AFLAC INC — Annual Report 2005

Jun 28, 2005

11-K 1 afl11k04.htm AFL 2004 FORM 11-K ON 401(K) AFL 11k 2004

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 11-K

(Mark One)
[ X ]	ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2004
OR
[ ]	TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ___ to _______
Commission file number	001-07434

Aflac Incorporated 401(k) Savings and Profit Sharing Plan

Aflac Incorporated 1932 Wynnton Road Columbus, Georgia 31999

Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

	Aflac Incorporated 401(k) Savings and
	Profit Sharing Plan
Date: June 27, 2005	By:	/s/ Casey Graves
		Casey Graves
		Second Vice President
		Human Resources

Aflac Incorporated 401(k) Savings and Profit Sharing Plan

Table of Contents
	Page
Report of Independent Registered Public Accounting Firm	1
Statements of Net Assets Available for Plan Benefits	2
Statements of Changes in Net Assets Available for Plan Benefits	3
Notes to Financial Statements	4-9
Schedule 1 - Schedule H, Line 4i - Schedule of Assets (Held at End of Year)	10
Exhibit 23 - Consent of Independent Registered Public Accounting Firm	11

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Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Pension Committee Aflac Incorporated 401(k) Savings and Profit Sharing Plan: We have audited the accompanying statements of net assets available for plan benefits of the Aflac Incorporated 401(k) Savings and Profit Sharing Plan (the Plan) as of December 31, 2004 and 2003, and the related statements of changes in net assets available for plan benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Aflac Incorporated 401(k) Savings and Profit Sharing Plan at December 31, 2004 and 2003, and the changes in net assets available for plan benefits for the years then ended in conformity with U.S. generally accepted accounting principles.

Our audits were performed for the purpose of forming an opinion on the basic financial statements of the Aflac Incorporated 401(k) Savings and Profit Sharing Plan taken as a whole. The supplementary information included in Schedule 1 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

June 20, 2005
Atlanta, Georgia

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Table of Contents Aflac Incorporated 401(k) Savings and Profit Sharing Plan Statements of Net Assets Available for Plan Benefits December 31,

	2004	2003
Assets:
Investments (Note 5)	$ 133,975,136	$ 111,507,145
Cash	19,331	336,005
Accrued employer matching contribution	-	216,851
Accrued employee contribution	-	322,359
Total assets	133,994,467	112,382,360
Liabilities:
Excess employee contributions payable	151,402	45,472
Total liabilities	151,402	45,472
Net assets available for plan benefits	$ 133,843,065	$ 112,336,888
See accompanying Notes to Financial Statements.

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Table of Contents Aflac Incorporated 401(k) Savings and Profit Sharing Plan Statements of Changes in Net Assets Available for Plan Benefits Years Ended December 31,

			2003
Contributions:
Participant withholdings	$ 7,749,511	$	7,098,479
Participant transfers from other plans	955,937		513,448
Employer matching	3,093,466		3,375,149
Total contributions	11,798,914		10,987,076
Dividend income	2,326,005		1,349,317
Interest income	365,196		297,474
Net appreciation in fair value of investments (Note 5)	11,255,222		18,191,985
Distributions to participants	(4,046,108	)	(6,343,044	)
Administrative fees	(193,052	)	(150,607	)
Increase in net assets	21,506,177		24,332,201
Net assets available for plan benefits:
Beginning of year	112,336,888		88,004,687
End of year	$ 133,843,065	$	112,336,888
See accompanying Notes to Financial Statements.

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Table of Contents Aflac Incorporated 401(k) Savings and Profit Sharing Plan

Notes to Financial Statements December 31, 2004 and 2003

1. DESCRIPTION OF THE PLAN

The Aflac Incorporated 401(k) Savings and Profit Sharing Plan (the Plan) was established for the benefit of the employees of Aflac Incorporated; American Family Life Assurance Company of Columbus (excluding Japan Branch employees); American Family Life Assurance Company of New York; Aflac International, Incorporated; and Communicorp, Incorporated (collectively "the Company").

The following description provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions.

