Mattel 2008 Annual Report Download - page 82

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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, 2008 is
reasonable based on historical returns.
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, 2008 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 2008 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 a 401(k) savings plan, The Mattel, Inc. Personal
Investment Plan (the “Plan”), sponsored by Mattel, which is a funded defined contribution plan intended to
comply with ERISA’s requirements. Contributions to the Plan include voluntary contributions by eligible
employees and employer automatic and matching contributions by Mattel. The Plan 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 of their Plan account balance to the Mattel Stock Fund, which allows
employees to limit or eliminate their exposure to market changes in Mattel’s stock price. Furthermore, the Plan
limits the percentage of the employee’s total account balance that may be allocated to the Mattel Stock Fund to
25%. Employees may generally reallocate their account balances on a daily basis. However, pursuant to Mattel’s
insider trading policy, employees classified as insiders and restricted personnel under Mattel’s insider trading
policy 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 maintains 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, 2008 and 2007 was $42.7 million and $49.2 million, respectively, and is included
in other noncurrent liabilities in the consolidated balance sheets. Changes in the market value of the participant
selected investment options are recorded as retirement plan expense within other selling and administrative
expenses. Separately, 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 $55.3 million and $64.5 million as
of December 31, 2008 and 2007, 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.
Incentive Compensation Plans
Mattel has annual incentive compensation plans under which officers and key employees may earn incentive
compensation based on Mattel’s performance and subject to certain approvals of the Compensation Committee of
the Board of Directors. For 2008, 2007, and 2006, $15.4 million, $73.5 million, and $93.7 million, respectively,
was charged to expense for awards under these plans.
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