Eli Lilly 2011 Annual Report Download - page 73

FORM 10-K
In evaluating the expected return on plan assets annually we consider numerous factors, including our historical
assumptions compared with actual results, an analysis of current and future market conditions, our current and
expected asset allocations, historical returns, and the views of leading financial advisers and economists for future
asset class returns. As noted, historical returns are just one of several factors considered and are not the starting
point for determining the expected return. Health-care-cost trend rates are assumed to increase at an annual rate of
7.4 percent for the year ended December 31, 2012, decreasing by approximately 0.3 percent per year to an ultimate
rate of 5.0 percent by 2020.
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as
follows:
2012 2013 2014 2015 2016 2017-2021
Defined benefit pension plans ........................... $416.1 $424.2 $437.2 $449.9 $464.2 $2,609.2
Retiree health benefit plans-gross ....................... $118.7 $119.1 $123.6 $127.3 $135.2 $ 790.8
Medicare rebates ..................................... (11.7) (9.9) (11.0) (12.4) (13.5) (91.7)
Retiree health benefit plans-net ......................... $107.0 $109.2 $112.6 $114.9 $121.7 $ 699.1
The total accumulated benefit obligation for our defined benefit pension plans was $8.20 billion and $7.23 billion at
December 31, 2011 and 2010, 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 $8.12 billion and
$5.96 billion, respectively, as of December 31, 2011, and $7.12 billion and $5.93 billion, respectively, as of
December 31, 2010. The accumulated benefit obligation and fair value of the plan assets for the defined benefit
pension plans with accumulated benefit obligations in excess of plan assets were $7.03 billion and $5.75 billion,
respectively, as of December 31, 2011, and $1.10 billion and $136.3 million, respectively, as of December 31, 2010.
Net pension and retiree health benefit expense included the following components:
Defined Benefit
Pension Plans Retiree Health Benefit Plans
2011 2010 2009 2011 2010 2009
Components of net periodic benefit cost
Service cost ...................................... $ 236.3 $ 219.2 $ 242.1 $ 72.4 $ 56.5 $ 53.7
Interest cost ...................................... 447.9 431.6 417.5 118.0 121.4 119.6
Expected return on plan assets ...................... (685.9) (638.2) (584.9) (129.4) (122.6) (117.9)
Amortization of prior service cost (benefit) ............. 8.6 8.8 8.0 (42.9) (37.2) (36.0)
Recognized actuarial loss ........................... 200.4 163.0 84.5 88.7 85.0 71.8
Net periodic benefit cost ............................ $ 207.3 $ 184.4 $ 167.2 $ 106.8 $ 103.1 $ 91.2
If the health-care-cost trend rates were to be increased by one percentage point each future year, the December 31,
2011, accumulated postretirement benefit obligation would increase by $209.4 million and the aggregate of the
service cost and interest cost components of the 2011 annual expense would increase by $15.1 million. A one
percentage point decrease in these rates would decrease the December 31, 2011, accumulated postretirement
benefit obligation by $187.1 million and the aggregate of the 2011 service cost and interest cost by $12.3 million.
The following represents the amounts recognized in other comprehensive income (loss) for the year ended
December 31, 2011:
Defined Benefit
Pension Plans Retiree Health Benefit Plans
Actuarial loss arising during period ............................................ $ 1,266.0 $ 221.3
Plan amendments during period ............................................... 10.0 1.1
Amortization of prior service cost (benefit) included in net income .................. (8.6) 42.9
Amortization of net actuarial loss included in net income .......................... (200.4) (88.7)
Foreign currency exchange rate changes ....................................... (4.9) 1.5
Total other comprehensive loss during period ................................... $ 1,062.1 $ 178.1
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
employees 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 $117.6 million, $119.8 million, and $127.6 million for the years ended
December 31, 2011, 2010, and 2009, respectively.
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