Eli Lilly 2007 Annual Report Download - page 98

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PROXY STATEMENT
9696
• 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 91 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 ($180,000 in 2007) as well as on the amount of annual earnings that can be used
to calculate a pension benefi t ($225,000). However, since 1975 the company has maintained a non-tax-qualifi ed
retirement plan that pays eligible employees the difference between the amount payable under the tax-qualifi ed
plan and the amount they would have received without the qualifi ed plan’s limit. The nonqualifi ed retirement plan is
unfunded and subject to forfeiture in the event of bankruptcy.
The following table shows benefi ts that named executive offi cers are entitled to under the retirement plan.
Pension Benefi ts in 2007
Name Plan
Number of Years of
Credited Service
Present Value of
Accumulated Benefi t ($) 1
Payments During
Last Fiscal year ($)
Mr. Taurel 2 tax-qualifi ed plan
nonqualifi ed plan
total
35
35 $1,169,470
$29,237,439
$30,406,909 0
Dr. Lechleiter 3 tax-qualifi ed plan
nonqualifi ed plan
total
28
28 $733,909
$6,563,736
$7,297,645 0
Dr. Paul 4 tax-qualifi ed plan
nonqualifi ed plan
total
15
15 5 $252,137
$3,037,525
$3,289,662 0
Mr. Armitage tax-qualifi ed plan
nonqualifi ed plan
total
9
9 6 $184,031
$795,456
$979,487 0
Mr. Rice tax-qualifi ed plan
nonqualifi ed plan
total
18
18 $231,424
$571,961
$803,385 0
1 The calculation of present value of accumulated benefi t assumes a discount rate of 6.75 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 11 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 27 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, if he is employed by the company past age 60. This
potential additional service credit increased the present value of his nonqualifi ed pension benefi t shown above by
$1,174,879.
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 toward his eligibility for a benefi t, it does not change the present value of his nonqualifi ed pension benefi t.
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
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 following 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.