Mattel 2007 Annual Report Download - page 95

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Mattel periodically commissions a 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, 2007 approximates the target allocation of such assets. The Administrative
Committee, which includes 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, 2007 is
reasonable based on historical returns, and based on the fact that the actual return on market value of plan assets
has been approximately 9% over the last ten years.
A one percentage point increase/(decrease) in the assumed health care cost trend rate for each future year
would impact the postretirement benefit obligation as of December 31, 2007 by approximately $4.8 million and
$(4.4) million, respectively, while a one percentage point increase/(decrease) would impact the service and
interest cost recognized for 2007 by approximately $0.3 million and $(0.3) million, respectively.
During 1999, Mattel amended The Fisher-Price Pension Plan to convert it from a career-average plan to a
cash balance plan and applied for a determination letter from the IRS. In 2003, Mattel amended The Fisher-Price
Pension Plan to reflect recent changes in regulations and court cases associated with cash balance plans and
submitted a new application for a determination letter to the IRS. Mattel plans to convert The Fisher-Price
Pension Plan to a cash balance plan upon receipt of a determination letter.
Defined Contribution Retirement Plans
Domestic employees are eligible to participate in 401(k) savings plans sponsored by Mattel or its
subsidiaries, which are funded defined contribution plans satisfying ERISA requirements. Mattel makes
employer contributions in cash and allows employees to allocate both their voluntary contributions and their
employer automatic and matching contributions to a variety of investment funds, including a fund that is fully
invested in Mattel common stock (the “Mattel Stock Fund”). Employees are not required to allocate any funds to
the Mattel Stock Fund, which allows employees to limit or eliminate their exposure to market changes in
Mattel’s stock price. Furthermore, Mattel’s plans limit an employee’s maximum allocation to the Mattel Stock
Fund to 25% of the employee’s total account balance. Employees may generally reallocate their account balances
on a daily basis. The only limitation on the frequency of reallocations applies to changes involving the Mattel
Stock Fund by employees classified as insiders or restricted personnel under Mattel’s insider trading policy.
Pursuant to Mattel’s insider trading policy, insiders and restricted personnel are limited to certain periods in
which they may make allocations into or out of the Mattel Stock Fund.
Certain non-US employees participate in other defined contribution retirement plans with varying vesting
and contribution provisions.
Deferred Compensation and Excess Benefit Plans
Mattel has a deferred compensation plan that permits certain officers and key employees to elect to defer
portions of their compensation. The deferred compensation plan, together with certain contributions made by
Mattel and participating employees to an excess benefit plan, earns various rates of return. The liability for these
plans as of December 31, 2007 and 2006 was $49.2 million and $50.6 million, respectively, and is included in
other noncurrent liabilities in the consolidated balance sheets. Mattel has purchased group trust-owned life
insurance contracts designed to assist in funding these programs. The cash surrender value of these policies,
valued at $64.5 million and $62.5 million as of December 31, 2007 and 2006, respectively, are held in an
irrevocable grantor trust, the assets of which are subject to the claims of Mattel’s creditors and are included in
other noncurrent assets in the consolidated balance sheets.
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