(a)	General
	The Plan is subject to certain provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
	Eligible employees may voluntarily participate in the Plan on the first day of the month, which coincides with or next follows the completion of thirty days of employment.
	The Plan is administered by a plan administrator appointed by the Pension Committee of Aflac Incorporated's Board of Directors. The majority of the Plan's administrative expenses are paid by the Plan sponsor. A portion of the Plan's administrative expenses is allocated to the Plan and is deducted from the investment earnings (losses) in participant accounts. Administrative fees on loans and in-service withdrawal expenses are paid directly by the requesting participant and are deducted from the loan or in-service withdrawal amount.
(b)	Contributions
	Contributions to the Plan are made by both participants and the Company. Participants may contribute portions of their salary and bonus on a pretax basis in increments of whole percentages of up to 50% in 2004 and 2003, subject to aggregate limits imposed by Internal Revenue Service (IRS) regulations. Aggregate limits as prescribed by the IRS were $13,000 for participants under the age of 50 and $16,000 for participants age 50 and older in 2004 and $12,000 for participants under the age of 50 and $14,000 for participants age 50 and older in 2003. The first 1% to 6% of participants' compensation contributed may be subject to a percentage matching contribution by the Company. For the years ended December 31, 2004 and 2003, subject to certain limitations, the Company's matching contribution was 50% of the portion of the participants' contributions, which were not in excess of 6% of the participants' compensation.

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	An account is maintained for each participant and is credited with participant contributions and investment earnings or losses thereon. Contributions may be invested in one or more of the investment funds available under the Plan at the direction of the participant. A separate account is maintained with respect to each participant's interest in the Company's matching contributions. Amounts in this account are apportioned and invested in the same manner as the participant's account.
(d)	Vesting
	Participants are 100% vested in their contributions plus actual investment earnings or losses thereon.
	Participants become vested in the Company's matching contributions and the related earnings or losses thereon according to the following schedule.
	Years of Service	Vested Percentage
	Less than 1	0%
	1	20%
	2	40%
	3	60%
	4	80%
	5 or more	100%
	A participant's interest in the Company's matching contributions and the related earnings or losses thereon is also vested upon termination either because of death or disability or after attaining early retirement date or normal retirement age. Except as previously described, participants forfeit the portion of their interest which is not vested upon termination of employment. These forfeitures are available to reduce the Company's future matching contributions or plan expenses. At December 31, 2004 and 2003, forfeited non-vested accounts totaled $467,409 and $391,567, respectively. No amounts have been specifically identified to reduce future matching contributions.
(e)	Distributions
	Participants may receive a distribution equal to the vested value of their account upon death, disability, retirement, or termination of either the Plan or the participant's employment. Distributions may only be made in the form of a lump-sum cash payment and/or Aflac Incorporated common stock.
	The Plan permits in-service withdrawals for participants who are 100% vested in the Company's contribution and have attained age 59 1/2.

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(f)	Loans
	Participants are allowed to borrow funds from their accounts. The minimum amount of any loan is $1,000. Participants may have up to two active loans from their account at any time. The maximum amount of loans made to a participant from the Plan, when added together, cannot exceed the lesser of:
	a.	50% of the participant's vested benefit (as defined by the Plan document); or
	b.	$50,000, reduced by the amount, if any, of the highest balance of all outstanding loans to the participant during the one-year period ending on the day prior to the day on which the loan is made.
	All participant loans carry a maturity date of five years or less from the date the loan is made and are secured by the balance in the participant's account. Interest rates on participant loans are established at the prevailing prime interest rate at the time the loan is made plus 2%. The prime interest rate was 5.25% at December 31, 2004, compared with 4.00% at December 31, 2003.
(g)	Transactions With Parties-in-Interest
	The assets of the Plan are held in a trust maintained by Charles Schwab Trust Company (Charles Schwab).
	As of December 31, 2004 and 2003, the statements of net assets available for plan benefits include the following investments in and accounts with Aflac Incorporated and affiliates of Charles Schwab, parties-in-interest to the Plan.

	2004	2003
Aflac Incorporated common stock	$ 65,683,491	$ 58,720,499
Schwab Institutional Advantage Money Fund	4,695,959	4,239,727
Schwab S&P 500 Investors Fund	1,993,518	1,599,189

1. SUMMARY OF ACCOUNTING POLICIES

(a)
The accompanying statements of net assets available for plan benefits and changes in net assets available for plan benefits have been prepared on the accrual basis of accounting.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the plan administrator to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

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(b)	Reclassifications
	Certain prior year amounts have been reclassified to conform with the presentation adopted in the current year statements. These reclassifications had no impact on net assets available for plan benefits.
(c)	Investments
	Investments are stated at fair value based upon market quotations obtained from national security exchanges. Securities transactions are accounted for on the trade date (the date the order to buy or sell is executed). Realized gains and losses on the sale of investments are calculated based on the difference between selling price and cost on an average cost basis.
	Participant loans are stated at cost, which approximates fair value.
	The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants' account balances and the amounts reported in the statements of net assets available for plan benefits.
(d)	Distributions
	Distributions to participants are recorded when paid.
(e)	Fair Value of Financial Instruments
	The carrying amounts for cash, receivables, and payables approximated their fair values due to the short-term nature of these instruments.

