the event of bankruptcy.
The following table shows benefi ts that named executive offi cers are entitled to under the retirement plan.
Pension Benefi ts in 2006
Name Plan Name
Number of Years of Credited
Service
Present Value of
Accumulated Benefi t ($) 1
Payments During
Last Fiscal year ($)
Current
Mr. Taurel 2 tax-qualifi ed plan
non-qualifi ed plan
total
35
35
$1,203,846
$30,103,284
$31,307,130
—
—
—
Dr. Lechleiter 3 tax-qualifi ed plan
non-qualifi ed plan
total
27
27
$693,969
$5,682,282
$6,376,251
—
—
—
Dr. Paul 4 tax-qualifi ed plan
non-qualifi ed plan
total
14
14 5 $242,446
$2,650,529
$2,892,975
—
—
—
Mr. Armitage tax-qualifi ed plan
non-qualifi ed plan
total
8
8 6 $165,003
$581,787
$746,790
—
—
—
Mr. Rice tax-qualifi ed plan
non-qualifi ed plan
total
17
17
$230,177
$378,739
$608,916
—
—
—
Retired
Mr. Golden tax-qualifi ed plan
non-qualifi ed plan
total
10
35 7 $237,299
$14,909,762
$15,147,061
$13,486
$850,758
$864,244
1 The calculation of present value of accumulated benefi t assumes a discount rate of 6 percent, mortality RP
2000CH (post-retirement decrement only), and joint and survivor benefi t of 25 percent.
2 Mr. Taurel is currently eligible for full retirement benefi ts.
3 Dr. Lechleiter is currently eligible for early retirement. He qualifi es for approximately 13 percent less than his full
retirement benefi t. Early retirement benefi ts are further described below.
4 Dr. Paul is currently eligible for early retirement because he is over 55 years old and has more than 10 years of
service. He qualifi es for approximately 32 percent less than his full retirement benefi t. Early retirement benefi ts
are further described below.
5 Dr. Paul will be eligible for an additional 10 years of service, should he still be employed by the company past age
60. This additional service credit increased the present value of his non-qualifi ed pension benefi t shown above by
$1,033,206.
6
Mr. Armitage will be credited with approximately one year of service when he reaches age 60, making him eligible to
receive a reduced retirement benefi t under the company’s retirement program. Since this arrangement only applies
towards his eligibility for a benefi t, it does not change the present value of his non-qualifi ed pension benefi t.
7 Mr. Golden’s additional years of service credit increased the present value of his non-qualifi ed pension benefi t by
$11,615,578.
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. 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 (average
annual 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