Employee Benefit Plans

12 Months Ended

Dec. 31, 2013

Employee Benefit Plans

Employee Benefit Plans

14. Employee Benefit Plans

• Supplemental Executive Retirement Plan

        We maintain the United Therapeutics Corporation Supplemental Executive Retirement Plan (SERP) to provide retirement benefits to certain senior members of our management team.

        Participants who retire at age 60 or older are eligible to receive either monthly payments or a lump sum payment based on an average of their total gross base salary over the last 36 months of active employment, subject to certain adjustments. Related benefit payments commence on the first day of the sixth month after retirement. Participants who elect to receive monthly payments will continue payments through the remainder of their life. Alternatively, participants who elected to receive a lump sum distribution will receive a payment equal to the present value of the estimated monthly payments that would have been received upon retirement. As of December 31, 2013 and 2012, all SERP participants had elected to receive a lump sum distribution. Participants who terminate employment for any reason other than death, disability, or change in control prior to age 60 will not be entitled to receive any benefits under the SERP.

        To help fund our obligations under the SERP, we maintain the United Therapeutics Corporation Supplemental Executive Retirement Plan Rabbi Trust Document (Rabbi Trust). Participants of the SERP will have no preferred claim on, nor any beneficial ownership interest in, any assets of the Rabbi Trust. The balance in the Rabbi Trust was $5.1 million as of December 31, 2013 and 2012. Investments held in the Rabbi Trust are included under restricted marketable investments and cash on our consolidated balance sheets.

        We recognize the unfunded balance of the SERP as a liability on our consolidated balance sheets. Since we do not fund the SERP, the liability is equal to the projected benefit obligation as measured at the end of each fiscal year. Expenses related to the SERP are reported under the captions, "selling, general and administrative expense" and "research and development expense" in the accompanying consolidated statements of operations.

        A reconciliation of the beginning and ending balances of the projected benefit obligation is presented below (in thousands):

	Year Ended December 31,
	2013			2012
Projected benefit obligation at the beginning of the year	$	47,206		$	32,952
Service cost		5,406			4,315
Interest cost		1,584			1,475
Actuarial (gain) loss		(3,162	)		8,464
Projected benefit obligation at the end of the year	$	51,034		$	47,206
Fair value of plan assets at the end of the year		—			—
Unfunded at end of the year(1)	$	51,034		$	47,206

(1)

Included within other liabilities on our consolidated balance sheets.

        The accumulated benefit obligation, a measure that does not consider future increases in participants' salaries, was $37.2 million and $33.2 million at December 31, 2013 and 2012, respectively.

        Future estimated benefit payments, based on current assumptions, including election of lump-sum distributions and expected future service, are as follows (in thousands):

Year Ended December 31,
2014	$	—
2015		23,502
2016		—
2017		—
2018		—
2019-2023		29,330
	$	52,832

        The following weighted-average assumptions were used to measure the SERP obligation:

	Year Ended December 31,
	2013			2012
Discount Rate		4.34	%		3.36	%
Salary Increases		5.00	%		5.00	%

        The components of net periodic pension cost recognized on our consolidated statement of operations consist of the following (in thousands):

	Year Ended December 31,
	2013		2012		2011
Service cost	$	5,406	$	4,315	$	4,255
Interest cost		1,584		1,475		1,356
Amortization of prior service cost		827		827		773
Amortization of net actuarial loss		794		—		91
Total	$	8,611	$	6,617	$	6,475

        Reclassification adjustments related to the SERP from accumulated other comprehensive loss to the statement of operations by line item and the tax impact of these reclassifications is presented below (in thousands):

Components Reclassified from Accumulated Other Comprehensive Loss(1)	As of December 31, 2013
Prior service cost:
Research and development	$	312
Selling, general and administrative		515
Total		827
Amortization of net actuarial loss:
Research and development		300
Selling, general and administrative		494
Total		794
Total prior service cost and amortization of net actuarial loss		1,621
Tax benefit		(601	)
Total, net of tax	$	1,020

(1)

Refer to Note 12—Accumulated Other Comprehensive Loss.

        Amounts relating to the SERP that have been recognized in other comprehensive gain (loss) are as follows (in thousands):

	Year Ended December 31,
	2013			2012			2011
Net unrecognized actuarial gain (loss)	$	3,956		$	(8,464	)	$	773
Net unrecognized prior service cost		827			827			(824	)
Total		4,783			(7,637	)		(51	)
Tax		(1,688	)		2,807			44
Total, net of tax	$	3,095		$	(4,830	)	$	(7	)

        The table below presents amounts relating to the SERP included in accumulated other comprehensive loss that have not yet been recognized as a component of net periodic pension cost on our consolidated statements of operations (in thousands):

	Year Ended December 31,
	2013			2012			2011
Net unrecognized actuarial loss	$	7,803		$	11,758		$	3,295
Net unrecognized prior service cost		5,698			6,525			7,352
Total		13,501			18,283			10,647
Tax		(5,074	)		(6,743	)		(3,936	)
Total, net of tax	$	8,427		$	11,540		$	6,711

        Estimated amounts included in accumulated other comprehensive income as of December 31, 2013 that are expected to be recognized as components of net periodic pension expense on our statement of operations for the year ended December 31, 2014 comprise the following (in thousands):

Amortization of prior service cost	$	827
Amortization of net actuarial loss		333
Total	$	1,160

• Employee Retirement Plan

        We maintain a Section 401(k) Salary Reduction Plan which is open to all eligible full-time employees. Under the 401(k) Plan, eligible employees can make pre-tax contributions up to statutory limits. Currently, we make discretionary matching contributions to the 401(k) Plan equal to 40 percent of a participant's elected salary deferral. Matching contributions vest immediately for participants who have been employed for three years; otherwise, matching contributions vest annually, in one-third increments over a three-year period until the three-year employment requirement has been met. Expenses related to the 401(k) Plan were $2.5 million, $2.1 million and $1.7 million for the years ended December 31, 2013, 2012 and 2011, respectively.