Employee Benefit Plans

The Company has various defined contribution savings plans under which eligible employees can participate by contributing a portion of their salary for investment, at the direction of each employee, in one or more investment funds. Several of the plans were adopted in connection with certain of the Company’s acquisitions. The plans are primarily tax-deferred arrangements pursuant to Internal Revenue Code (“IRC”) Section 401(k) and are subject to the provisions of the Employee Retirement Income Security Act (“ERISA”). The Company matches employee contributions in varying degrees (either in shares of the Company’s common stock or cash, in accordance with the applicable plan provisions) based on the contribution levels of the employees, as specified in the respective plan documents. Expense relating primarily to the Company’s matching contributions for these defined contribution plans for the years ended December 31, 2011, 2010 and 2009 was $6.5 million, $5.6 million and $6.6 million, respectively.

The Company has a non-contributory, defined benefit pension plan covering certain corporate headquarters employees and the employees of several companies sold by the Company in 1992, for which benefits ceased accruing upon the sale (the “Qualified Plan”). Benefits accruing under this plan to corporate headquarters employees were fully vested and frozen as of January 1, 1994.

The Company also had an excess benefit plan (“EBP”) that provides retirement payments to certain headquarters employees in amounts generally consistent with what they would have received under the Qualified Plan. The retirement benefits provided by the EBP are generally comparable to those that would have been earned in the Qualified Plan, if payments under the Qualified Plan were not limited by the IRC. On September 30, 2010, the Company terminated the defined benefit portion of its Excess Benefit Plan. See additional information at the “Plan curtailment” and “Benefit plan termination and related costs” section of this Note.

The Qualified Plan is funded with an irrevocable trust, which consists of assets held in the Vanguard Intermediate Term Treasury Fund Admiral Shares fund (“Vanguard Fund”), a mutual fund holding U.S. Treasury obligations. In addition, the Company has established rabbi trusts, which are also held in the Vanguard Fund, to provide for retirement obligations under the EBP. The Company’s general approach is to fund its pension obligations in accordance with the funding provisions of ERISA.

Components of Net Periodic Pension Cost and Other Amounts

Recognized in Other Comprehensive Income (Pre-tax)

(in thousands):



	For the years ended December 31,
Net Periodic Pension Cost (Pre-tax):	2011			2010			2009
Service cost	$	—		$	2,226		$	1,499
Interest cost	269			3,323			5,997
Amortization of deferred amounts (primarily prior actuarial losses)	109			4,891			1,000
Return on assets	(241		)	(224		)	(242		)
Net periodic pension cost	137			10,216			8,254
Benefit plan termination and related costs (see below)	—			25,187			—
Net periodic pension costs and benefit plan termination and related costs	137			35,403			8,254
Other Changes in Plan Assets and Benefit Obligations
Recognized in Other Comprehensive Income (Pre-tax):
Net loss (gain), net of curtailment	1,145			(49,463		)	40,342
Amortization of net (loss)	(110		)	(4,891		)	(1,000		)
Amortization of prior service cost	—			—			—
Total loss (gain) recognized in other comprehensive income	1,035			(54,354		)	39,342
Total loss (gain) recognized in net periodic pension cost and other comprehensive income	$	1,172		$	(18,951	)	$	47,596

Plan curtailment

As a result of plan curtailments, the projected benefit obligation of the Excess Benefit Plan was remeasured as of July 31, 2010 and September 30, 2010, resulting in a pretax increase to other comprehensive income of approximately $23.3 million during the 2010 year.

Benefit plan termination and related costs

On September 30, 2010, the Company terminated the defined benefit portion of its Excess Benefit Plan (“the Plan”) which was not a qualified plan under the Internal Revenue Code of 1986, as amended. As a result of the termination, each active participant’s terminated plan liability was determined, based primarily on the participant’s compensation and duration of employment, as of September 30, 2010. Partial payments were made to non-active participants through September 30, 2010, with the final payments made in September 2011. As a result of the Plan termination, the Company recognized a one-time charge to expense of approximately $25 million in the third quarter of 2010 for benefit plan termination and related costs, primarily comprised of the recognition of previously deferred actuarial losses.

