Mattel 2005 Annual Report Download - page 78

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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:
December 31,
2005 2004
Defined benefit pension plans:
Discount rate ............................................................. 5.4% 5.7%
Weighted average rate of future compensation increases ........................... 4.4% 4.4%
Postretirement benefit plans:
Discount rate ............................................................. 5.4% 5.7%
Annual increase in Medicare Part B premium ................................... 6.0% 6.0%
Health care cost trend rate:
Pre-65 .............................................................. 9.0% 10.0%
Post-65 ............................................................. 10.0% 11.0%
Ultimate cost trend rate (pre- and post-65) ...................................... 5.0% 5.0%
Year that the rate reaches the ultimate cost trend rate:
Pre-65 .............................................................. 2010 2010
Post-65 ............................................................. 2011 2011
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
Benefit of
Medicare Part D
Subsidy
2006 ............................................... $ 18,502 $ 4,747 $ (408)
2007 ............................................... 18,240 4,769 (438)
2008 ............................................... 19,226 4,920 (464)
2009 ............................................... 18,745 5,018 (487)
2010 ............................................... 18,275 4,994 (503)
2011 – 2015 ......................................... 109,574 25,221 (2,518)
Mattel expects to make cash contributions totaling approximately $14 million to its defined benefit pension
and postretirement benefit plans in 2006, including approximately $11 million for benefit payments for its
unfunded plans.
Mattel’s domestic defined benefit pension plan assets are comprised of the following:
December 31,
2005 2004
Equity securities .......................................................... 70% 72%
Debt securities ............................................................ 26 28
Cash.................................................................... 4 —
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 December 31, 2005 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 December 31, 2005
is reasonable based on historical returns, and based on the fact that the actual return on market value of plan
assets has been approximately 12% over the last ten years.
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