Defined Benefit Plans

6 Months Ended

Jun. 30, 2011

Defined Benefit Plans

Defined Benefit Plans

7.  Defined Benefit Plans

Covance sponsors various pension and other post-retirement benefit plans.

Defined Benefit Pension Plans

Covance sponsors two defined benefit pension plans for the benefit of its employees at two United Kingdom subsidiaries and one defined benefit pension plan for the benefit of its employees at a German subsidiary, all of which are legacy plans of previously acquired companies.  Benefit amounts for all three plans are based upon years of service and compensation.  The German plan is unfunded, while the United Kingdom plans are funded.  Covance’s funding policy has been to contribute annually a fixed percentage of the eligible employee’s salary at least equal to the local statutory funding requirements.  Pension plan assets are administered by the plans’ trustees and are principally invested in equity and debt securities.

The components of net periodic pension expense for these plans for the three and six month periods ended June 30, 2011 and 2010 are as follows:

	United Kingdom Plans						German Plan
	Three Months Ended June 30						Three Months Ended June 30
	2011			2010			2011		2010
Components of Net Periodic Pension Cost:
Service cost	$	1,120		$	891		$	212	$	166
Interest cost	2,094			1,866			165		144
Expected return on plan assets	(2,638		)	(2,175		)	—		—
Amortization of net actuarial loss	336			302			30		17
Participant contributions	(515		)	(501		)	—		—
Net periodic pension cost	$	397		$	383		$	407	$	327

	United Kingdom Plans				German Plan
	Three Months Ended June 30				Three Months Ended June 30
	2011		2010		2011		2010
Assumptions Used to Determine Net Periodic Pension Cost:
Discount rate	5.20	%	5.75	%	4.60	%	5.50	%
Expected rate of return on assets	6.50	%	6.75	%	n/a		n/a
Salary increases	4.50	%	4.50	%	2.50	%	3.00	%

	United Kingdom Plans						German Plan
	Six Months Ended June 30						Six Months Ended June 30
	2011			2010			2011			2010
Components of Net Periodic Pension Cost:
Service cost	$	2,248		$	1,776		$	424		$	345
Interest cost	4,202			3,720			330			300
Expected return on plan assets	(5,294		)	(4,335		)	—			—
Amortization of net actuarial loss	674			602			60			36
Participant contributions	(1,034		)	(999		)	—			—
Net periodic pension cost	$	796		$	764		$	814		$	681
Assumptions Used to Determine Net Periodic Pension Cost:
Discount rate	5.20		%	5.75		%	4.60		%	5.50		%
Expected rate of return on assets	6.50		%	6.75		%	n/a			n/a
Salary increases	4.50		%	4.50		%	2.50		%	3.00		%

Supplemental Executive Retirement Plan

In addition to these foreign defined benefit pension plans, Covance also has a non-qualified Supplemental Executive Retirement Plan (“SERP”).  The SERP, which is not funded, is intended to provide retirement benefits for certain executive officers of Covance.  Benefit amounts are based upon years of service and compensation of the participating employees.

The components of net periodic pension cost for the three and six month periods ended June 30, 2011 and 2010 are as follows:

	Three Months Ended June 30						Six Months Ended June 30
	2011			2010			2011			2010
Components of Net Periodic Pension Cost:
Service cost	$	321		$	348		$	641		$	695
Interest cost	174			173			347			347
Amortization of prior service credit	(30		)	(30		)	(59		)	(59		)
Amortization of net actuarial loss	74			38			147			77
Net periodic pension cost	$	539		$	529		$	1,076		$	1,060
Assumptions Used to Determine Net Periodic Pension Cost:
Discount rate	4.40		%	5.25		%	4.40		%	5.25		%
Salary increases	3.75		%	4.00		%	3.75		%	4.00		%

Post-Employment Retiree Health and Welfare Plan

Covance also sponsors a post-employment retiree health and welfare plan for the benefit of eligible employees at certain U.S. subsidiaries who retire after satisfying service and age requirements.  This plan is funded on a pay-as-you-go basis and the cost of providing these benefits is shared with the retirees.

The components of net periodic post-retirement benefits cost for the three and six month periods ended June 30, 2011 and 2010 are as follows:

	Three Months Ended June 30						Six Months Ended June 30
	2011			2010			2011			2010
Components of Net Periodic Post-retirement Benefit Cost:
Service cost	$	30		$	24		$	59		$	48
Interest cost	72			78			145			155
Amortization of net actuarial loss	8			—			15			—
Net periodic post-retirement benefit cost	$	110		$	102		$	219		$	203
Assumptions Used to Determine Net Periodic Post-retirement Benefit Cost:
Discount rate	4.70		%	5.25		%	4.70		%	5.25		%
Health care cost trend rate	8.50		%(a)	7.50		%	8.50		%(a)	7.50		%

(a) decreasing to ultimate trend of 5.00% in 2018