1. FEDERAL INCOME TAXES

The Internal Revenue Service has determined and informed the Company by letter dated February 27, 2002, that the Plan and related trust are in compliance with applicable sections of the Internal Revenue Code and is exempt from Federal income taxes. The Plan intends to continue as a qualified plan and trust to maintain its tax exempt status.

Participants in the Plan are not subject to federal and state income taxes on their contributions, on amounts contributed by the employer, or on earnings or appreciation of investments held by the Plan until withdrawn by the participant or distributed to the participant's named beneficiary in the event of death.

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1. PLAN TERMINATION

Although it has not expressed any intent to do so, the Company has the right to terminate the Plan at any time subject to the provisions of ERISA. In the event of Plan termination, participants would become 100% vested in their accounts.

1. INVESTMENT FUNDS

The following table presents the fair value of individual investments that exceeded 5% of the Plan's net assets as of December 31:

	2004	2003
Mutual Funds:
Davis New York Venture Fund	$ 8,994,657	$ 7,483,109
Dodge & Cox Balanced Fund	17,317,632	12,625,063
Dodge & Cox Stock Fund	17,706,846	13,483,165
Aflac Incorporated common stock	65,683,491	58,720,499

During 2004 and 2003, the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value as follows:

Mutual Funds	$ 5,371,233	$ 8,155,688
Common Stock	5,883,989	10,036,297
Total investments	$ 11,255,222	$ 18,191,985

1. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500

The following is a reconciliation of net assets available for plan benefits as presented in these financial statements to the balance per Form 5500 as of December 31:

Net assets available for plan benefits	$ 133,843,065	$	2003 — 112,336,888
Deemed distributions	(11,133	)	(9,693	)
Net assets available for plan benefits - Form 5500	$ 133,831,932	$	112,327,195

Deemed distributions are defaulted and unpaid participant loans of active participants that are disallowed on the Form 5500.

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The following is a reconciliation of changes in net assets available for plan benefits as presented in these financial statements and Form 5500 as of December 31:

			2003
Increase in net assets per statement of changes
in net assets available for plan benefits	$ 21,506,177	$	24,332,201
Deemed distributions	(1,440	)	(25	)
Paid-off deemed distributions	-		28,929
Net income - Part II Line K Form 5500	$ 21,504,737	$	24,361,105

Paid-off deemed distributions are cash receipts on defaulted participant loans of active participants disallowed on Form 5500 in previous years.

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Table of Contents SCHEDULE 1 Aflac Incorporated 401(k) Savings and Profit Sharing Plan Schedule H, Line 4i - Schedule of Assets (Held at End of Year) As of December 31, 2004

Identity of Issue and Description of Investment	Shares/Units	Current Value
Money Market Funds
Schwab Institutional Advantage Money Fund*	4,695,959	$ 4,695,959
Mutual Funds
Columbia Fixed Income Securities Fund	169,083	2,257,265
Davis New York Venture Fund	293,081	8,994,657
Dodge & Cox Balanced Fund	218,244	17,317,632
Dodge & Cox Stock Fund	135,976	17,706,846
Growth Fund of America	142,280	3,874,289
Julius Baer International Equity Fund	91,488	2,891,946
Rydex OTC Fund	140,044	1,525,078
Schwab S&P 500 Investors Fund*	107,006	1,993,518
Calamos Growth Fund	28,252	1,496,777
Total Mutual Funds	-	58,058,008
Aflac Incorporated common stock*	1,648,682	65,683,491
Participant loans (1,725 loans outstanding with interest rates
from 6.0% to 11.5% and maturity dates of less than one year
to five years)	-	5,537,678
Total Investments	-	$ 133,975,136
*Indicates party-in-interest, as defined in ERISA Section 406.

See accompanying independent auditors' report.

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