Mattel 2004 Annual Report Download - page 80

The assumptions used in determining the projected and accumulated benefit obligations of Mattel’s
domestic defined benefit pension and postretirement benefit plans are as follows:
As of Year End
2004 2003
Defined benefit pension plans
Discount rate .............................................................. 5.7% 6.0%
Weighted average rate of future compensation increases ............................ 4.4% 4.4%
Postretirement benefit plans
Discount rate .............................................................. 5.7% 6.0%
Annual increase in Medicare Part B premium .................................... 6.0% 4.0%
Health care cost trend rate:
Pre-65 ............................................................... 10.0% 8.0%
Post-65 ............................................................... 11.0% 9.0%
Ultimate cost trend rate (pre- and post-65) ...................................... 5.0% 5.5%
Year that the rate reaches the ultimate cost trend rate:
Pre-65 ............................................................... 2010 2007
Post-65 ............................................................... 2011 2007
The future benefit payments for Mattel’s defined benefit pension and postretirement benefit plans are as
follows (in thousands):
Defined Benefit
Pension Plans
Postretirement
Benefit Plans
Before Subsidy
Effect of
Medicare Part D
Subsidy
2005 ................................................ $ 17,877 $ 5,388 $ —
2006 ................................................ 18,371 5,258 (400)
2007 ................................................ 18,958 5,142 (408)
2008 ................................................ 20,257 5,320 (441)
2009 ................................................ 20,654 5,409 (467)
2010 – 2014 .......................................... 119,705 32,010 (2,874)
Mattel expects to make cash contributions totaling approximately $15 million to its defined benefit pension
and postretirement benefit plans in 2005, including $12 million to cover benefit payments of its unfunded plans.
Mattel’s domestic defined benefit pension plan assets are invested as follows:
As of Year End
2004 2003
Equity securities ........................................................... 72% 71%
Debt securities ............................................................. 28 28
Cash ..................................................................... — 1
100% 100%
Mattel commissioned an actuarial study of the plans’ assets and liabilities to determine an asset allocation
that would best match cash flows from the plans’ assets to expected benefit payments. The percentage allocation
of plan assets as of year end 2004 approximates the target allocation of such assets. The Pension Committee of
the board of directors, together with Mattel’s Treasurer, monitors the returns earned by the plans’ assets and
reallocates investments as needed. Mattel’s defined benefit pension plan assets are not directly invested in Mattel
common stock. Mattel believes that the long-term rate of return on plan assets of 8.0% as of year end 2004 is
reasonable based on historical returns, and based on the fact that the actual return on market value of plan assets
has been approximately 11% over the last ten years.
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