As of December 31, 2010, the Company had approximately $75 million in notes payable remaining to participants, recorded in “Other current liabilities” on the Consolidated Balance Sheets. These notes payable were fully funded as of December 31, 2010 with rabbi trust assets, having a fair value of approximately $86 million, invested for the purpose of satisfying these obligations.

Approximately $75 million and $58 million of payments were made during 2011 and 2010, respectively to former plan participants, primarily to three former executives (Joel F. Gemunder, Cheryl D. Hodges and Patrick E. Keefe) using funds obtained upon the liquidation of rabbi trust assets. In addition, under the terms of the related separation agreements, Mr. Gemunder and Ms. Hodges earned interest on their unpaid benefit plan amounts at a rate of 8.75% per annum until the final payments were made in February 2011. In connection with the funding of the payments in 2010 to the former executives, the Company recorded a gain of approximately $3.6 million in the fourth quarter of 2010 on rabbi trust assets liquidated to make the payments.

The estimated amount of net loss in accumulated other comprehensive income expected to be recognized as a component of net periodic pension cost during the 2012 year is approximately $0.3 million.

The actuarial assumptions used to calculate net periodic pension costs for years ended December 31 were as follows:



	2011		2010		2009
Discount rate	5.4	%	3.8	%	5.6	%
Rate of increase in compensation levels	N/A		15.0	%	10.0	%
Expected rate of return on assets	6.0	%	6.0	%	6.0	%

The actuarial assumptions used to calculate the benefit obligations at the end of plan year were as follows:



	2011		2010		2009
Discount rate	4.3	%	5.4	%	3.8	%
Rate of increase in compensation levels	N/A		N/A		15.0	%
Expected rate of return on assets	6.0	%	6.0	%	6.0	%

The discount rate assumption was determined giving consideration primarily to the Citigroup Pension Liability Index. It should be noted that the actuarial calculation is highly dependent upon the stock price on the date(s) of stock award vesting and, accordingly, can fluctuate significantly with changes in Omnicare’s stock price. The expected rate of return on assets was estimated based primarily on the historical rate of return on intermediate-term U.S. Government securities.

Obligations and Funded Status

(in thousands):



	For the years ended December 31,
Change in Plan Assets:	2011			2010
Fair value of plan assets at end of prior year	$	4,081		$	3,917
Actual return on plan assets	387			291
Employer contributions	31			—
Benefits paid	(140		)	(127		)
Fair value of plan assets at end of year	$	4,359		$	4,081
Change in Projected Benefit Obligation:
Projected benefit obligation at end of prior year	$	5,034		$	157,120
Plan curtailment	—			(23,359		)
Establishment of notes payable	—			(86,389		)
Service cost	—			2,226
Interest cost	269			3,323
Actuarial loss/(gain)	1,291			(827		)
Benefits paid	(140		)	(47,060		)
Projected benefit obligation at end of year	$	6,454		$	5,034
Funded Status:
Projected benefit obligation in excess of plan assets	$	(2,095	)	$	(953	)
Accumulated benefit obligation at end of year	$	6,454		$	5,034

The Company’s investment strategy generally targets investing in intermediate U.S. government and agency securities funds, seeking a moderate and sustainable level of current income by investing primarily in intermediate-term U.S. Treasury obligations with a low credit default risk.

Amounts Recognized in the Consolidated Balance

Sheets Consist of (in thousands):



	December 31,
	2011		2010
Current liabilities	$	—	$	—
Noncurrent liabilities	2,095		953
Total	$	2,095	$	953
Amounts Recognized in Accumulated Other Comprehensive Income (Pretax) Consist of:
Net loss	$	1,985	$	950
Prior service cost	—		—
Total	$	1,985	$	950

Information for Pension Plans with an Accumulated Benefit Obligation in excess of Plan Assets

(in thousands):



	December 31,
	2011		2010
Qualified Plan:
Projected benefit obligation	$	6,454	$	5,034
Accumulated benefit obligation	6,454		5,034
Fair value of plan assets (1)	4,359		4,081


(1)	See "Obligations and Funded Status" table of this note for further discussion.

No funding is anticipated to be necessary in 2012 relating to the Qualified Plan.

Projected benefit payments, which reflect expected future service, as appropriate, for each of the next five fiscal years and in the aggregate for the five fiscal years thereafter as of December 31, 2011 are estimated at approximately $0.3 million per year through 2021.